Transparency essential to real estate growth

Experts made their comments during a recent online conference held in Ho Chi Minh City by cafeland.vn, discussing how to understand mortgaged real estate projects. The issue had not been discussed earlier, having been prompted by an incident with the Harmona project in the city’s Tan Binh District a few months ago. 

Six hundred people purchased Harmona apartments, but were later shocked to learn that their homes would be seized by a bank because the developer had mortgaged the building and failed to repay the loan.

Pham Ngoc Lien, Director of the HCM City Land Registration Office under the municipal Department of Natural Resources and Environment, said that, after hearing about the incident, city authorities had assigned the office to look into the problem. 

The office later released a list of 77 projects which had been used as collateral by developers to borrow from banks, with the purpose of improving market transparency and protecting the legitimate rights of home buyers. 

According to Lien, many customers said that when looking for a house or apartment, they found little information on mortgages on the mass media. 

Lien said it was time to have a triangular collaboration among localities’ departments of natural resources and environment, departments of construction and the State Bank of Vietnam (SBV) to regularly examine projects to discover incidents, prevent disputes and protect home buyers. 

Financial expert Nguyen Tri Hieu said that under the current regulations, investors were allowed to mobilise capital from both commercial banks and from the people to help in building projects. 

“This is a big shortcoming. In the US, real estate businesses can only come to the banks to seek loans. While people have to pay investors a sum of money in advance as a deposit, the investors can not touch the money until they finish the projects.” 

“However, in Vietnam, allowing investors to, on the one hand, mobilise bank funds while, on the other hand, raise money from buyers, turns buyers into unwilling investors. The situation is likely to cause risks and disputes, and eventually home buyers suffer damages”, Hieu stressed. 

Nguyen Xuan Bac, an official from the SBV’s Department of Credits, said that the allowance is in compliance with Article 3 of the SBV’s Circular 26/2016 dated December 9, 2015. 

Therefore, the disclosure of projects that were mortgaged was not unusual, but State agencies should come forward to disclose information. Also, enterprises should not be permitted to release information to ensure their objectivity and transparency. 

Le Hoang Chau, Chairman of the HCM City Real Estate Association, said that consumers were facing greater risks when buying a home. Due to this, the State management agencies should proactively participate to ensure that information is updated.

Many investors voiced support for mortgaged projects to be publicised, but also said that if the publication is not clear and specific enough, it would negatively affect project developers and the real estate market would also be harmed. 

Le Huu Nghia, Director of Le Thanh Company, said, in fact, that such mortgages were normal and had been issued for decades. However, some incidents occurring due to investors’ weak financial capacity or banks’ poor management of cash flow makes this mortgage become "dangerous" in the eyes of customers. 

According to Nghia, authorities should avoid providing vague information which would lead to misunderstandings and disadvantages for businesses. 

For example, to implement a project worth 1 trillion VND, Company A receives a mortgage of 45 billion VND, but should not assume the same liabilities as Company B, receiving a mortgage of 500 billion VND. 

Luong Si Khoa, Deputy Chairman of An Giang Investment Company, said that the disclosure was necessary. However, there should be specific criteria for publication of information to make the process easier and well-founded. 

Nguyen Khanh Hung, CEO of Green Land Corporation, said that not only listed companies, but also unlisted businesses, must disclose information about mortgaged projects to ensure the project’s fairness. 

At the same time, it was essential to require commercial banks to supply specific information about mortgaged projects, such as project name, name of mortgager, purpose of mortgage and mortgage period.

This would help avoid one asset being a collateral at different credit institutions, and avoid customers becoming confused, Hung said. 

Other information, such as interest rates and payment preferences, was not needed to be made public, as such information was deemed to be confidential, he added. 

Hung highlighted the role of real estate enterprises and commercial banks in actively releasing information because they were most aware of the problems, adding that State agencies should also have strict punishments for those not fulfilling their responsibilities. 

Hieu added that the disclosure must be made continuously and should have a specialised agency to carry out this work. Also, buyers and businesses would have to pay a small fee when looking up information. 

Lien, from the HCM City Land Registration Office, said that at present, constantly updating information on the status of mortgaged projects was a difficult task because it requires the participation of many organisations. 

The Department of Natural Resources and Environment could only implement the periodic disclosure with a frequency of about 3 or 6 months. Therefore, the most important factor is the actions of businesses and banks in providing information. Then, potential buyers can have access to management agencies to verify the information released. 

In the near future, Lien said he hoped that a database of projects will be quickly updated by all information sources and be built so that providing information would be a public procedure, and information would be updated continuously in real time.