Instead of "squeezing", it is necessary to "direct" the capital flow into real estate

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A view of the seminar.

The quality of real estate capital flows should be of top concern

At the seminar "Opening up capital flows for Vietnam's real estate market" held on the afternoon of May 9, experts said that in Vietnam, capital has boosted the real estate market.

However, there are still many limitations in mechanisms, policies and methods of managing and regulating capital flows for this market.

Enterprises still depend first and foremost on bank credit, while this source of capital is being strictly controlled and tends to be increasingly tightened. Therefore, improving capital flows for the real estate market should be one of the policy priorities.

In order for the real estate market to recover after the pandemic, besides focusing on ensuring credit sources for real estate loans, it is necessary to expand other capital mobilization channels for real estate, creating conditions to develop safe and healthy real estate corporate bonds.

In addition, it is necessary to identify solutions to improve management capacity and market regulations; perfect the system of policies and laws and boldly have a pilot mechanism in the development of capital sources for Vietnam's real estate market, especially new types with great potential and room for growth.

Speaking about capital sources in the real estate market, Dr. Can Van Luc, a member of the National Financial - Monetary Policy Advisory Council, said that capital sources in the current real estate market include own capital, contributed capital of enterprises; credit capital, guarantee, financial leasing; capital from business partners; capital from the State budget; FDI capital and capital raised from the capital market (stocks, bonds, investment funds, technology platforms).

Real estate credit capital by the end of the first quarter of 2022 increased by about 2.4% compared to the beginning of the year. Total outstanding loans of real estate are about VND2.23 quadrillion, accounting for about 20% of the total outstanding loans of the economy. In which, housing loans are estimated at 65% (VND1.45 quadrillion), the rest is credit for real estate business, accounting for about 35% (VND0.78 million).

Besides, by the end of April 2022, the whole market issued corporate bonds with VND72,000 billion, of which real estate companies issued VND27,000 billion, ranked first and accounting for 37.3%.

According to Dr. Le Xuan Sang, Deputy Director of the Vietnam Institute of Economics, along with the stock market, the corporate bond market is also an important channel in mobilizing capital for investment in the real estate market.

This market helps to reduce risks for the financial system and enterprises, especially in minimizing risks due to large deviations in terms of maturity and currency in the balance sheet - a key reason behind the East Asian currency crisis.

According to experts, the corporate bond market in general and the real estate corporate bond market, in particular, generated some problems and negative information.

Although they are only isolated phenomena, they have seriously affected the market, causing confusion for investors and the bond issuance of genuine real estate developers.

According to Dr. Vu Tien Loc, Member of the National Assembly, Chairman of the Vietnam International Arbitration Center, in the current context, it is effective and safe to clear capital flows for real estate, besides increasing the number of people. The quality of capital flows of the real estate market should be the top concern. He also noted that if the pincers tighten, the real estate market cannot develop, so it is necessary to "control the flow" of capital in the direction of opening up, not suffocating.

No "horizontal alignment" in tightening corporate bond issuance

Proposing a number of policy solutions to open capital flows for real estate, Dr. Le Xuan Sang said that the motto of developing real estate investment channels is to strengthen existing channels such as bank credit and bonds of real estate enterprises and promote them, associated with reducing risks of newly formed and weak channels such as investment through real estate investment trusts (REITs).

"For capital channels such as credit, bond issuance can be tightened, not "horizontally" but depending on each issuer to have effective regulation, not suffocate or cause panic, fear of investors on a large scale. Solution groups need short-term solutions and medium- and long-term solutions,” said Dr. Le Xuan Sang.

Regarding short-term solutions, Mr. Le Xuan Sang said that it is necessary to isolate and clarify bond issuers, real estate lenders and outstanding loans, the nature of bank loans, the credibility of issuers (to avoid systemic panic, especially when the information is not transparent enough, updated, with many "malicious" rumors) and many individual investors have limited investment skills.

Dr. Can Van Luc expressed a desire to develop a more balanced and harmonious financial market for real estate, and create development but still control risks. He emphasized it is necessary to "refine" capital flow, not tighten the flow of capital into real estate and focus on regulating the supply and demand of real estate.

Along with that, expert Can Van Luc said that it is necessary to improve the institution in the direction of amending Decree 153/2020/ND-CP and Decree 156/2020/ND-CP accordingly, reviewing the Securities Law (especially regulations on professional investor conditions), it is necessary to have a credit rating, regulations on grouping of real estate segments.

In addition, there should be guidance and permission for the establishment of specialized real estate financial institutions such as housing savings funds, real estate investment trust funds; real estate refinancing agencies mortgage housing, securitizing real estate.

At the same time, allocate bank capital more appropriately to support the development of social housing, housing for low-income people.

For real estate enterprises, in addition to credit capital, businesses need to pay attention and flexibly mobilize capital from other channels such as issuing bonds, offering shares to existing shareholders, treasury shares and investment funds.

“Enterprises need to aim for transparency, professionalism and honesty, especially credit records, securities issuance records, implementation of commitments and restrictions," Dr. Can Van Luc said.

Proposing some solutions to open up capital flows for the real estate market from international experience, economic and financial expert Nguyen Tri Hieu said that it is necessary to immediately adjust the legal regulations on the corporate bond market separately to create confidence for investors.

“Decree 153/2020/ND-CP on private placement of bonds needs to clearly stipulate that credit rating is a mandatory condition for bond issuance, so that investors have a basis for assessing the risks of the bonds they invest in," Nguyen Tri Hieu said.