Bad debt eats away at ailing property sector

HA NOI (Homeid)— The true number of non-performing real estate bad debts are feared to be much higher than figures previously reported by credit institutions.

The true number of non-performing real estate bad debts are feared to be much higher than figures previously

reported by credit institutions. Photo baodatviet.vn

 

According to the National Finance Supervision Council (NFSC), real estate bad debts accounted for around 34 per cent of the sector's total outstanding loans.

However, State Bank of Viet Nam (SBV) statistics recorded that the sector's bad debt ratio stayed at just 5.68 per cent up to the end of May, representing a 0.41 per cent increase since the end of 2012.

Such figures from credit institutions did not reflect the reality of the property market, the NFSC claimed, adding that the bad debt ratio should be much higher due to the prolonged frozen market.

NFSC said credit institutions failed to accurately account a range of loans between 2010-12, leading to the flattering bad debt ratio figures.

The Council pointed out that many high-risk loans were designated as enterprise bonds, investment trusts or payable debts, instead of their true status as non-performing debts.

A December 2012 construction ministry report cited SBV figures to claim that total outstanding loans in the real estate sector as of October 31, 2012 were estimated at roughly VND207.595 trillion (US$9.886 billion).

Industry expert Nguyen Quang A calculated that using the SBV's ratio of 5.39 per cent, the real estate sector's non-performing debts stood at around VND12 trillion ($571.5 million) – nearly equivalent to half the Government's VND30 trillion ($1.42 billion) property market support package.

Using the NFSC's ratio of roughly 34 per cent, the expert estimated total real estate bad debts at VND76 trillion ($3.62 billion) – more than double the value of the support package.

Taking into account high real estate inventories and the prolonged stagnant market, the latter figure sounded more reasonable, he said.

Experts also urged the Government to apply more precise and consistent figures which reflected the true situation of the property market as base to form policies from. — VNS 

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