Circular 06 - barriers to credit access

Specifically, Mr. Quyet said that in Circular 06, the State Bank of Vietnam (SBV)'s regulation that only loans are granted to projects that meet business conditions will be a big difficulty for businesses. In fact, before the project is sold to customers, the investor needs capital for initial implementation and construction, without which it will be almost impossible to do anything.

Most investors today only have about 10 - 20% of their total investment capital from their own resources, and even "healthy" businesses only have about 25% of their own capital, with the remaining 80% of capital mobilized from banks and customers.

Meanwhile, to implement the project until it is eligible for sale, 30 - 40% of the total investment must be spent to pay for expenses such as: site clearance costs, land tax, infrastructure construction costs, etc.

Thus, if they cannot borrow capital from banks, investors will lack 15 - 25% of capital to build until the project is qualified for business.

“ Such analysis shows that without bank loans, almost the majority of real estate businesses will not be able to implement projects until they are eligible to sell houses, except for a few businesses with great economic potential ,” said Mr. Quyet.

Therefore, according to Mr. Quyet: " If not for individuals, we should lend to investors, because otherwise, investors will almost not be able to carry out any construction projects ."

Leaders of Dat Xanh North also proposed that projects should only be required to have sufficient legal conditions as a basis for lending capital.

According to Mr. Quyet, most businesses today depend on capital from banks, while the conditions for borrowing capital are still quite strict. Previously, businesses could borrow based on credit and business plans, meaning that they only needed a good, feasible business plan to get a loan. But now, borrowing based on a feasible business plan is very difficult.

“ If Circular 06 takes effect, borrowing for businesses will be much more difficult. Having a feasible business plan but lacking capital will also become unfeasible, ” Mr. Quyet worried.

Difficulty in borrowing will cause businesses to reduce production and business, not develop or develop slowly.

Some investors cannot even reduce the scale because they are in the investment process. If they want to continue implementing on schedule, they must invest in more machinery and workers. In addition, they have signed a contract with a partner and must pay in advance to the partner.

For a long time, 50-60% of these funds have been borrowed from banks, so it has been difficult to complete plans and operations.

“ I think Circular 06 will have the strongest impact and cause the most difficulties for businesses that are doing projects. Many businesses will certainly go bankrupt ,” said Mr. Quyet.

State Bank "wrongly banned" the subject?

According to Mr. Quyet, Circular 06 has created an overly cautious protective barrier for banks.

In fact, there is a big “knot” that has not been resolved yet, which is the legal issue. Therefore, many projects, investors have invested and banks have lent, but the legal approval procedures are slow, and in the end, the lending banks are behind schedule, and the businesses are also behind schedule.

For example, the project was initially expected to be eligible for business within 1 year, but in reality it took 2 years, causing the bank to delay its capital recovery plan. The businesses themselves cannot confirm when the project will be eligible for business, so the bank is being cautious to avoid "holding" bad debt.

The procedures for a project to be eligible for business must go through many stages such as: land valuation, licensing by the Department of Construction, Department of Natural Resources and Environment... Therefore, the bank will not know when it will be able to recover its capital.

“ Banks are actually also afraid of legal uncertainty because they do not know when the project will be put into operation. If they lend, the bank will not be able to recover the capital, causing bad debt. Therefore, I think the root problem now is still to untie the legal knot ,” said Mr. Quyet.

Sharing the same view, Mr. Le Hoang Chau - Chairman of Ho Chi Minh City Real Estate Association (HoREA) said that perhaps the State Bank is "banning the wrong" subjects. Because real estate projects that do not meet business conditions and real estate projects that do not meet legal conditions are different.

According to Mr. Le Hoang Chau, when a real estate project has a fund established and its investment policy approved, it means that the enterprise is recognized as an investor because it has land. If the project has a construction permit, it is very good. That is enough legal conditions for the project but not enough business conditions.

" At this time, investors need to borrow capital, but why is it forbidden to lend? Enterprises already have projects, have collateral, and have proven their ability to repay debts. Why not lend? ", Mr. Le Hoang Chau asked.

" As for a project assigned by the State to the investor, in the beginning, investment capital is very needed. Saying that borrowing at this time is not risky is not true. I admit that any business activity has risks, but the problem is the level of risk. The project has been formed, which means there is land, the investor has spent a lot of money ," Mr. Le Hoang Chau further analyzed the story of the project's risks.

Ngoc Vy