Govn’t working on relief packages for frozen realty market

The government is working on many packages of combined relief solutions to help the local real estate market and related industries, said a senior state official at a recent National Assembly (NA) meeting in Hanoi.

 

The Government and the Ministry of Construction are focused on building legal documents related to real estate and urban development so that the local realty market will come under strict supervision, said Construction Minister Trinh Dinh Dung.

Unfeasible projects with no cleared ground will have their licenses revoked, said Dung.

In addition, capable realty developers will be required to restructure their property product development plans in an effort to build more social housing projects for low-income people and those entitled to social housing policies.

The government will also join forces with the State Bank of Vietnam in extending credit loans to investors building such social housing projects, and people who buy units from these projects.

Another solution proposed by the Minister at the macro level is to ask the NA to allow value-added tax (VAT) exemption for families and individuals planning to buy social housing for the first time.

Realty investors developing social housing projects will also enjoy preferential enterprise income taxes at maximum rates and pay land use fees in accordance with the development stage of their projects, according to Dung’s proposal.

Hanoi and Ho Chi Minh City have also been asked to focus on expediting procedures to remove difficulties for realty enterprises.

Regarding unsold building material inventories, the minister said that as rising inventories in bricks and cement and other building materials are caused by the decrease in total social investment, tackling the realty market will help ease this issue.

Other solutions include the development of new investment projects in the field of construction and the removal of difficulties for the property market, like increasing the number of social housing projects that use domestically-made building materials.

“Frozen” market

The local real estate market is in a “frozen” state with very few transactions taking place. While local realty investors find it hard to boost sales, many people who need a house find the prices unaffordable.

As of August 31, total outstanding loans for the real estate sector stood at VND203 trillion, 66 percent of which account for bad debt, Dung said.

However, if taking into account all the real estate-related loans, such as real estate loans, or investment and business loans backed-up up by real estate products as collateral, the total outstanding credit is about VND1,000 trillion, or 57 percent of total outstanding loans.

So, if the realty sector is in trouble, its bad debts will rise, along with the hurdles of the real estate market, affecting many other social and economic sectors, such as cement and steel industries, and the safety of the banking system.

The cause of this situation is that past development of the real estate market lacked clear and visionary planning, leading to greater supply than demand.

Currently, there are 2,399 projects in 44 provinces and cities nationwide, and nearly 71,000 hectares of land used for real estate.

Hanoi now has 368 real estate projects taking up about 20,000 hectares, but there are only 233 ongoing projects, accounting for about 40 percent, or 8,000 hectares.

Unsold inventories are now at about 16,469 apartments, 4,116 low-rise buildings, and 25,870m2 of office buildings.

In addition, the property product structures are unreasonable, with a large number of real estate products fitting in the high-end market, while there are only a few small-to-medium sized projects at affordable prices for low-income people.

Capital for real estate projects mainly comes from bank loans, so as the market became unexciting, bad debts in real estate loans increased.

 

Source: Tuoi Tre News