HCMC – The State Bank of Vietnam (SBV) has made clear that its recently issued Circular 22 imposes no restrictions on lending to those buying homes that will be constructed in the future.
Circular 22, which will take effect on July 1 this year, amends and supplements Circular 41/2016, regulating the capital adequacy ratio (CAR) of banks.
Since the central bank’s circular came out, there have emerged concerns over possible impact on homebuyers who need bank loans to buy homes that will be built by commercial residential projects.
The circular has been interpreted as preventing commercial banks and foreign bank branches from lending to to-be-built homes. Without the option of using the property itself as collateral, homebuyers would have to explore alternative security measures for their loans if they need a loan.
However, the SBV said that Circular 22 preserves the right of individuals and organizations to purchase such properties. The circular introduces adjustments to risk ratios for specific loan categories. Notably, the risk ratios for loans dedicated to social housing have been reduced compared to those for other real estate and housing to encourage banks to channel funds into social housing projects in line with Government policy.
This circular reduces risk ratios for banks supporting industrial real estate projects from 200% to 160%, and agricultural development loans supporting rural growth now have a lowered risk ratio of 50%. Importantly, the circular maintains existing risk ratio regulations for loans related to real estate purchases and other housing.
In response to concerns raised by the HCMC Real Estate Association (HoREA) regarding potential restrictions on financing to-be-built homes, the central bank said that Circular 22 does not alter regulations for these loans.
The criteria for secured loans, project-based financing, and the valuation of finished homes financed through loans remain consistent with the previous guidelines.
Under the current regulations, loans for to-be-built homes and mortgages secured by future assets are subject to risk ratios ranging from 30% to 120%, depending on the loan-to-value ratio (LTV). In cases where LTV information is unavailable, the risk ratio is fixed at 150%.
The SBV underscores that these measures aim to strike a balance between facilitating access to financing for the real estate sector and managing potential risks.
