VND50,000 Billion Credit Package: Expected to Melt the Ice

The disbursements of the credit package will be implemented by four parties: banks, manufacturers of building materials, contractors and investors. However, the experts remain skeptical about its effectiveness because the lesson learned from the credit package of VND30,000 billion before.

 

According to the State Bank of Vietnam, in the future, there will be many commercial banks involved in the credit package for real estate investment. Therefore, this funding will not only stop at VND50,000 billion but also be up to VND120,000 billion to remove the real estate inventory. VNCB and Thien Thanh Group will join hands to connect the suppliers to support the real estate projects. According to this model, the price of construction materials will be reduced from 10-20 percent to help businesses lower prices of real estate.

 

Nguyen Viet Manh, Head of Credit Department of the State Bank of Vietnam, said that in addition to the credit package of VND50,000 billion implemented by VNCB and its partners, other 7 other banks are affiliated to register with the State Bank of Vietnam for other credit package of VND7,000 billion  However, Manh noted that this is normal commercial credit package raised from the capital of credit institutions to fund the real estate projects and it provides none of preferential interest rates as that of the credit package of VND30,000 billion.

 

The facts that the inter-bank partnership is likely to pour the amount of up to VND120,000 billion into the real estate make many people concerned about whether this push-up actually becomes a real boost for the property market which has been frozen for over several years.

 

Initially, this support package will focus on the implementation of the stalled projects, to help clear the deadlock for investors, manufacturers and material suppliers, especially the customers who invest in the projects but after several years, not receiving the final products from their investment.

 

However, with this support package, many are concerned that more new projects funded by the package are likely to increase the real estate inventories which are high now due to the purchasing power and declining confidence of customers.

How much businesses could borrow and what the interest rate is will depend entirely on their deals with banks. The linkage among stakeholders are the global trends. However, what is the main goal behind this linkage? If it is for the declining price of the real estate, it should be supported; however; if it aims to gain profit, it may cause the unavoidable outcomes such as monopoly and interest groups. This distorts the property market which is facing difficulties.

 

I found strange that the credit package of VND50,000 billion is implemented by the Thien Thanh Group. After negotiating that they could supply cheaper materials than other building material companies, the group is nominated to be a intermediary among banks, investors, and contractors.

 

I'm not clear about why the Thien Thanh group was assigned to be an intermediate party to supply building materials to disburse the money. What are roles of other material suppliers? Why are they not be involved in the supply chain? Why is only one supplier chosen for this supply chain? Thus, will this make the market competition less healthier, leading the form of new interest groups?

 

The major problem of the current real estate market is not how to create products but pushing up the buying power. If no one buys, the irrecoverable capital will turn the loans into bad debt. Is it a PR strategy of the banks to support Thien Thanh Group?

 

I think this is a good idea though it's not new. Two years ago, the Bank for Investment and Development of Vietnam (BIDV) launched a similar credit package under a circle partnership in which the bank would coordinate with the investors, contractors, building materials manufacturers and buyers to avoid loss but finally, this support package failed.

 

I look forward to the success of the credit package to prop up the real estate market, investors, manufacturers and all the people out of trouble. However, from idea to action is a long way to go. The remaining problem is how to make the partnership be a closed circle to support the real estate market.

 

I do welcome capital resources to warm up the real estate market. In regard to the credit package of VND50,000 billion, the in-progress projects can be done but the question is: is the product sold? Does the demand exist? The banks, known as investors, express their concerns that whether the in-progress projects could be done to collect the old debts or will the projects be sold out or will the debts be paid?

 

I think pumping money into the property is only effective if the money is targeted to right "demand" but new credit package seems to focus on the "supply". If the "demand" does not exit, the credit package is pointless. In the past, the banks used to give loans uncontrollably but now, they cannot do that. That's not to mention the hidden interests between businesses and banks. Everything must be transparent before the good results come.