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Promoting real estate loans: will trampled footsteps?

Only within 3 years back here, the credit flow into real estate has been increased total of 80%.

Credit in the real estate sector is growing at a fast rate. According to the Credit Department, real estate credit in the past year continued to increase, the current real estate business loan portfolio about VND360,000 billion. Compared with the number at 3 years ago (2012) approximately VND197,000 billion, the banks were " pumped " into the real estate sector about VND163,000 billion (approximately US $ 7.4 billion), equivalent increase about 80 %.

Still, many experts still believe that the real estate market, there is no risk of a bubble in 2016.

However, recently, in Resolution No. 01 / NQ-CP on duty, major solutions to direct the implementation of plans of economic development - social and state budget in 2016, the Government has noted the State Bank should focus strictly control credit grants for potential risk areas such as real estate, project payback long time...

Around these issues, we have an interview with Dr. Nguyen Duc Do, Deputy Director of the Institute of Finance and Economics, Finance Academy.

Sir, why credit property is now to be classified in the field of potential risks?

Dr. Nguyen Duc Do: In recent times, many banks and businesses have stepped up investments, completing real estate projects unfinished in order to increase supply to the market. This is expressed through increasing steel imports.

Does the market need to be strong enough to absorb the growing supply? If the demand for real estate is mainly speculative and based on credit, means the solvency of the buyer is really low, businesses and real estate investors are very easy to fall into indebtedness at a high level, as supply becomes redundant. At that time, the bad debt in the bank is going to increase.

This may be why the government had issued a warning about the credit risk of real estate.

The real estate market has shown signs of recovery, which means the bank has opened a series of "room" and was aggressive in lending, sparking fears of bubble real estate is cyclical. In your opinion, are banks going back to the old way of the previous year?

With the rapidly increasing supply, property prices will hardly be increased substantially to high levels to be called a bubble. Perhaps, we should only start to worry about the price of the real estate bubble, when the bad real estate debt is handled thoroughly, means even the real estate project the least attractive also found a buyer .

However, it seems now there is a race to see who complete projects sooner to offer to the market.

Loans to real estate is considered an attractive segment for banks. Meanwhile, lending rates for real estate relatively high with high credit demand growth system, are therefore increasingly difficult lending rates fell not, sir?

With credit scale real estate accounts for about 8% of total credit, can hardly speak lending rates, real estate is the main reason that the general interest rate is currently at a high level.

Deposit rate and lending at a high level today, mainly because the scale budget deficits, public debt, high levels of bad debt and the situation where people and businesses are hoarding foreign currency.

Well, thank you.

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