Property developers ask for loosening of corporate bond policies

The real estate market in HCM City froze in the first quarter as demand and purchasing power tumbled due to COVID- 一 九. — Photo ndh.vn HÀ NỘI — The HCM City Real Estate Association (HoREA) has asked for corporate bond regulations to be loosened to help businesses get through the COVID- 一 九 pandemic, local media have reported.

According to HoREA chairman Lê Hoàng Châu, bonds had become a key tool for real estate firms to raise funds for projects. The association suggested that real estate firms be permitted to continue raising funds from bond issuances as they faced difficulties from the outbreak.

From January to March, about  五 三,000 units went on sale but only  一 四 per cent were sold – the lowest rate in four years. Eight hundred real estate trading houses, or  八0 per cent of the total, were closed during the period.

In total,  九 四 per cent of real estate firms closed, while new businesses declined by  一 二 per cent on-year.

The real estate market had frozen in the first quarter, Châu said. Trading volume fell  七0 per cent on-year and total revenue slumped  八0 per cent on-year, leading to a shortage of cash and liquidity.

Policies should be amended to assist the development of the corporate bond market, while promoting transparency and protecting the rights and benefits of investors and companies.

It is not the first time real estate firms have asked for the loosening of corporate bond regulations.

Local property developers are facing uncertainties as the Government and the State Bank of Vietnam (SBV) are trying to raise the standards for real estate bond issuance.

From  二0 一 九, banks were asked to cut the ratio of short-term loans used for mid-term and long-term lending to a maximum of  三0 per cent from  四0- 四 五 per cent to strengthen the banking sector and lower financial risks.

The central bank on November  一 五,  二0 一 九 issued a circular to restrict local banks from making loans for customers to trade in corporate bonds.

Under the circular, a bank must record a less-than- 三 per cent bad debt rate if it wanted to fund corporate bond buying. Customers cannot take out loans to trade corporate bonds if they used the bonds themselves as collateral, and total corporate bond-lending must only account for a maximum of  五 per cent of the bank’s charter capital.

Real estate firms in  二0 一 九 raised a total of VNĐ 一0 六. 五 trillion (US$ 四. 五 六 billion) from bond issuances. The figure was equal to  三 八 per cent of the economy’s total. Eighty-four per cent of the firms had the value of bond issuances triple their equity total, and average bond interest rate was  一0. 三 per cent per annum.

In the first three months of  二0 二0, total corporate bonds raised in Việt Nam were worth VNĐ 三 七. 三 trillion, with real estate firms accounting for  五 五 per cent of the total and interest rates averaging  一0. 三 per cent per annum. — VNS