Vietnam’s central bank and five state-run lenders are drawing up a loan package to bolster the struggling property market and help spur economic growth. Real estate stocks rose.
The program, worth about 70 trillion dong ($3.3 billion), will “connect investors, contractors and suppliers in construction projects and create conditions for them to cut costs and lower prices, in order to spur sales,” Nguyen Viet Manh, head of the lending department at the central bank, said in a phone interview yesterday. The package will be put in place “soon,” he said.
The government is trying to bolster an economy which grew 4.96 percent in the first three months of the year, slowing from 6.04 percent in the fourth quarter of 2013. The central bank last month cut its policy rates and said it is stepping up efforts to help businesses and resolve bad debt, of which a third were tied to soured property loans at the end of 2012.
“This will support the market since it can help developers and their contractors to get sufficient funds to finish their construction projects at lower costs,” said Nguyen Tri Hieu, an economist at Ocean Commercial Joint-Stock Bank in Hanoi. “Banks’ lending to properties was not so efficient before, which caused losses for lenders, so this loan package could be better,” and liquidity in the market will increase, he said.
Beton 6 Corp. led real-estate stock gainers today, surging 6.9 percent, while Pacific Property & Infrastructure Development JSC rose 6.8 percent and Sonadezi Long Thanh Shareholding Co. climbed 5.1 percent compared to a 0.6 percent gain for the benchmark VN Index (VNINDEX) at close. The dong was little changed at 21,093 against the U.S. dollar.
The loan program will allow companies that already have non-performing loans to get new funding in order to finish their projects and eventually pay back lenders, the central bank said in a statement e-mailed today. The program also aims to reduce unsold stockpiles of construction materials and the numbers of unfinished projects, it said. The loans could be expanded to include infrastructure projects, it said.
Bank lending rose 1.35 percent in March from a month earlier, after falling in the two previous months, according to a statement from the central bank on April 2. The regulator said it had requested lenders to boost loans to help meet its credit-growth target of 12 percent to 14 percent this year.
The program will help investors and contractors to speed up construction projects, and can help spur credit growth while making sure the money will be appropriately used, Manh said.
“The money will come from banks, not the state budget, and be given to more than 80 projects” and won’t offer special rates, Manh said. The central bank’s role will be to monitor the process and ensure banks disperse loans properly, he said.
The central bank last month cut its policy rates. Prime Minister Nguyen Tan Dung earlier this week repeated a request to the monetary authority to increase measures to lower lending rates and help businesses, according to a government posting.
This package is separate from a 50-trillion dong loan for real estate being discussed by a group of other commercial lenders, initiated by Vietnam Construction Bank, a private bank and Thien Thanh Group, a property developer, said Manh.
The central bank also last May approved 30 trillion dong of low-interest home loans at five banks. Few takers have emerged, and the property market’s rebound from a three-year slump may be delayed until 2015 as families struggle to access affordable loans and confidence lags, according to CBRE Group Inc.