The Art of Persuasion: Crafting a Compelling Headline “The ACB Chairman’s Conundrum: Navigating the Murky Waters of Real Estate Collateral”

At the Government’s meeting with banks on the afternoon of September 21, ACB’s Chairman, Mr. Tran Hung Huy, stated that the new laws enacted in 2024 have brought about significant changes and positive impacts on the real estate market, such as the Land Law, Housing Law, and Real Estate Business Law.

However, credit institutions hope for more detailed guidance regarding specific mortgage acceptance, particularly concerning production and business land (annual land rent) in industrial zones. According to Article 37 of the 2024 Land Law, only the right of transfer is stipulated for leasehold land, and mortgage rights are limited to assets owned by the lessee that are attached to the land.

This restriction impacts credit institutions’ ability to determine the value of annual land rent in industrial zones and relies on the cooperation of investors due to legal risks associated with handling secured assets.

Meanwhile, the market demand is enormous. Industrial real estate has maintained its leading position throughout 2023 and continued to grow in the first half of 2024, driven by policies promoting public investment and the substantial potential of FDI capital.

According to Mr. Tran Hung Huy, clear guidance permitting the acceptance of leasehold rights as collateral would enable enterprises utilizing annually rented land to maximize their resources and the value of their land use rights. It would also facilitate their access to capital by allowing them to mortgage this leasehold right and provide a comprehensive legal basis for credit institutions in valuing and accepting leasehold land as collateral.

Regarding production and business land (one-time land rent/land allocation with payment), Point b, Clause 3, Article 33 of the 2024 Land Law permits the mortgage of investment projects with business purposes that are entitled to land use fee or rent exemption or reduction.

However, this mortgage can only be executed if the enterprise has repaid the State a sum corresponding to the period for which it was exempted from land use fees or rent. Currently, there are no guidelines on determining this amount. In reality, some projects are eligible for land use fee or rent exemption or reduction, but there are no detailed instructions on calculating the amount corresponding to the exempted or reduced fees or rent to be repaid to the State.

“What remains unclear is how this amount is determined, whether it includes interest for late payment, and whether there are other influencing factors,” shared Chairman Tran Hung Huy. He further added that credit institutions, as well as related agencies such as notary offices, land use right registration agencies, and secured transaction registration agencies, are confused about how to handle these situations, directly impacting enterprises’ interests.

Therefore, detailed guidance on this matter is highly necessary. It will expand and create opportunities for credit institutions and customers to have additional mortgage acceptance rights in these cases.

“ACB earnestly hopes that the Government and relevant ministries and sectors will soon issue Decrees and Circulars to guide these issues. This will enable credit institutions and customers to maximize their resources and assets to expand and develop their businesses. Banks in the system are united in controlling input costs, thereby creating a basis for further reducing lending interest rates,” emphasized ACB Chairman Tran Hung Huy.