Resumption of suspended projects could erase bad debt in property sector
The bad debt in the real estate sector could be resolved if steps are taken to resume suspended projects, according to the HCM City Real Estate Association (HoREA).
Around 500 real estate projects in HCM City have been suspended for various reasons, including problems related to land clearance, land-use payments, and investors’ weak financial capacity.
The suspended projects have created a big volume of bad debt, severely burdening both property developers and banks as well as the entire economy, the association has said.
The 90ha Phuoc Kien Project in Nha Be District developed by Quoc Cuong Gia Lai Company had been delayed for 10 years, according to a report from Thanh Nien (Young People) newspaper.
Eight per cent of the total land for the project has not been cleared.
Nguyen Thi Nhu Loan, the company’s chairwoman, told Thanh Nien newspaper that the suspended project had placed her company under pressure as it had invested VND5 trillion (US$220 million).
The company has to pay more than VND500 million ($22,000) each day in bank interest.
The situation has also affected the company’s partners, she said, adding that the company had decided to sell the project to a new investor.
The VND5 trillion Saigon One Town in District 1, which has been delayed for six years, has been sold to another investor.
The Kenton project in Nha Be District has resumed after several years of delay after its investor sought an additional VND1 trillion from banks.
Pham Cong Chanh, a real estate expert in HCM City, was quoted in Thanh Nien newspaper as saying that bad debt would be handled if 500 suspended projects resume.
Along with helping companies and banks, it would create a diverse supply in the city’s property market, he said.
Chanh added that the authority should focus on projects with high liquidity that can be sold immediately. The others should be divided in different groups with different solutions.
Other experts agree that one solution is not needed for all projects.
Mortgaged projects that have land clearance and building permit problems should be allowed to resume, while projects which have problems related to planning should be in one group, experts said.
Banks should also give more support to developers to solve the problems.
Le Hoang Chau, chairman of HoREA, said that it was important to reduce the number of suspended projects to handle bad debt.
A big cash flow would occur in the market if these projects resumed and more real estate products were put on the market, he added.
He said that it was necessary to create more advantageous conditions to encourage merger and acquisitions (M&A).
If M&A deals are implemented well, more cash would flow to the market and there would no need for funds from the State budget.