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Property companies hit the wall   2008-09-21 - VIR

The market’s poor health is seeing firms catch a cold

 Property companies throughout the country are on the brink of collapse and may not survive through the year if help is not given.

That was the message delivered by Do Thi Loan, secretary general of Ho Chi Minh City Real Estate Association.

A slump in the property market has persisted with few signs of improvement as projects remain inactive and companies feel the sting of bank loans.

The sales manager of a real estate company said his company had to lay off 50 employees in July. Another well-known estate agent also had to lay off 70 employees in early August to cut costs.

Nguyen Quang Trung, general director of Saigon Xanh Real Estate Investment and Development Joint Stock Company, said most property companies were surviving on bank loans, while deals were not being struck and building material costs soared.

To help struggling companies, experts have proposed several solutions, such as creating a market segment with housing prices ranging between VND500 million and VND1 billion ($30,300-$60,600) an unit.

Dinh The Hien, a financial expert, said for the property market to develop sustainably, banks must loosen real estate credit.

In the long-term, diversified and stable sources of capital must be created, including capital obtained from the issue of shares and bonds and property and mortgage funds, Hien said. Dr Tran Kim Chung, of the Central Institute of Economic Management, said businesses must promote cooperation with other partners in order to implement projects.

Some companies are of the opinion that banks should loosen their grip on monetary policy and reduce interest rates. Also, the Housing Law stipulates that foundations should be built before mobilising capital. They say this regulation is too rigid and needs to be revised and called for allowing investment after they have a land use right certificate and 1:500 development plans.

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