Real estate businesses must be responsible for the money “stuck” in the land

Enterprises borrow capital to develop projects, credit institutions must control so that the credit capital flow is used for the right purpose. Photo:TL

PV: Real estate businesses are currently still having difficulty getting capital, while bank capital is quite abundant but still cannot lend. What is your opinion on this situation?

Mr. Nguyen Quoc Hung: In my opinion, real estate businesses first need to reconsider their decisions when investing money in agricultural land, or land areas that have not been approved or planned. This cannot push all responsibility to the government, nor force banks to bear overall responsibility.

Currently, a lot of cash flow is “stuck” in land without sufficient legal procedures and according to real estate businesses, more than 70% of it is due to difficulties related to legal issues. Legal procedures are incomplete, the project cannot be completed, even if the house is built but the legal documents are not complete, it is not eligible to sell to people. With such projects, even if banks inject capital, it will not be effective.

The bank is ready to spend capital on real projects, real needs, fully legal, and effective for society. Reality shows that there are banks willing to lend real estate projects at interest rates lower than the VND 120,000 billion preferential credit package, but cannot lend because the project’s legal procedures are incomplete.

PV: Real estate businesses have reported some problems with regulations on cases where banks are not allowed to lend, or regulations that force deposits and guarantees to be frozen… Does this limit freedom? business and investment of businesses and people?

Mr. Nguyen Quoc Hung: The law does not prohibit individuals and organizations from contributing capital to the business activities of other individuals and organizations. If that capital is the individual’s own capital, it depends on how much capital they contribute and where they invest it. Okay. However, if that capital is a bank loan, they must comply with the law on credit institution operations and the bank’s internal regulations.

Because the lending principle of credit institutions is that customers must use capital for the right purpose and loan capital must be inspected before, during and after lending. When a bank lends to a customer for the purpose of contributing capital to a third party for business, the loan capital must be controlled, but reality shows that in some cases, if the bank lends capital to a third party, the bank does not can come to check the loan capital (except in cases where there is a three-party agreement allowing the bank to check related books and documents).

PV: However, every project must go through every stage: From the beginning, then gradually complete the procedures and legal documents… so there must be some solution to be able to have capital for the original project. first and then gradually complete the legal documents, sir?

Mr. Nguyen Quoc Hung: Many businesses “favor” loans through capital contributors, but the legal procedures are not complete, this can avoid controlling cash flow… I think that businesses investing in large projects need capital. large enough to invest, the wishes of individuals and organizations contributing capital to implement the project are also practical in business activities.

However, when businesses borrow capital to develop projects, credit institutions must control so that the credit capital flow is used for the right purpose, in the right project for which the loan has been approved, to avoid cases where the investor uses capital for the wrong purpose, for example, maybe they used the money to buy land with incomplete legal documents elsewhere.

Accordingly, to have capital for the project, banks can participate as a capital contributor in the form of co-financing so that banks can jointly appraise, jointly disburse, and jointly control the loan capital. If we do so, the project will never lack capital and will be deployed very quickly.

PV: Thank you Sir!