The year 2007 was prosperous for the real estate market. This prosperity originated from the fact that banking system loosened the restrictions on granting credit to investors. According to financial reports, real estate credit occupied 25% of total credit of year 2007. At this time, credit supply from banks strongly increased due to the short-term capital raising and low interest rate. Besides, the easy process of releasing funds and loosened lending procedures made it more convenient for investors to get credit from the banks. With the huge interest from real estate investment, investors eagerly use bank loans for project implementation.

Increasing inflation contributed to pushing prices higher in the real estate market. Banks easily accepted real estate mortgages because they thought the possibility of taking their capital back was high. Besides, investors were too sure of their investment and paid less attention to plans for future.

At the end of 2007, the State suddenly made some changes on policies in order to restrain inflation, but, it turned out that macroeconomic policies became unstable, investors was losing their belief and picked up the solution of keeping their capital by taking their money out of investment fields. This forecasted a gloomy future in 2008.

Since the beginning of 2008 until now, real estate market has cooled down. State-owned banks have tightened credit by withdrawing money in circulation and not taking steps to replenishing capital for investors in a hurry. In the investors’ view, it is the main reason that caused the real estate prices to strongly decrease.

The policies of state-owned banks toward tightening credit are showed by raising prime interest rate, required reserve ratio and most importantly, issuing treasury bills to attract 20,300 billion VND. In addition, the fact that banks tighten real estate credit has caused big difficulties for many real estate firms in mobilizing capital to support the construction projects which are in the process of implementation. The progress of some projects is bound to slow down or even, stop. Investors cannot but transfer their unfinished projects or cooperate with other firms if they want to maintain those projects.

However, real estate firms also should take this chance to balance turnovers, costs and give careful consideration to their investment decisions . According to experts' evaluation, investors are now showing a more cautious attitude towards their decisions. The pressure of paying out bank debt gets higher, which make investors less daring to take risk. This is clearly shown on the fact that the number of successful transactions has gone down substantially. Granting real estate credit is not as easy as before. Banks have to select qualified enterprises and specify which enterprises are eligible to get bank credit.

What are solutions for real estate enterprises in current situation?

While domestic investors get in trouble, foreign investment is increasingly pouring into Vietnam. Foreign investment funds with strong financial sources are ready to merge, take over, or replace unqualified domestic enterprise in implementing potential projects. In order to grab opportunities for further development, real estate enterprises will have to approach and take advantage of these new funds.

Prestigious real estate enterprises can take the initiative in mobilizing capital with low interest rate by issuing real estate bonds (accompanied by the right of buying property of definite projects).

Another noticeable chance for investors is social housing project. Currently, business of social houses possesses many advantages under state-owned sponsorship in terms of input material prices. Additionally, the releasing bank loans from ADB and the commitment of financial support for social housing projects from commercial banks are remarkable advantages for investors.