How can we resolve the difficulties facing the real estate market?

* Reporter: Dr. Tran Du Lich , many solutions to support the real estate market have been proposed, but why do businesses continue to report difficulties and need "rescue" in terms of both capital and legal matters?

- Dr. Tran Du Lich: I disagree with the term "rescue". A comprehensive solution is necessary, but it shouldn't be a "rescue".

Not just recently, but for the past few decades, the Vietnamese real estate market has developed very rapidly and strongly, but in an unhealthy way, as evidenced by excessive speculation. Of course, in a market economy , speculation exists in every sector, but when speculation becomes excessive, it leads to distortions in supply and demand and prices.

For example, during the period of 2009-2011, the real estate market only froze in the high-end product group, unfinished projects, land subdivision for sale, or projects where the foundation was completed but then abandoned... Meanwhile, finished products in the mid-range and low-price segments continued to trade normally, and were even in short supply.

In 2022, along with the enthusiastic economic recovery after the COVID-19 pandemic was brought under control, the real estate market also experienced massive growth across many product segments, with a wave of investment and speculation becoming quite common. Many real estate companies partnered with commercial banks, committing to loans to stimulate speculation instead of facilitating housing purchases for people with genuine needs.

While resort real estate and condotels are thriving, there is not much residential housing in urban areas. For example, in Ho Chi Minh City, there have been no new projects or products in the housing segment for middle and low-income earners for several years.

* If the real estate market needs rescuing, what would be the order of priorities?

- Everyone knows that real estate business is a business conducted with other people's money, including credit loans, bond issuance, customer advances, and a portion of the company's own capital.

The real estate market needs to be allowed to self-regulate and self-cleanse, alongside a comprehensive reform program from the government, instead of focusing on immediate bailouts. (Photo: HOANG TRIEU)

In the context of a volatile financial market, when all four sources of capital for the real estate market, especially corporate bonds, cease to exist, capital shortages are inevitable. Furthermore, a series of projects that were poised for further development and implementation are hampered by procedural and legal obstacles, preventing additional supply. This creates a vicious cycle: projects under development lack the necessary capital to continue, while new projects face legal hurdles.

Given this situation, I believe the government 's biggest goal is not simply to address the immediate problems in the real estate market, but rather to develop a relatively well-structured plan to revitalize the market in the medium to long term.

* What are the specific solutions, sir?

- There is a very close correlation between the financial market and the real estate market. Therefore, solutions to improve the health of the real estate market need to be synchronized with addressing issues in the financial market through a comprehensive action plan.

Institutionally, it is necessary to review all legal regulations related to the real estate market from the project's inception to its operation and development, including: regulations on the credit system, regulations in the Law on Real Estate Business, the Law on Housing, the Law on Land, the Law on Construction, etc. From there, adjustments should be made to address shortcomings in the entire legal system, rather than just resolving issues in one or two laws.

Given the legal bottlenecks, it is possible to propose that the task force on resolving difficulties and obstacles for real estate projects select a few exemplary cases for resolution, creating a legal basis for other areas to follow and replicate the solution.

Note that financial tools should be used to control and limit real estate speculation. Priority should be given to housing projects with genuine market demand, with a focus on providing financial support to both homebuyers and developers, in order to increase a reasonable supply to the market. In reality, there are many abandoned urban areas with large amounts of capital tied up there.

So where does the money come from to fund residential projects that are truly necessary for people in need? This situation is similar to the secondary market. The key is to let the market self-cleanse and self-regulate; how can we rescue it, and who can?

It is recommended that large real estate companies proactively restructure to reduce financial pressure. Investors can restructure themselves by selling off projects that are causing them debt problems or projects that are too intertwined with multiple sectors.

Investors need a risk management system; they cannot act indiscriminately or overuse financial instruments. The State Bank recently cited the example of a real estate company developing dozens of projects simultaneously across the country – how can they be rescued? From the banks' perspective, they may choose not to reclassify the debt, but instead restructure, extend, or postpone debt for companies in this category.

The most important thing is to start immediately; the longer you delay, the harder it will be!

(To be continued)

Source: https://nld.com.vn/kinh-te/go-kho-cho-bat-dong-san-cach-nao-20230214223803655.htm