Laws on real estate mortgages confusing: ACB bank chairman

Banks in Vietnam are confused when appraising real estate mortgages due to a lack of guiding decrees and circulars, said Asia Commercial Bank (ACB) chairman Tran Hung Huy.

Huy made the statement at a dialogue between the government and banks in Hanoi on Saturday.

He commented that the newly enacted Laws on Land, Housing and Real Estate Business have brought positive, significant changes to the real estate market, but credit institutions wish to see detailed guidance on real estate mortgages.

"Businesses must pay for annual land leases, but the 2024 Land Law only stipulates the rights to transfer and mortgage assets attached to land. It does not mention the rights to mortgage leasing rights in land lease contracts," he said.

Huy argued that this affects credit institutions in assessing the value of annually leased land at industrial parks given legal risks related to handling collaterals.

"Meanwhile, lending demand from this sector is very high. Industrial real estate was a leading segment throughout 2023 and continued to grow in the first half of this year thanks to public investment promotion policies and foreign direct investment (FDI) flows," he noted.

According to Huy, clear guidance allowing acceptance of leasing rights in land lease contracts as collateral will help businesses maximize their resources and raise additional capital. This will also provide sufficient legal basis for credit institutions when accepting land leased with annual payments as collateral.

Do Minh Phu, chairman of another private lender TPBank, proposed allowing investors with non-residential land use rights to invest in commercial housing projects.

He argued that if such a rule is effective, it will remove difficulties for many real estate developers.

In response, Minister of Natural Resoures and Environment Do Duc Duy said that the 2024 Land Law does not regulate this issue. "The law only stipulates that the state will withdraw land and conduct bidding and auctions for investors that develop large-scale projects with synchronous social and technical infrastructure."

He added that his ministry is compiling a decree on piloting the implementation of commercial housing projects via transfers of land use rights or having land use rights.

"This resolution will stipulate cases as proposed by TPBank, including agricultural land, non-agricultural land, and non-residential land," Duy said.

"Such a resolution, once approved, will remove difficulties for many developers and localities. The draft has been appraised by the Ministry of Justice. We plan to seek government opinions next week and then submit to the National Assembly for approval," the minister added.

The Land Law was passed by the parliament on January 18, 2024, while the Law on Housing and the Law on Real Estate Business were approved in November 2023.

The three laws came into effect on August 1, 2024, five months ahead of schedule. The early enforcement of the laws is expected to improve the legal framework for sustainable and healthy development of the Vietnamese property market.