'Exchanging gold for houses': Who benefits?

Vinhomes' "exchange gold for a house" program is attracting the attention of investors with a series of attractive commitments. However, many people are still unclear about the legal basis of this transaction.

Through its partner gold and jewelry company, Vinhomes announced it will support customers in converting idle gold into cash to purchase real estate. Photo: Duc Anh .

While the domestic real estate market is still searching for new capital, Vinhomes' recently announced program to "convert gold resources into cash for buying houses" has immediately sparked significant debate among investors.

The idea of ​​converting gold reserves held by the public into capital for the real estate market is considered bold and could even open up a new direction for the market. However, along with this appeal come a series of questions about legality, risk management, and the ability to protect investors from unpredictable market fluctuations.

Unlocking the "enormous" economic resources.

According to a program announced by Vinhomes on May 25th, Vietnam's largest real estate developer will collaborate with gold and silver companies (official partners have not yet been announced) to help customers convert their gold resources into cash, which they can then use to purchase real estate.

After 5 years, depending on the profit margin of the real estate, customers can choose one of two options. First, they can continue to hold the Vinhomes property. Second, they can choose not to continue holding the property but receive a cash equivalent to 110% of the converted gold. A Vinhomes representative confirmed that the company will refund customers "according to the gold price at the time after 5 years".

It is estimated that Vietnam has up to 500 tons of gold held by its citizens, potentially generating approximately $80 billion in capital for the economy. Notably, the majority of this asset is currently held in people's safes, meaning it is outside the circulation of the economy.

New policy from Vinhomes and its partner gold, silver, and gemstone companies. Photo: Vinhomes .

Speaking to Tri Thức - Znew s, Mr. Nguyen Quang Huy, CEO of Finance and Banking at Nguyen Trai University, assessed that the noteworthy aspect of this model is its market-based approach.

"This is not a gold mobilization and lending activity within the credit system, but rather an asset conversion mechanism involving legitimate gold trading businesses. If implemented transparently and with appropriate risk control, this model could contribute to increasing asset liquidity in the economy, supporting liquidity in the real estate market, and diversifying capital sources beyond bank credit," Mr. Huy commented.

In addition, the program could also open up more asset management options for citizens, given that the amount of gold held by the population is still considered very large.

Sharing the same view, Mr. Ta Quoc Duong - Financial Advisor at Hub Dong Hanh under FIDT Investment Consulting and Asset Management Joint Stock Company - commented that Vinhomes' program created a strong media effect because it struck a chord with the people, especially those who hold gold.

"This could be a pioneering product that helps unlock the idle gold resources held by the people, which have long been considered a huge resource lying dormant in safes, to bring into the real estate market to increase liquidity and provide new capital for the market. This is a very welcome idea from Vinhomes," Mr. Duong emphasized.

In the context of tighter controls on real estate credit and a purchasing power that has not fully recovered, a real estate company's attempt to access "dead" assets held by the public is seen as an unprecedented experiment in Vietnam.

However, both experts emphasized that the most appealing part of the show is also the part that currently lacks the most information.

Concerns about the legal framework to protect investors.

According to Mr. Ta Quoc Duong, the key concern is not the 10% profit margin after 5 years or market appeal, but rather the legal nature of the business model. The financial expert at Hub Dong Hanh under FIDT believes there are three issues that need to be clarified.

First, regarding "gold mobilization." According to Mr. Duong, the activity of mobilizing gold (or similar forms) has been completely stopped since 2012, as stipulated in Circulars 11/2022 and 24/2012 of the State Bank of Vietnam. After 2012, the government's stance on strictly controlling the gold market and combating gold hoarding was clearly defined in Decree 24/2012.

"Regarding Vinhomes' program, it needs to be clarified whether this constitutes a gold mobilization activity. Although Vinhomes does not directly receive gold from homebuyers, there is still a risk that it could be considered a gold mobilization activity if there are activities that demonstrate the nature of such a mobilization," he analyzed.

Specifically, the company has extensive advertising to attract gold from the public; the revenue from gold sales is used for business operations (money from gold sales is used to develop Vinhomes projects); and there is a mechanism for returning profits and benefits (profitable conversion options). This is the first obstacle that could lead to the program being flagged by regulatory authorities.

Next is the commitment to receive back the gold. Accordingly, customers can receive back an amount equivalent to 110% of the gold converted to purchase real estate, meaning customers receive an additional 10% interest on the initial gold amount.

According to Mr. Duong, this content needs further clarification; however, the expert believes that this content could easily be considered a violation of the regulation prohibiting the use of gold as a means of payment (stipulated in Decree 24/2012) if there are signs of using gold as a measure of value during the conversion process, contradicting the government's stance against gold hoarding.

"From the perspective of combating the 'goldization' of the economy and stabilizing the gold market, the government's program, despite having restrictions on the timing of gold ownership to limit the scope of participants, inevitably sets a precedent. Other investors will implement similar programs, and it's possible that a significant number of people will find it more advantageous to buy projects with gold than with cash. This could create a localized artificial gold rush," Mr. Duong analyzed, but emphasized that this is only his personal opinion.

Experts recommend that investors wait for official information from Vinhomes as well as feedback from regulatory agencies before deciding to participate in the "exchange gold to buy a house" program. Photo: Duc Anh .

Similarly, Mr. Nguyen Quang Huy also noted that this model involves gold, real estate, and medium- to long-term financial commitments, therefore, legal and risk management requirements need to be set at a high standard. Participating parties must fully comply with legal regulations and consult closely with the State Bank of Vietnam and other relevant regulatory agencies.

Further analysis by expert Nguyen Quang Huy suggests that for models involving significant assets owned by individuals, market confidence is always the decisive factor.

To gain that trust, the entire operating mechanism needs to be transparently disclosed, including the method of gold pricing, the exchange mechanism, the repayment conditions, the rights and obligations of the parties, and the plan for handling significant market fluctuations.

In particular, what concerns people most is the ability to ensure their rights are protected when they need to receive back the equivalent value of gold after the commitment period.

From a personal finance consultant's perspective, Mr. Ta Quoc Duong assesses that this program could create a "double advantage" for gold holders, allowing them to access real estate while not completely losing the ability to benefit from future gold prices.

However, both experts recommended that investors should wait for official information from Vinhomes as well as feedback from regulatory authorities before deciding to participate in the program.

Source: https://znews.vn/doi-vang-mua-nha-ai-huong-loi-post1654524.html