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Directing Credit Toward Real Estate Projects

Directing Credit Toward Real Estate Projects

Tuesday 07, 04 2020
The new credit policy of the State Bank under Circular 36 has gradually diversified capital flows into high-end mid-end projects, serving the housing needs of the majority of people in large urban areas.

Policies to help the market stabilize

The State Bank is operating credit policies in a tightening direction for real estate. The developments from the beginning of 2019 show that banks have reduced the ratio of short-term capital for medium and long-term loans from 45% to 40%, increasing the risk ratio for real estate business loans from 150 % to 200%.

Notably, leading banks such as Techcombank have had solutions "to go first and foremost" to accompany the policy, to meet the needs of people to settle down and ensure stable growth. Specifically, Techcombank's ratio of short-term capital used for medium and long-term loans as of September 30, 2019, was 36.1%.

Meanwhile, the demand for settlement of the young population market of 100 million people in Vietnam is still very large. Data from market research companies show that there are an additional 200,000 couples getting married each year and wishing to live separately, nearly half a million families need to change their places.

According to an AC Nielsen survey, young people used to borrow their parents, relatives, and friends to buy a house, but now 65% choose to go to the bank.

According to the State Bank, as of the end of June, the credit balance for the real estate sector reached nearly VND 1.4 million billion, up 6.5% compared to the end of 2018. According to the State Bank, as of the end of June, the credit balance for the real estate sector reached nearly VND 1.4 million billion, up 6.5% compared to the end of 2018.

This data shows that the portion of capital directly lent to real estate businesses with investors of banks increased or even decreased, while capital lent to consumers for the purpose of buying houses to live as apartment buildings continue to increase.

Experts said that the State Bank's credit tightening may temporarily affect real estate enterprises, but in the long run, it will stabilize and make the market healthier. "Credit control for real estate should be selective, increase capital for projects that are completed quickly and effectively, and limit capital supply for incompetent investors who may prolong the projects” Dr. Le Xuan Nghia noted.

Credit control for real estate

Sticking to the real needs of the people

Analysis of real estate credit data at Techcombank shows that the bank leads and keeps abreast of market trends. In the first 9 months, real estate credit growth at Techcombank reached VND 113,186 billion, of which direct loans to project investors and contractors accounted for only 35%, the rest was used as 2 forms of loan to customers to purchase housing: Installment payments from a fixed monthly income or using real estate like mortgage.

Techcombank's demand-for-home credit model is highly appreciated for its effectiveness in minimizing credit concentration risk. This product is designed in series, including loans for investors developing housing projects, construction contractors, material suppliers, furnishing businesses, and complete equipment, and homebuyers.

Risk management is centralized at a focal point, which is the bank and interconnects data at the links of the chain so that loan flows are traceable and strictly managed. Besides, due to its focus on customers who buy houses for housing, with clear plans and cash flow, the NPL ratio of real estate credit of Techcombank, according to the bank's leaders, is at only 0.5%.

Good risk management is an important factor contributing to the growth of revenue and profit of Techcombank. This is also the only bank committed to investing up to US $ 300 million to improve the technology infrastructure from 2016-2020 to ensure a good customer experience.

Accordingly, Techcombank has developed effective products and business models, high profits and low risks, improved service quality and increased customer benefits. For example, the project "The process of buying a house on M + technology" enhances the transparency of the loan process, helping customers to actively grasp the progress of loan processing records throughout the loan journey.

According to Ms. Nguyen Van Linh, M + Project Director of Techcombank, the home loan journey with the M + digitization process has the percentage of approved documents compared to the initial record up to 96%. In particular, the processing time for documents from initialization to approval is completed, resulting in a shortened credit limit of only 20 minutes. Processing time from the start of the loan application to the completion of disbursement takes only 4 working days, making it easier for young couples to access the home loans.

In fact, the demand for housing of Vietnamese people always grows as income increases. Therefore, the fact that banks such as Techcombank control the cash flow of loans to buy houses to stay, pioneering to create new experiences that contribute to the healthy and sustainable development of the market not only helps banks develop stably, improving the quality of life of the people but also supports the economy with sustainable growth.

According to the November 2019 assessment of ACBS, Techcombank was ready to make a breakthrough for the next stage of development, with a clear strategy and ambitious business strategy, especially when developing a strategy based on the Value Chain. This is the foundation for Techcombank to expand its customer base at a lower cost than its competitors, as well as shift its revenue structure to non-interest income by diversifying products according to customer needs.

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