Banks blamed for chronic lack of investment in Vietnam real estate

The real estate market in Vietnam is slowing as rising interest rates and banks cutting lending opportunities begins to affect activity.

Some areas, particulary constructions, are suffering a severe lack of capital. Banks are refusing to lend to both companies and individuals.

Developers and builders are putting projects on hold or slowing down work in the hope that economic stability will return soon.

A major developer in Ho Chi Min City has been forced to delay the construction of a commercial and office centre planned for District 5 after two partners postponed their involvement due to the acute credit shortage.

Tran Minh Hoang, chairman of the Vinaland Real Estate Company, has called for a change in property law to make it easier for those seeking finance. At present banks restrict lending for construction and the property industry believes that if alternatives were available then the country's real estate would be given a much needed boost.

Dang Hoang Vu, director of the Thanh Binh Real Estate Trading Joint-stock Company, blames the banks for the current situation. 'The government and credit agencies provide finance to the property market through the banking industry. And it is the banks that have retreated from their role of ensuring that construction projects are realised and managing the flow of capital to the property industry,' he said.

Private investors are also being hit by rocketing interest rates. Unable to buy a house without a bank home loan, house-hunters must be prepared to take on a debt with an interest rate as high as 21%.