HoREA proposes maintaining ratio of short-term capital for long-term loans

HoREA proposes maintaining ratio of short-term capital for long-term loans By Le Anh If the maximum ratio of short-term capital used for long- and medium-term loans is reduced, the capital for the real estate sector is likely to drop – PHOTO: LE ANH HCMC – The HCMC Real Estate Association (HoREA) on September 27 suggested the State Bank of Vietnam should not reduce the maximum ratio of short-term funds used for medium- and long-term loans to 40% from early next year from the current 45%. According to the association, the amendment is damaging to the real estate market as property enterprises are in dire need of medium- and long-term loans. Real estate firms in developed countries have raised capital from investment funds and stock markets. Bank loans are mainly provided to homebuyers. Meanwhile, in Vietnam, property companies are dependent on bank loans and the capital mobilized in advance from homebuyers, while most homebuyers also take loans from banks. Due to the large proportion of short-term capital in banks’ total mobilized capital, banks find it difficult to meet the demands of the real estate market. According to the Law on Real Estate Business, investors in property projects must provide at least 15% of the equity or 20% of the investment capital. The remaining 80-85% of capital can be mobilized from banks or customers. In the year to August, the outstanding credit for the real estate sector accounted for some 7% of the total outstanding loans. If consumer credit used for house… [Read full story]