Real estate businesses and home buyers find it difficult to borrow capital with Circular 06

While many businesses and people are struggling because of difficulties in borrowing capital from banks, the State Bank of Vietnam (SBV) recently issued Circular 06 adding 4 capital needs that credit institutions (CIs) are not allowed to lend.

Many experts believe that Circular 06 has created additional barriers, making access to credit more difficult than before, because it has increased the number of cases in which credit institutions are not allowed to lend from 6 to 10.

Creating bottlenecks, pushing businesses into difficult situations

Responding to VTC News , Mr. Nguyen The Diep, Vice President of the Hanoi Real Estate Club, expressed concerns about the "bottleneck" of credit flow for real estate that could be created by Circular 06. According to Mr. Diep, in the context of real estate businesses struggling with prolonged difficulties, Circular 06 of the State Bank of Vietnam, which will take effect from September 1, 2023, will unintentionally create a "narrow door" that makes it even more difficult for capital to reach businesses, potentially pushing many real estate businesses into a situation where it is difficult to access loans.

Mr. Diep pointed out that Circular 06 has added 4 cases of customers (increasing from 6 to 10 cases) "who need capital but are not allowed to borrow credit", unintentionally hindering and suffocating businesses' ability to access credit. " Clause 8, 9 and 10 will lead to a situation where some businesses in economic sectors that need to borrow capital, including real estate businesses, home buyers, and real estate investors, will have difficulty accessing credit ", Mr. Diep said.

Experts say that Circular 06 will make it difficult for real estate businesses to access credit capital. (Illustration photo)

Sharing the same view, Mr. Le Hoang Chau - Chairman of Ho Chi Minh City Real Estate Association (HoREA) analyzed that Circular 06's addition of cases of not being able to access credit capital not only affects real estate business activities in the "conditional investment and business sectors" but also has a "negative" impact on investment and development in general because some other investment projects will also fall into cases of being banned from lending, such as investment projects under the PPP method (investment in the form of public-private partnership) to implement infrastructure works, bridges, roads, ports, airports, power plants, hospitals, schools, agriculture, forestry, fisheries, etc.

Circular 06 will make it difficult for real estate businesses and home buyers to access credit.

Because, after being recognized by a competent state agency as the investor of a PPP project, the enterprise has sufficient legal status and at this point, there is a need to mobilize capital to compensate for financial investments to implement the project, or there is a need to find a "third party" to invite capital contribution, investment cooperation, business cooperation to implement the project. However, Clause 9, Article 8 of Circular 39/2016/TT-NHNN (amended and supplemented in Clause 2, Article 1 of Circular 06/2023/TT-NHNN) stipulates that credit institutions are not allowed to lend to "third parties".

On the contrary, when these PPP projects are qualified to be put into operation, which is also the time when the project is completed, the investor will have revenue from the project. For example, after the power generation investment project has been completed, connected, tested, and has an electricity selling price, at this point, the investor no longer needs to mobilize capital to implement the investment project.

Therefore, according to the Chairman of HoREA, Circular 06 has not created conditions for real estate project investors to cooperate with investors. Mr. Chau said that borrowing credit capital "to pay for capital contributions according to capital contribution contracts, investment cooperation contracts or business cooperation contracts to implement investment projects" during the stage when the project is under construction but "does not meet the conditions for putting into business" (although the project has full legal documents such as "decision approving investment policy" or "Construction permit") is not satisfactory.

Mr. Chau proposed that the Prime Minister and the State Bank amend Circular 06 to facilitate real estate businesses to borrow capital as soon as the project is eligible for implementation.

"Banks have protected themselves too well"

Mr. Nguyen Quoc Hiep, Chairman of the Board of Directors of Global Real Estate Investment Joint Stock Company (GP Invest) - Chairman of the Vietnam Association of Construction Contractors (VACC), said that the regulation that real estate projects must meet the conditions to be put into operation before being able to borrow capital is unreasonable, "banks have protected themselves too carefully".

Mr. Hiep asked: " Real estate businesses must build infrastructure first, and meet technical infrastructure requirements before they can open for sale. When the project is qualified for sale, what is the point of borrowing credit? Who needs to borrow anymore? "

Meanwhile, when approving loans for businesses, banks also carefully examine business plans, not easily lending. Banks also require real estate businesses to mortgage projects and mortgage additional assets. " If credit is tightened like this, it will be very difficult for real estate to develop. I think this regulation needs to be reconsidered ," Mr. Hiep emphasized.

Dr. Can Van Luc, member of the National Financial and Monetary Policy Advisory Council, agreed that the State Bank should reconsider the project in the direction that it may not meet the current conditions but may meet the conditions in the future (in the form of "future-formed assets") according to the assessment of credit institutions, then credit loans should be allowed.

Experts also said that the regulation of not lending capital to pay for capital contributions under capital contribution contracts, investment cooperation contracts or business cooperation contracts is to block future real estate buyers. Until now, investors only need to complete the foundation of the building after approval to be allowed to sell to customers to raise more capital to continue completing the project.

All sales agreements at this time are based on capital contribution contracts or business cooperation contracts and banks provide loans so that customers can buy houses. If Circular 06 comes into effect, investors will not be able to mobilize capital from buyers, which means they will have to invest their own capital to complete the project and then sell the products. This will cause difficulties for investors because few people have enough capital to complete the project.

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Source: https://vtc.vn/chuyen-gia-doanh-nghiep-bat-dong-san-nguoi-mua-nha-kho-vay-von-voi-thong-tu-06-ar807539.html