Vietnam’s central bank is mulling over a ban against home loans provided by commercial banks as deposits for people seeking to invest in legally incomplete residential projects.
This is part of a draft circular the State Bank of Vietnam (SBV) plans to work out to tighten control over house lending to reduce credit risk in the real estate market.
According to SBV, commercial banks have been providing home loans as deposits for customers to invest in projects yet to fully meet legal requirements. Such early lending can cause risks to lenders because if all legal requirements are not met, customers and project owners may cancel the sales contract.
As SBV is seeking feedback on the draft circular, Ho Chi Minh City Real Estate Association chairman Le Hoang Chau said he thought this tightening measure is needed to prevent earlier-than-regulated home selling by property developers, who are supposed to complete procedures first.
Another fact is those home buyers who have to rely on bank loans as deposits are likely to be ones unable to arrange money for later payment times. Therefore, the new SBV move is expected to make the market more stable.
At present, a deposit for house buying frequently accounts for 20-30% of the total price.