HCMC – Prime Minister Pham Minh Chinh has said the Government will not bail out the struggling real estate sector.
Speaking at a hybrid conference on policies and solutions for the frozen real estate sector yesterday, February 17, Chinh said there would be no bailout but government agencies, local authorities and real estate businesses would have to sit down together find coping measures.
The real estate sector plays a critical role in the economy, so when it has problems, the economy and people’s lives would be affected, according to business leaders.
Data from the Ministry of Construction showed that the construction and real estate sectors have contributed around 11% to Vietnam’s gross domestic product.
Since last year, the real estate has been grappling with the liquidity crunch as it has found it extremely hard to access bank loans, launch new corporate bond issues and look for home buyers.
Real estate firms have scaled down or put off their investment projects and initial public offering plans, and 40% of property companies have become insolvent due to low or no cash flows.
One of the problems is land prices cannot be determined based on market principles under the current land law.
Real estate companies cannot issue new corporate bonds to raise funds to repay for their bonds that fall due this year.
Data of the Vietnam Bond Market Association showed around VND309 trillion worth of corporate bonds will fall due this year, with issuers in the real estate sector accounting for a whopping VND119 trillion.
Real estate firms proposed the Government make credit access easier for businesses and homebuyers.
Banks should give loans to feasible projects, social housing projects and creditworthy companies while rescheduling loans for property firms.
However, PM Chinh attributed the current real estate market woes to the imbalance between supply and demand, with high-end homes outnumbering affordable ones.
Relevant authorities and businesses should work together toward sustainable development, he suggested, adding property firms need to lower home prices, restructure product portfolios, and accepting lower profit margins.
He also asked banks to restructure real estate loans and cut down on costs to make it possible to lower interest rates.