Accelerating financial products of real estate in Vietnam

The above entitled conference hosted by the VNU University of Economics and Business (VNU-UEB) took place on 15th July 2014. UEB Vice Rector Dr. Nguyen Truc Le and Dr. Le Trung Thanh - Associate Dean of Faculty of Finance and Banking co-chaired the conference.

Real estate market is particularly important to the economy in terms of both scale and the pervasion. In spite of its recent formation since early 1990’s, the real estate market in Vietnam has gone through many ups and downs. Most recently, in the period of 2007-2010, the real estate market exploded with prices pushed up too high, and became a bubble market. So far, after experiencing the breakthrough, the market has become frozen with high inventory level, leading to more consequences for the economy. Therefore, there should be proper solutions to recover the market towards sustainable and professional manner.

The conference was held to announce several research results of the UEB’s research team in Finance and Banking, and to create a forum for experts, scholars and scientists to discuss deeply on the issue.

Participating in the conference were head of departments, the faculties of VNU-UEB; delegates from the state agencies, finance companies, securities firms, real estate companies; graduate students and undergraduate students interested in the topic.

Dr. Nguyen Truc Le makes the opening remarks at the conference

There were three presentations on the real estate market development policy in Vietnam, international experience and implications for Vietnam.

Among those, the paper on development policy for real estate market in Vietnam presented by Dr. Le Trung Thanh has mentioned an overview of the characteristics of the real estate market and a number of key features of the legal base, changes in Vietnam real estate market. Thereby, the paper provides some policy recommendations in order to develop Vietnam real estate market including: completing the legal framework, developing rental housing market and social housing, increased use of tax instruments, developing the secondary market for real estate credit and training  human resources in accordance with international accreditation standards, etc.

Analyzing the situation of real estate loans in Vietnam, MSc. Le Hai, Deputy General Director of Military Bank (MBBank) has presented the situation of real estate loans and the new solutions, product idea. The paper analyzed the role of commercial banks in financing for real estate market; mentioned the practical experience in real estate lending in MBBank, and proposed some solutions, new product ideas for real estate loans.

The highlights in the solution of real estate loans in MBBank is a way of lending chain composing of 4 main subjects: materials suppliers, contractors, investors and house buyers to reduce market risk and accelerate the handover progress.

(From left) Dr. Le Trung Thanh, Dr. Quach Manh Hao, MSc. Le Hai

The presentation on the world’s experience of real estate finance products by Dr. Quach Manh Hao (UEB’s Faculty of Finance and Banking) has clarified the theoretical issues and development foundation of the primary and secondary market of real estate loans, emphasizing two main characteristics of the secondary market. 
First, the loan on the primary market for homebuyers can be securitized to provide in the secondary market in order to attract kinds of social capitals and reduce risks for the banking system.
Second, the real estate projects can raise capital on the stock market due to the bond issuers (a special form of company - SPV), in which investors are provided sufficient information to invest in bonds tied to a specific project. This will help reduce risks for investors thanks to the information transparency and effective governance of cash flows from project. In addition, the paper also indicates the model of developing real estate finance products market in the developed countries such as Japan, South Korea, however these models are based on the same principles as mentioned above.

According to MA. Nguyen Quoc Viet (team members of Faculty of Finance and Banking), the market of real estate finance products will be the guideline for the development of real estate products which is suitable with the needs of settlement capability of home buyers, serving effectively for the development of housing.

At the same time, a number of specific conditions for the formation and development of this market in Vietnam is finalizing the legal system, establishing the professional organizations in the implementation of services for the secondary market as the credit rating, loan management, foreclosures, insurance, etc.

The conference received many comments from the participants

Discussing the findings of the papers, the delegates at the conference gave many ideas and comments, analyzed the difference between the real estate market in Vietnam and in other countries, or the reason why the disruption of the real estate market in the U.S. has greater influence on the U.S. economy than in Vietnam economy. Other delegates raised the issue of providing information, consultancy and orientation of the current real estate market in Vietnam is still weak, the real estate projects as well as people buying houses and land mainly in movement.
Therefore, participants also suggested some solutions for the real estate market in Vietnam including the development of real estate finance products. The comments appreciate the models, the proposed plans; however the majority agreed that, with the current conditions of Vietnam, it should focus on developing the primary market for real estate credit.
Summarizing the conference, on behalf of the organizers, Dr. Le Trung Thanh thanked the participants who had contributed valuable comments. Dr. Le Trung Thanh said these comments and ideas would be very useful for the research team of VNU-UEB in the further research on this topic in the near future.

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