Vietnam’s real estate loans stand at a safe level and property developers are not on the verge of bankruptcy, despite an ongoing market slump, a government official has said.
Real estate has not been the cause of the country’s credit problems, Deputy Construction Minister Nguyen Tran Nam was quoted as saying in an interview on news website VnEconomy. “In fact the sector has been the victim of instabilities and weaknesses within the banking system.”
Nam said outstanding loans for the sector, including those given out to pay for site clearances and new factory projects, only account for around 8 percent of total outstanding credit.
“This is not high and it’s still safe,” he said, noting that real estate loans are secured by properties whose prices tend to appreciate over time.
The bad debt ratio of the sector is around 3 percent, which is approximately the same as the average ratio of the overall banking system, Nam said.
“Some banks owned by real estate companies have large internal loans, so their property credit may reach 30 or even 50 percent of their total loans. But it’s rare and it’s their own fault,” he said.
Vietnam’s property market is still in a downturn that began two years ago, following a peak in 2007-2008. Experts said a credit squeeze imposed by the government on the sector since last year has left developers and homebuyers struggling.
Nam said it was not necessary to worry about the real estate industry collapsing now even as many companies in other sectors are struggling. Property firms often have a simple organization structure and their assets are also products that can be sold, he added.
“Property firms have been complaining, but I don’t think the situation is so bad that they will have to declare bankruptcy,” he said in the interview.
