Hanoi (VNS/VNA) - The Ho Chi Minh Real EstateAssociation (HoREA) has suggested the State Bank of Vietnam (SBV) extend theapplication of regulations on banks’ maximum ratio of short-term funds used formedium- and long-term loans until the end of 2020.

The HoREA also proposed the rate should bereduced to 37 percent starting from January 1, 2021; 34 percent from July 1,2021; and 30 percent from July 1, 2022.

The moves were announced after the SBV releaseda draft circular stipulating that the maximum ratio of short-term funds usedfor medium- and long-term loans at banks would be reduced from the current 45percent to 40 percent from 2019 to June 30, 2020.

Under the SBV’s draft circular, the rates of 37percent and 30 percent will be applied from July 1, 2020 and July 1, 2021,respectively.

According to the HoREA, the amendments willdamage the real estate market as property enterprises are in dire need ofmedium- and long-term loans. It explained that due to the large proportion ofshort-term capital in banks’ total mobilised capital, banks will find itdifficult to meet the demands of the real estate market.

The HoREA said real estate firms in developedcountries have raised capital from investment funds and stock markets. Bankloans are mainly provided to homebuyers. However, in Vietnam, propertycompanies are dependent on bank loans and capital mobilised in advance fromhomebuyers, while most homebuyers also take loans from banks.

The local stock market has yet to become a majorchannel of capital access for real estate enterprises as the number of listedproperty firms is small. Only some 65 out of more than 1,000 real estate firmsare listed on the stock market, the HoREA said.

Real estate investment funds and the stockmarket are unable to meet the high demand for capital in the property sector.Vietnam currently has only one investment fund for the sector, Techcom VietnamReal Estate Investment Trust, an arm of Vietnam Technological and CommercialJoint Stock Bank, with charter capital of only 50 billion VND (2.14 million USD).

The foreign direct investment (FDI) inflow tothe local real estate market is also limited and does not meet capital demands,though it accounts for some 21 percent of the country’s total FDI value, theHoREA said.

It expects the application of the amended Law onSecurities this year to create favourable conditions for the establishment ofreal estate investment funds and trusts to provide capital for the local market.

According to the Law on Real Estate Business,investors in property projects must provide at least 15 percent of the equityor 20 percent of the investment capital. The remaining 80-85 percent of capitalcan be mobilised from banks or customers.  - VNS/VNA