Solutions offered in battle to survive amid credit tightening

In orderr to replenish capital sources, Phung Quang Hai, CEO of Khai Hoan Land JSC, a major real estate developer in the southern region, noted that the sector’s leading players are now not heavily reliant on bank credit as in the past, yet are diversifying their capital raising, such as through corporate bond issuance.

“As a real estate developer, we are very prudent in using bank loans. Currently, the lending rate on our equity remains tiny,” said Hai.

He made the remarks at a talk show on real estate tickers held at Vietnam Investment Review headquarters last week.

“Squeezing capital sources into the real estate sector is a right move from the government, as signs of inflated prices have been spotted in many projects, such as those in Ho Chi Minh City suburbs that don’t have good locations. This has adversely hampered developers’ access to capital sources for project execution,” said Hai.

After developing robustly during 2016-2019, property-oriented credit experienced a spike as the bank lending rate fetched relatively low at just 5-6 per cent. The situation, however, continues to change radically, and Hai is warning developers to thoroughly keep their feet on the ground and adapt to new conditions.

Also at the event, Pham Danh Khoi, who is director of the Finance-Economics-Real Estate Institute of Dat Xanh Services JSC (DXS), said the government’s tightening credit in real estate has helped cool down the feverish market and mitigate speculation.

Businesses expect banks to have their credit limits loosened to amplify capital sources for production and business activities.

“If this happens, credit growth in the second half of the year would not stay as high as in the first half,” Khoi said, adding that the easy money period has passed, and the forthcoming capital market would bring certain influences to the operation of investors and businesses.

DXS leveraged its growth acceleration trajectory by diversifying loans from local and external sources more than a year ago, helping to secure stable capital flow for long-term development.

Vu Ngoc Quang, a senior expert at the Investment Analysis and Consulting Centre under Hanoi-based SSI Securities Corporation, remarked that for real estate project implementation, developers often use 20-30 per cent of their equity, and the remainder comes from diverse sources such as bank loans, corporate bond issuance, or homebuyers’ capital.

“Current tightening credit and constrained bonds have cast significant impacts on real estate developers’ multi-faceted operations, including project development, mergers and acquisitions, and their ticker performance,” Quang said.

For instance, the tickers of many listed real estate developers saw a plunge of 60-70 per cent in recent months, which has shocked both investors and brokers.

Quang suggested that investors holding real estate tickers which incurred price nosedives should be “more relaxed”, partly restructuring their portfolio by shifting into buying stock in more promising sectors.