New law promotes real estate-related bad debt settlement

A customer makes transactions at a VietinBank’s branch. Most bad debts are secured by assets, mainly real estate. — VNA/VNS Photo

HÀ NỘI — New regulations on bad debts, whose collateral are real estate, in some newly-issued laws, are expected to promote the settlement of bad debts in the future, experts said.

According the Land Law, Housing Law, Real Estate Business Law and Law on Credit Institutions, effective from August 1 this year, instead of having to transfer all of a real estate project as collateral to recover bad debts, banks will have the right to transfer part of the project.

Banks said that most bad debts are secured by assets, mainly real estate. However, values of the real estate collateral tend to be large and that makes it difficult for banks to find buyers. Therefore, they expect the new regulations will create favourable conditions for them to handle bad debts.

For example, a housing project, which is a collateral for a bad debt, includes many different buildings. Instead of having to find customers to buy all the project with large value as previously, banks now can find a buyer for a part of the project. As the collateral asset is divided into small parts with small values, it will be more convenient for customers to buy the collateral.

In addition, the settlement of the real estate collateral is also eased as to be qualified for the transfer of a project. The new Real Estate Business Law, Land Law and Housing Law do not require the project to have land use right certificates like before, but only require a land allocation decision from a competent authority.

Nguyễn Quang Huy, Director of the Nguyễn Trãi University’s Faculty of Banking and Finance, said before the Law on Credit Institutions was passed, the transfer of part of the project was not easy because there was no match between the law and the Land Law, Housing Law and Real Estate Business Law. However, after all the laws take effect from August 1 this year, the assignment of legal responsibilities for the partial transfer of real estate projects has become clearer, which will help speed up the time to handle bad debts.

In addition, the Law on Credit Institutions also allows expanding the subjects and scope of buying and selling bad debts, including buying debt from domestic credit institutions and foreign bank branches. This will help handle bad debts at many banks, including domestic and foreign banks.

Hoàng Thị Mai Thảo, Deputy General Director of SHB, said the new regulations in the Law on Credit Institutions will create transparency for the market, helping customers feel more secure when transacting real estate. If a bad debt arises, debt recovery will be handled faster thanks to a clear legal framework.

It is estimated that in the first six months of 2024, the Vietnam Asset Management Company (VAMC) handled nearly VNĐ8.2 trillion of bad debt, reaching 70 per cent of its yearly plan.

With new regulations in the Law on Credit Institutions 2024 and other newly passed laws, the handling of bad debts and sale of collateral assets at credit institutions are expected to become more favourable. At the same time, the regulations can also help create transparency and trust in the market. — VNS