Real estate firms ready to face tightened lending requirements
Real estate firms ready to face tightened lending requirements
Real estate firms need to scale up efforts to cope with more stringent lending requirements from banks from this year as well as the upcoming influx of new supply.
In light of the State Bank of Vietnam (SBV)’s Circular No.19/2017/TT-NHNN dated December 28, 2017, from January 1, 2018 the maximum ratio of short-term capital sources used for medium and long-term lending at banks and foreign bank branches is set at 45 per cent, which will be reduced to 40 per cent from January 1, 2019.
Circular No.19/2017/TT-NHNN is to amend and supplement SBV’s Circular 36/2014/TT-NHNN dated November 20, 2017, prescribing limits and prudential ratios in operations of credit institutions and foreign bank branches.
Despite facing rising pressures in operation, the executives of many real estate businesses, however, said firms should not be too nervous as the pressure could motivate firms to search for suitable measures to weather the storm for sustainable development and adapt to a new business environment.
According to Ngo Quang Phuc, deputy general director of Ho Chi Minh City-based Him Lam Land, most real estate businesses currently focus on four major capital sources: equity capital, joint venture (JV) capital, capital raised from customers, and capital raised from banks.
Loans account for a major part, which means the new stringent requirements will surely affect the market.
“Dynamic businesses need to always be prepared when it comes to capital sources. Amid finite equity capital and more stringent lending requirements, firms must take initiative with the remaining sources,” Phuc said.
Identifying market risks, lots of real estate firms have paid heed to enriching capital sources to reduce borrowing costs.
Luong Tri Thin, chairman of Ho Chi Minh City-based Dat Xanh Group, said that in the second quarter of this year Dat Xanh will officially shake hands with a leading Japanese partner for project development.
“In the first project, the Japanese partner will contribute 30 per cent of the capital for joint implementation. At successive projects, they will raise the capital ratio, but will not exceed 49 per cent,” Thin said, adding that teaming up with the Japanese partner is important to the group’s development journey.
Besides apartment projects, Dat Xanh is increasing investment into large-scale urban area development, a segment where the Japanese partner has a wealth of experience.
Not only Dat Xanh, many other developers have taken a similar approach. A source from Danh Khoi Limited, also based in Ho Chi Minh City, unveiled that the company has just inked a cooperation deal with a Japanese investor to jointly implement upcoming projects.
In late 2017, privately-held Phuc Khang Group joined hands with Japan’s Mitsubishi Group to form a JV for project development. Earlier, An Gia struck a cooperation deal with Japan’s Creed Group Investment Fund.
Market pressures in 2018 also feature an upcoming influx of supply. Accordingly, early this year city-based major developer Novaland launched more than 1,000 apartment and shophouse products in District 2.
A string of the company’s other projects will also roll-out within the year.
This year, Dat Xanh Group is set to launch more than 10,000 apartments. Accordingly, 3,100 apartments will come from 12 towers under Dat Xanh’s Gem Riverside project in District 2, more than 3,500 apartments from eight towers under the Opal City project in District 9, 4,247 apartments from 10 towers under the Opal Premium project, and thousands of apartments under Lux Riverview in the city’s southern part.
According to the group’s general director Nguyen Nam Hien, Hung Thinh Group will launch about 10,000 apartment units this year. Of these, right in the first quarter Hung Thinh will announce its project in District 7 which encompasses 4,000 apartments and then another project in the city’s eastern part with the scale of 3,000 apartments.
