Worried about real estate projects being "shelved" if bad debt increases?

That was the concern of Mr. Le Hoang Chau - Chairman of the Ho Chi Minh City Real Estate Association, at the workshop "Handling bad debt: What is the harmonious solution?", organized by Tien Phong Newspaper, on May 27.

Mr. Vo Hong Thang, Deputy General Director of DKRA Group, said that as of May, outstanding real estate credit in Vietnam reached more than 1.56 million billion VND, an increase of about 260,000 billion VND compared to the end of last year, equivalent to an increase of 20%. If the credit of the whole system grows at the target of 16% this year, the total outstanding real estate debt could reach 3.8-3.9 million billion VND. However, credit still mainly flows to real estate businesses, while people are not interested in borrowing to buy houses due to high prices.

Notably, the bad debt ratio in the real estate sector is increasing rapidly. Statistics show that the total bad debt of 27 listed banks has exceeded VND265,000 billion, up 18.5% over the same period.

"Real estate businesses are facing a "half-happy, half-worried" situation. Loan interest rates have decreased by more than 2 percentage points compared to the end of 2023, helping to lower capital costs. The birth of a VND120,000 billion credit package for social housing and credit support policies from the State Bank. However, many difficulties still weigh on businesses, lending conditions are increasingly strict, especially in the context of many companies' financial reports showing weakness" - Mr. Vo Hong Thang said.

Lo dự bán bất động sản — In the context of increasing bad debt, according to businesses, many banks are increasingly cautious, only accepting real estate as collateral, and are not flexible with other assets such as stocks or property rights...

Mr. Le Hoang Chau acknowledged that the situation of bad real estate debt is becoming increasingly complicated, greatly affecting the stability of the financial market and the health of businesses. Without a comprehensive and breakthrough solution, a series of unfinished projects will continue to be "shelved", causing a chain reaction of consequences for banks, investors and workers.

"Dealing with bad debt is not only about debt recovery but also an opportunity to recover the market. It is recommended that the Government consider issuing a special mechanism to deal with bad debt in a drastic and synchronous manner. Many projects of great value are stuck in a spiral of procedures and legal disputes, making it impossible for banks to foreclose and for businesses to restructure. It is necessary to perfect the legal framework for handling secured assets in a transparent manner, shortening the foreclosure process, including through public auctions or project transfers," said Mr. Le Hoang Chau.

According to Fulbright experts, when completing the Law on Credit Institutions, a balance must be struck between the bank's right to seize assets and the borrower's property rights.

This balance must be based on the following principles: increasing risk coverage for banks, reducing the cost of capital for borrowers, and improving access to credit for the economy .

Dr. Do Thien Anh Tuan - Fulbright School of Public Policy and Management, commented that this bad debt, also known as "blood clot", lasts from year to month, causing damage to banks and to people with mortgaged assets.

Assets that are frozen, seized, sealed, and clearly cannot be used for anything, cannot generate profit, causing waste. During the 2017-2023 period, Resolution 42/2017/QH14 on piloting bad debt settlement of credit institutions opened a special mechanism to help credit institutions handle assets more quickly and effectively.

"However, when the resolution expires at the end of 2023, the legal system will immediately fall into a state of lacking an effective handling mechanism. It is necessary to legalize the successes of Resolution 42 to ensure the bank's right to legally seize assets and also ensure that the borrower's property rights must be protected," said Mr. Do Thien Anh Tuan.

Source: https://nld.com.vn/lo-du-an-bat-dong-san-dap-chieu-neu-no-xau-gia-tang-196250527143612139.htm