Contrary to the predictions that once the Circular 13 becomes valid on Oct. 1, the cash flow to the real estate sector would stop, commercial banks are still welcoming lenders as the lending interest rate dropped to 14 percent per annum.
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The Circular 13 on the capital adequacy ratio (CAR) stipulates that the CAR must be at 9 percent at least, and that commercial banks must not use more than 80 percent of mobilized capital for lending. It was thought that the regulation would lead to the increase in the cost of capital for banks. Therefore, analysts warned that this would force banks to raise lending interest rates to cover the higher costs.
But to everyone’s surprise, banks still have not adjusted interest rates for the loans taken to fund realty purchases or realty development projects.
At present, commercial banks still provide the loans worth up to 70 percent of the values of the houses clients plan to buy. The Bank for Investment and Development of Vietnam (BIDV) is lending at the interest rate of 14 percent, while Military Bank at 15 percent, and Techcombank at 15 percent (applied to less-than-10-year term loans) and 15.5 percent per annum (for over-10-year term loans).
Especially, Eximbank offers relatively “pleasant” lending interest rates. Those clients, who get short term loans (for less than 10 years) have to pay the interest rate of 13 percent only, while those, who want medium and long term loans will have to pay the rate of 13.5 percent per annum.
Meanwhile, VietinBank is offering loans with the interest rate of 15.6 percent for short term and 16.2 percent for long term. The rates offered by Agribank are 14.5 and 15 percent, respectively.
According to the State Bank of Vietnam, the outstanding loans provided to the real estate sector had reached 218 trillion dong by the end of September 2010, an increase of 18 percent over the same period last year.
Analysts once warned commercial banks about the “real estate bubble” which may emerge if banks try to expand real estate credit. However, some economists have reassured the public that the real estate outstanding loans are still within the safety limits.
Truong Thanh Duc, Head of the Legal Division of Bao Viet Bank said that funding real estate projects remains a very good and profitable business for banks. Therefore, feasible realty projects are still their optimal choices. Duc said that though the capital costs have increased, big banks with profuse capital can continue to lend at the current interest rates.
Statistics showed that in the first eight months of the year, banks’ credit growth rate had reached 16 percent, lower than the 27 percent growth rate obtained at the same period last year. The State bank of Vietnam earlier this year decided that the credit growth rate for the whole year 2010 must be curbed at 25 percent. This means that banks will have the “room” of another 10 percent for credit growth.
