Four apartment blocks in Đà Nẵng City. Decree No.06 hasn't come into force yet but it is facing disapproval from many companies and associations. — VNA/VNS Photo Quốc Dũng
The State Bank of Vietnam (SBV) several months ago enacted a legal document to make it easier for real estate companies to get bank loans, but the legal effort has not worked out as intended.
Decree No. 06, issued by SBV on June 28 and expected to take effect on September 1, is a revised version of Decree No. 39, which regulates the lending activities of credit institutions and branches of foreign banks.
The Vietnam Association of Realtors (VAR) is calling for the repeal of Decree No.06 for the reason that it fails to capture the spirit of Resolution No.33, which centers around measures to promote the development of a sound realty market.
In other words, the decree did not clearly define the scope of its beneficiaries. The ambiguity has led to a situation that who would get the loans is left to the discretion of banks themselves.
Many banks could exploit that to flatly refuse loans to companies in distress, rendering the decree ineffective. For companies that are heavily strapped for cash, the refusal could be fatal to their viability.
But the ambiguity is not the only reason for VAR to disapprove the decree. Another reason is that the decree is too restrictive to M&A, which has always been a way out for companies of their financial hardship.
VAR said the Government should take back the decree and draw up a new one that comes in line with Resolution No.33 and is free of legal ambiguity.
The HCM City Real Estate Association (HoREA), meanwhile, is asking not for the abolishment of Decree No.06 but for some revisions.
The association suggests Article 1 be revised on grounds of its inconsistency with the Law on Credit Institutions.
The former bars credit institutions from making loans to borrowers who would use the loans to "contribute capital to LLCs and partnerships" whereas the latter stipulates the other way round: they can lend as long as their borrowers use the loans "for legitimate purpose".
HoREA Chairman Lê Hoàng Châu goes so far as to call for the abolishment of an article under which credit institutions are not allowed to make loans to borrowers who would use the loans to finance "realty projects with adequate legal documents".
Nguyễn Quốc Việt, chairman of the Vietnam Association of Construction Constructors, suggests some terminology changes to the decree.
He said the term "business conditions" should be replaced by "legal conditions" in the decree because there is no such concept of "business conditions" in any legal document on real estate.
Ngô Đức Sơn, director-general of the DRH Holding, said it is urgent to revise the decree because the real estate sector has been stymied by so many restrictive legal documents and has had enough of it.
He said the authority to control credit risks should be transferred back to banks. Whether borrowers are qualified for loans or not, banks should be the ones to judge and decide.
The Director-General of a commercial bank in HCM City said it would be unreasonable to keep the article that bars banks from making loans to borrowers who would use the loans for investment cooperation.
He said the article would make borrowers disqualified for the loans that they could have otherwise taken to purchase homes.
Their voices have been well heard by the Government. Deputy Prime Minister Lê Minh Khái has requested SBV to review the decree in light of the public opinion and revise it if necessary.
"The Government is working to ensure not a single voice goes unheard," said the Deputy PM at a conference on Decree No. 06 on Thursday.
SBV Deputy Governor Phạm Thanh Hà said the central bank would be eager to revise the decree should it not produce its desired effect on the real estate market. — VNS