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Property-guarantee barriers remain despite new circular

Update: August, 29/2015 - 09:09

Transactions being conducted at Sacombank's branch in Lang Son Province. Sacombank is one of five additional banks that are eligible to guarantee property investors. — VNA/VNS Photo Tran Viet

HA NOI (VNS)— Issues relating to banking guarantees for future property purchases remain, even though Article 56 of the Law on Real Estate Business came into effect two months ago.

Following the article coming into effect, property developers, before selling or leasing unfinished properties, must now obtain guarantees from eligible commercial banks as assurances of their financial obligations to buyers.

Five more banks to guarantee investors

HA NOI — The State Bank of Viet Nam named five more banks on Thursday that qualify for guaranteeing property investors, following issuance of regulations on the realty trading law. The banks are Sacombank, Kien Long Bank, Nam A Bank, as well as Orient Commercial Bank and Viet Nam International Bank.

The newly revised Law on Real Estate Business, which took effect on July 1, stipulates that property investors can sell or rent houses only with the underwriting of commercial banks.

The Ministry of Construction said such regulations aim to protect the interests of homebuyers, whose advanced money will be refunded if investors fail to assure the completion of their projects.

Earlier this month, the central bank listed 33 banks that offer such property guarantees. These included foreign lenders such as HSBC Viet Nam, Standard Chartered, Indovina Bank, along with Vinasiam Bank and Viet Nam – Russia Bank.

The central bank has also issued a circular regulating bank property underwriting, without specifying how it selects qualified lenders. — VNS

The purpose of the article is to protect homebuyers. If property developers fail to hand over apartments to buyers, despite commitments, banks will be responsible for returning a buyer's money, in line with signed contracts. In addition, this will help improve the sense of responsibility of investors.

There are two forms of guarantees, trust loans and mortgages. It is easy to grant mortgages for both property developers and banks.

The State Bank of Viet Nam officially enacted Circular No 07/2015 on the mortgage guarantee, and also announced the list of 38 commercial banks that are eligible to provide bank guarantees for future property projects.

However, there are no estate projects in Ha Noi receiving guarantees from banks, as Circular 07 and the Law on Real Estate Business reportedly have conflicts. The reason was that the law required guarantees be given before signing housing purchasing contracts, while the circular asked home buyers to have a signed contract before approving guarantees.

Several customers came to Hoang Vuong Property Transaction Floor to purchase apartments. However, they said they were afraid of projects that were not guaranteed.

Ta Phuc Hai, the company's director, said investors who did not have bank guarantees would cause home buyers to hesitate, while businesses had to stop the sales to wait for guidelines from the central bank.

"We have been denied the opportunity to sign guarantee contracts with banks for our project, though we work with several banks," he said.

Meanwhile, lawyer Tran Minh Hai, director of Basico Law Firm, said the basic characteristic of the guarantee was to assure participation by three parties, including the bank, investor and home buyer. However, the revised law required the guarantee be implemented before the sale, or there would be no buyers, while banks could not violate their guarantee regulations.

Sharing his ideas, Huong Tran Kieu Dung, general director of property developer FLC Group, told Viet Nam News that when a bank gave guarantees for a large project, their risks would be higher and they could face difficulties in money flows.

The guarantee would be for several categories, as a property project often is a complex of apartments, retail stores and offices.

In addition, estate investors would also find it difficult to meet the requirements of financial ability and project progress from banks, to become eligible to receive the guarantee.

"I wonder whether a property project needs to be guaranteed if an investor has prestige in the market and receives the trust of home buyers?" Dung asked.

She added that the guarantee should not be required for entire projects. Instead, the guarantee would be given to customers who request it.

"I think this could help banks reduce money flow pressures, while investors could also reduce unnecessary costs," she noted. — VNS

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