Developers struggle as market gloom persists

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The real estate market in Ho Chi Minh City has been hit hard by tightened credit access and new regulations that make it more difficult for buyers to sell their homes.

The investor of a residential project in Go Vap District has decided to delay its launch which was scheduled for mid-November. He said the project had a good location and competitive prices but there were uncertainties about local demand.

A mid-price apartment project in Nha Be District had it sales postponed twice after some banks refused to give loans to buyers. The developer said it was running out of funds, and does not know when it can start selling the apartments that are almost ready.

Such cases are not rare in HCMC these days. In fact, many developers are struggling with their residential projects, with some failing to attract homebuyers even after slashing prices.

Pham Van Hai, general director of ACBR, the real estate arm of Asia Commercial Bank, said the market is gloomy because interest rates are too high and it's hard for buyers to find access to loans.

"For those who have money, they have more choices like depositing their savings in banks or buying dollars, instead of spending a lot of money to buy homes amidst grim prospects in the short term," Hai said.

The central bank has been trying to tighten control over loans for the non-production sector, which includes real estate, stock and consumer loans. Statistics complied by the Vietnam Economic Times last week show that these loans accounted for up to 18 percent of all loans given by banks, and that most of the loans were committed to real estate.

Nguyen Hoang Minh, deputy head of the central bank's HCMC branch, was quoted in a report on VnExpress news website last week saying commercial banks in the city have been ordered to review their loans. He said interest rates on loans to the non-production sector have been set high, between 17 and 20 percent.

The local real estate market has been stagnant for months. The forecasts of a recovery happening in the last months of this year look unlikely.

Experts say that besides the credit problem, the market has also been affected by new regulations which make the procedures more complicated for buyers who want to sell their apartments to others.

The director of a real estate exchange who wished to remain unnamed said secondary sales, which are not conducted by developers but by homebuyers, have fallen to a really low level recently.

The buyers are now required to have ownership titles bearing their names before they can start selling their homes. The problem is many developers hand over the homes to buyers but it takes more time to grant ownership titles, the director said.

Another regulation, which bans buyers of unfinished homes from transferring their down-payment contracts to another buyer, has also contributed to the market downturn, experts say.

Le Hoang Chau, chairman of the HCMC Real Estate Association, said the new regulations aim to promote a healthy development for the market and protect homebuyers. However, some of them actually caused difficulties for buyers as they did not give them the freedom to sell their home or transfer their contracts to other people, he said.

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