Vietnam banks hold back on real estate development loans

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Many banks have shied away from offering real estate loans after the government ordered tighter controls over lending to prevent a property bubble, a news report said Sunday.

The general practice is that when it gets difficult to expand loans in the production sector, commercial banks often switch to real estate loans, a banker was quoted by local news website VietNamNet as saying.

But now lenders have to control their real estate loans and the best way to do so is to focus on homebuyers and restrict lending to developers, he said.

The Asia Commercial Bank has said it has stopped financing real estate projects and only provides loans for home purchases and repairs, but lending conditions have been tightened for these as well.

An official from the Hanoi-based Maritime Bank said the State Bank of Vietnam inspects real estate lending carefully and banks have to report on both the amount of loans and what they will be used for. When credit conditions become strict, it's not easy to find qualified clients, the official said.

Prime Minister Nguyen Tan Dung early this month had asked commercial banks to tighten control over real estate loans.

Loans for the real estate sector in the first five months reached VND192 trillion (US$10.1 billion), accounting for 10 percent of all lending nationwide, according to the State Bank of Vietnam.

Hoang The Thoa, an expert from the central bank, said this was a time when developers have difficulty accessing bank loans even though interest rates are quite attractive.

He said many developers were having to use down payments from customers to fund their projects.

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