A view of Linh Dam New Urban Area. Loans pouring into the real estate sector are expected to be tightened (Source: VNA)

Hanoi (VNA) – Loans pouring into the real estate sector are expected to be tightened given that the sector is said to be experiencing robust growth.

In a draft document issued by the State Bank of Vietnam circulated for the opinion of financial institutions, the risk index of receivable lending for real estate and securities might be raised from 150 percent (the lowest level) as stipulated in Circular No 36, to 250 percent.

Maximum ratio of short-term funds used for medium and long term loans might be adjusted from 60 percent to 40 percent.

The Ministry of Construction's Department of Housing and Real Estate Market Management reported that as of November 2015, outstanding loans invested in the market was up to 375 trillion VND (16.67 billion USD), a surge of 20 percent compared to the figure of December 2014. This is the result of the Circular No 36 which was in effect from February 1, 2015.

Three activities which have the highest rate of increase in loans are, buying the right to use land with 36.3 percent, building new urban areas with 10.7 percent, and investing in other real estate businesses at 11.2 percent.

The proposed amendments imply the central bank's concern about the overheating of the real estate sector, according to a report of the Ho Chi Minh City Securities Company.

The new rules, if applied, would have a negative impact on developers such as Novaland, Vingroup, Dat Xanh, and Nam Long as well as their customers, it said.

Lenders that are major players in the mortgage market, such as ACB, Sacombank and Techcombank, would also be affected, it said.

This change would not affect families and individuals who buy houses to live under the scheme of pay-by-instalment.

Previously, experts also raised concerns over the real estate "bubble" which might occur in the future if the lending for property investments was not controlled.

Expert Nguyen Tri Hieu told news website ttvn.vn that the warm-up of the real estate market could help deal with bad debts, but in fact, the market was still facing difficulties as the volume of inventories was still high.

Therefore, commercial banks should not only speed up the lending, but also need to strictly supervise the quality of loans as well as the sources of debt servicing, he said.

🥀 It is the time for the central bank to tighten credit in the real estate market, he stressed, while adding that property businesses should prepare financial resources themselves to avoid over-reliance on the banking system.-VNA