$20 bln package under consideration to partially boost realty sector
04-06-2012
 For illustration purpose only Photo: Tuoi Tre |
It includes a VND120 trillion ($5.75 billion) public investment package and a VND300 trillion ($14.41 billion) package of bank and official development assistance loans, according to the conference held to explore the revival of the real estate market held in Ho Chi Minh City by the Real Estate Association of Vietnam and Lao Dong newspaper.
Vice Minister of Construction Nguyen Tran Nam told the conference that the government is stepping up public investment disbursements including the VND12 trillion package, VND3 trillion from government bonds, and VND17 trillion from other investment instruments.
As planned in 2012, credit growth of about 15-16 percent is needed, but up to this point the rate has been negative.
This means that in the remaining 7 months, the rate has to increase by 2-3 percent on average, or around VND300 trillion in total, in addition to ODA funding, and other investment channels.
"The cash flow will certainly stimulate economic growth, having a positive impact on many industries, including real estate," Nam said.
Nam also said that the people's money will flow into real estate when interest rates start cooling down, while the remaining investment channels have began losing their appeal.
Banks with surplus capital will offer more loans, creating a stepping stone to support the real estate market. BIDV has launched a VND4 trillion package of real estate loans within 2 years. ACB and several other banks are also expected to offer such packages.
Sharing Nam’s view, Le Xuan Nghia, former deputy chairman of the National Financial Supervision Commission (NFSC), believes that the disbursement will promote a positive impact on the economy, including real estate.
The overdose of anti-inflation policies has led to GDP decline, as the economy has shown many signs of deflation with rising inventories.
Therefore, promoting public investment expenditure in accordance with the approved plan of 2012 is necessary to restore the growth of the economy.
This could gradually pull the real estate market back on track, though at a slower rate, by the end of the year.
"I have never seen so much attention paid to the real estate sector, as the government is working on a program to find solutions to revive the industry.”
“The government has begun to mark it as the platform for the whole economy, since if it wobbles, the economy will likely face a certain death "Nghia said.
Vice Minister of Construction Nguyen Tran Nam also told the conference that the ministry will submit two proposals for the establishment of two housing funds to the government next week.
They include a fund subsidized by the state budget for the poor to buy houses, and a fund for middle and higher income earners to save their own money to buy houses.
Also, the ministry has shifted the focus to rental housing development, with the support of the state budget, as demand for the segment is huge.
Currently, housing firms are not keen on the segment because no mechanism of state support exists and there is no legal guarantee for persons with rental properties.
The Ministry of Construction is also continuing to recommend that the purchase of social housing be 100 percent free of value added tax (VAT), and a 5 percent VAT slapped on commercial houses with area and pricing less than 90 m2 and VND 20 million per m2 with bank lending support.
Le Hoang Chau, president of the Ho Chi Minh City Real Estate Association, said the government needs to consider real estate as an important component of the economy.
The government should not let the real estate businesses stand aside while the business groups enjoying preferential interest rates.
Resolution No.13 should be amended so tax breaks will also be applied for the real estate business.
The most urgent need is to fix Decree No.69 on the collection of land use fees worth 100 percent of the market price, he said.
According to Mr. Chau, real estate inventory is very large, impacting industries such as cement, iron, steel, building materials, and furniture. With more than 90 percent of real estate business suffering losses in 2012, the government should take action as fast as possible, before it's too late," he said.
Worries on side effects raised
While experts believe the government's cash flow, worth hundreds of trillions, pumped into the market will revive real estate by the end of 2012, many businesses fear the opposite.
The housing market experienced three years of crisis, and many economic experts said it cannot be saved in a such a hurried manner. Dr. Pham Do Chi, Deputy Director of VinaCapital Investment Fund, said that the expectation that the real estate market will prosper again in the coming months is too optimistic.
Real estate markets in more developed countries, such as America and Japan, and even the those on the same level of development, like Thailand, take decades to recover from crisis, and having still not yet fully recovered.
"Old lessons about the real estate of our countries do not need to be relearned here. Measures to save the housing market need to be studied more carefully," said Chi.
General Director of Vietnam Trust Company, Nguyen Lam Son, said the funding should only be channeled to home buyers, as too much support for businesses can lead to market distortions.
This expert said the government should develop new valuation mechanisms for a new period as the housing market has declined so strongly, and building capacity index of homebuyer credit, such as a policy to offer interest rate subsidies for first-time home buyers.
"Corporate tax incentives can only be viewed as temporary, while long term incentives for new home buyers are the keys," he said.
