The necessity of the topic
The banking system in Vietnam has significantly evolved, playing a crucial role in capital circulation and socio-economic development Commercial banks prioritize safety and profitability, implementing operational processes and mandatory requirements for credit activities A key aspect of credit lending is the necessity for customers to provide collateral, which helps banks assess loan amounts and terms Currently, real estate is the most common form of collateral for bank loans in Vietnam.
Mortgaged real estate appraisal is crucial in the credit operations of commercial banks, as it enables banks to set appropriate loan levels by assessing potential risks, thereby enhancing their competitiveness and reputation in the lending market For customers, accurate valuation of mortgaged properties facilitates capital conversion for business activities and fosters trust in the quality of services provided by commercial banks.
The process of determining loan amounts based on real estate mortgage appraisals remains inconsistent, resulting in unreliable valuations that do not accurately reflect asset worth Additionally, challenges such as an unstable real estate market further complicate valuation outcomes, negatively impacting both customers and banks Therefore, enhancing the appraisal process for real estate mortgages is essential to improve the quality of credit activities.
From the above reasons, the thesis “Enhancing real estate appraisal at Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) – Dang Van Ngu
Transaction Office – Dong Da Branch” is chosen for researching in order to advance the appraisal process.
Objectives of the study
- The research provides basic theories related to the real estate valuation
This article examines the current state of mortgaged real estate valuation at the Dang Van Ngu Transaction Office, highlighting the achieved results while identifying limitations and their underlying causes The analysis reveals both the successes in property assessments and the challenges faced, providing insights into the factors that hinder effective valuation practices in this context.
- Proposes a number of solutions to improve the mortgaged real estate valuation at Dang Van Ngu Transaction Office in the future.
Subjects and scope of research
Subject is the appraisal of real estate in lending operations of VietinBank
This study primarily examines critical aspects of valuation organizations within the banking sector, specifically focusing on the processes and methods used to appraise real estate mortgages for bank loans.
This article analyzes the methods and processes used in the appraisal of mortgage real estate at VietinBank's Dang Van Ngu Transaction Office in the Dong Da Branch during the 2019-2020 period.
Research methodology
To achieve research aims, the research methods used are comparison, statistics analysis…This research also have the support from credit management officers and appraisal officers.
Structure of the thesis
In addition to the introduction, list of references, conclusion… the thesis consists of
Chapter 2 Real estate appraisal at Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) – Dang Van Ngu Transaction Office – Dong Da Branch
Chapter 3 Solutions to enhance the real estate appraisal at Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) – Dang Van Ngu Transaction Office – Dong Da Branch
LITERATURE REVIEW
Theoretical background
Assets are categorized based on their management purposes and usage, with the primary classification being into movable and immovable assets This classification system has been in existence for thousands of years.
Real estate is a vital asset for every country, typically representing around 40% of its physical property The performance of the real estate market significantly influences other sectors, including the capital market and the goods and services market Each nation has a unique definition of real estate shaped by its legal systems, ownership structures, cultural context, and economic conditions.
Real estate generally refers to land and any long-term improvements made to it, encompassing both natural and artificial resources associated with the property.
According to Article 174, Civil Code No 33/2005/QH1 and Article 107, Civil Code
According to No 91/2015/QH13, real estate encompasses immovable properties, which include land, houses and structures attached to the land, additional properties associated with these structures, and any other properties defined by law.
Real estate possesses distinct economic characteristics that influence the buying and selling processes, while its physical characteristics differentiate real property from personal property.
The scarcity of land, stemming from its limited supply, creates a significant imbalance between the demand and availability of real estate Although many areas of land remain uninhabited and unused, prime locations and quality land are not abundant This limited supply fuels speculation in the real estate market, resulting in a consistent upward trend in property prices.
Improvements built on real estate are a significant economic characteristic
Buildings, driveways, or landscaping attaching to the land have an impact on value
The value of a parcel of land is significantly influenced by improvements made on neighboring properties, particularly in residential areas where the quality of nearby homes plays a crucial role External factors such as airports, industrial plants, and recreational facilities can also affect property values Enhancements like adding a pool or landscaping can boost a home's worth, while detrimental developments, such as a nuclear power plant, can lead to a decline in surrounding land values In the absence of improvements, new owners may need to invest in upgrades themselves, which can diminish the economic value of the land.
Permanence of investment in real estate highlights the long-term and stable returns associated with property investments Improvements made to land are designed for longevity, as evidenced by the fact that more buildings are demolished for redevelopment than collapse over time While structures are durable, their economic viability is significantly affected by neighborhood changes Consequently, real estate investors prioritize the economic usefulness of a building over its physical lifespan, as this directly impacts their return on investment.
6 realized over a period of time that is called the economic life This determines the worth of an investment in land and improvements
Location is one of the most important economic characteristics of real estate
The value of land is significantly influenced by its location, with factors such as weather, scenery, job opportunities, and proximity to essential amenities like schools and shopping playing a crucial role in determining desirability This concept, known as area preference or situs, is also affected by economic, social, and governmental changes, including population shifts and zoning modifications Conversely, land situated in challenging environments—such as near canyons, swamps, steep mountains, deserts, or tundras—tends to be less valuable due to the difficulties in construction, accessibility, and utility provision, all of which diminish its economic potential.
Real estate also has physical characteristics While economic characteristics can be found in other types of property, physical characteristics distinguish land from most other types of property and investment
The unique feature of real estate is its immutable location; while topography can be modified for construction or affected by natural events, the land's fundamental position remains constant As a result, the geographical location of a property significantly impacts its value, making location a critical factor in real estate investment.
Additionally, property taxes levied on land can vary significantly from location to location
Real estate is characterized by its indestructibility, as the land itself remains unchanged despite man-made or natural alterations, while structures and improvements can be damaged or destroyed This stability makes land a reliable investment; however, neglect and lack of maintenance can diminish its value It's important to note that while the physical land endures, the depreciation of improvements can significantly impact overall value, and shifts in economic desirability of a location can further influence this.
Even neighboring properties can possess distinct features, as it is rare to find two identical real estate parcels in the market Each piece of land varies due to factors such as geographic location, sun exposure, topography, and soil conditions, making every parcel unique This uniqueness, often referred to as heterogeneity, is significant for investors and architects who seek to appeal to customers or fulfill personal preferences.
1.1.2 Overview of real estate appraisal
1.1.2.1 Definition of real estate appraisal
Currently, there are many widely used definitions of appraisal Most of the definitions see appraisal as an estimate of an asset’s value at a certain point of time
Real estate appraisal is the process of determining the market value of a property, essential for transactions due to the unique nature of each property and its condition Location significantly influences valuation, yet it's often the upgrades or improvements that can enhance a property's worth Appraisal reports are crucial for mortgage loans, settling estates and divorces, and taxation, and they may also help establish a property's sale price.
According to Article 4, Law on Real Estate Business 2006, real estate appraisal is the consultancy and determination of the price of a specific real estate at a specified time
Real estate appraisal involves assessing the value of a specific property for a particular purpose at a specific time This process considers the property's unique characteristics and relevant economic factors in the real estate market, utilizing established methods and standards for accurate valuation.
Real estate appraisal is grounded in technical standards and considers factors such as nature, location, scale, current conditions, and market prices at the time of valuation It must be independent, objective, and compliant with legal regulations Importantly, real estate valuation represents an "estimation" of property value, resulting in a price that may differ from the market price The valuation determined by pricing organizations can align with, exceed, or fall below the market price, with accuracy influenced by the qualifications of the valuators and prevailing socio-economic conditions.
1.1.2.2 The necessity of real estate appraisal
Empirical research
Real estate appraisal is crucial for both the economy and banking operations, prompting numerous studies aimed at improving appraisal processes within banks.
Nguyen Minh Duc (2018) analyzes the real estate appraisal practices at Sai Gon Thuong Tin Commercial Joint Stock Bank – Thang Long Branch, highlighting the need for improvements He suggests implementing multiple appraisal methods simultaneously to enhance valuation accuracy and recommends the establishment of an independent, diversified real estate information system to ensure consistent and up-to-date data management within the bank.
26 market trend as well as collecting as much information about the real estate market through different sources
Nguyen Thi Thu Phuong (2016) emphasizes the importance of integrating various methods in the appraisal process to enhance outcomes at Vietnam Technological And Commercial Joint Stock Bank (Techcombank) A key recommendation from this research is to prioritize technology development within appraisal activities, which aims to improve the bank's information resources and customer management systems.
Vu Thi Ngoan (2015) highlights that implementing appraisal software can significantly enhance the appraisal processes at Bac A Commercial Joint Stock Bank (BacA AMC) by effectively managing information related to appraisal cases and market data The research also emphasizes the importance of establishing a comprehensive database, specifically recommending the creation of databases for land price ratio comparisons and land unit prices across different areas.
While the studies offer valuable insights for enhancing appraisal activities in banks, they serve primarily as references due to the unique operational dynamics and constraints of each institution.
REAL ESTATE APPRAISAL AT VIETNAM JOINT STOCK
Introduction to Vietnam Joint Stock Commercial Bank for Industry and
2.1.1 Introduction to Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank)
After the separation from the State Bank of Vietnam according to Decree no
Established on March 26, 1988, VietinBank, officially recognized by the Ministers Council under decision 53/HDBT, has emerged as a leading enterprise in Vietnam's banking sector With over 30 years of continuous innovation and development, VietinBank offers a wide range of modern financial and banking products and services of exceptional quality.
VietinBank's core operations revolve around banking transactions and deals, focusing on mobilizing short, medium, and long-term deposits from both organizations and individuals The bank provides loans of similar durations based on its available funding resources Additionally, VietinBank offers payment services, conducts foreign exchange transactions, invests in bonds and commercial papers, and provides a range of other banking services.
VietinBank boasts a comprehensive network that includes its Head Office located in Hanoi, two Representative Offices in Da Nang and Ho Chi Minh City, a Southern Customer Center, and more than 150 local branches along with 958 transaction offices across various cities and provinces.
09 Non-business units, 07 Subsidiaries, 01 Joint-venture company, over 2000 ATMs and over 30000 POS Moreover, the bank has 02 branches in Germany, 01 Subsidiary in Laos and 01 Representative office in Myanmar VietinBank
28 developed a large correspondent banking network with more than 1000 banks in 90 countries and territories in the world
The transition from a one-tier to a two-tier banking system in Vietnam marked a significant milestone with the establishment of the Industrial and Commercial Bank, now known as VietinBank This shift aimed to enhance the efficiency and competitiveness of the banking sector, facilitating improved financial services for both businesses and individuals.
Successfully implementing the restructuring project in terms of debt settlement, organizational model, mechanisms, policies and business operation
The success of the equitization, strong innovation and development in all aspects of banking operations
Implementing strategic management, making breakthroughs in technology, continuing to comprehensively innovate the banking operations, promoting business growth in association with ensuring efficiency, safety and sustainability
Figure 2.1: Organizational chart of VietinBank
Business performance of VietinBank in 2020
Table 2.1 VietinBank business performance in 2020
Unit: In billion VND or %
Targets set by AGM in
Relative to targets set for
Deposits mobilized from economic entities & residents
Source: Consolidated and separate financial statements of VietinBank in 2020
Showing sustainable development scale, enhancing quality of assets
Total assets went up by 8.1% from 2019 with more than 1.3 quadrillion VND
As of 2019, credit exposure reached 1.03 quadrillion VND, reflecting a significant increase of 74 trillion VND, or 7.8% The structure of outstanding loans has progressively improved, showcasing a greater focus on retail and small to medium-sized enterprises (SMEs) Additionally, the rise in outstanding loans in VND has contributed to ensuring profitability within the credit portfolio.
Mobilized deposits have been idealy balanced with credit growth rate, and cost of funds decreased sharply in response to its interest income
Deposits mobilized was 990 trillion VND, showing an increase by 10.9% from
2019 LDR was guaranteed to comply with the regulations of the State Bank of Vietnam
CASA funds improved constantly, increased 27.8% from 2019 CASA ratio rose from 17.0% in 2019 to approximately 19.6% in 2020
NPL ratio was 0.9%, complied with the limit set by the State Bank of Vietnam and the Bank’s General Meeting of Shareholders
VietinBank successfully repaid the full amount of 13 trillion VND in special bonds sold to VAMC in under two years, strengthening its balance sheet and enhancing its financial capacity This achievement lays a robust foundation for the bank's future business operations.
Profits of the Bank exceeded goals and the income structure has transformed positively, with high performance regarding profitability ratios
Non-interest income surged by 33% compared to 2019, capitalizing on market opportunities This growth led to an increase in the proportion of non-interest income to total operating income, rising from 18.1% in 2019 to 21.5% in 2020.
Net service fee income increased by 7% from 2019
Income from foreign currency trading was nearly 2 trillion VND, went up by
27.8% compared to last year because VietinBank has maintained its top position regarding sales and market share of forex trading in the market
In 2023, profits from securities trading exceeded 962 billion VND, marking a substantial increase from 2019, with growth observed across all operations, including inter-bank interest rate trading, government bond trading, and both interest rate and commodity derivatives trading.
The Bank has demonstrated significant improvement in resource utilization and management compared to previous years, achieving a notable decrease in its Cost-to-Income Ratio (CIR) from 38.8% in 2019 to approximately 35.5% in 2020.
In 2020, VietinBank experienced a nearly 5 trillion VND reduction in profits due to decreased lending interest and fee rates aimed at supporting businesses and residents affected by the Covid-19 pandemic and natural disasters To address this, the bank implemented proactive measures to restructure its operations, transitioning from extensive to intensive growth and focusing on quality-driven strategies This included optimizing its loan portfolio, increasing non-interest income, and enhancing fund and cost efficiency Consequently, VietinBank's separate pre-tax profit reached 16,449 billion VND, while its consolidated pre-tax profit was 17,085 billion VND, ensuring the bank's ability to meet the capital and financial service needs of the economy and contribute significantly to the State budget and the country's socio-economic development.
2.1.2 Introduction to Dang Van Ngu Transaction Office – Dong Da Branch
Transaction office was established and officially came to work from January 5,
In 2011, the VietinBank Dong Da branch began operating under direct management, providing essential retail banking services These services include mobilizing deposits from both organizations and individuals, facilitating loans, processing payments, and enabling money transfers.
33 receiving and paying remittances, treasury services, and card services, L/C guarantee and other products and services of VietinBank
Organizational chart of Dang Van Ngu Transaction Office
Accounting and customer service department
The transaction accounting department of the bank is responsible for managing various transactions and fulfilling essential customer needs, including deposits, withdrawals, authorizations, collections, payments, account openings, and other related paperwork.
The credit department directly carries out credit operations such as lending, financial leasing guarantee, helping the Bank and customers connect.
Real estate appraisal at Vietnam Joint Stock Commercial Bank for Industry
Industry and Trade (VietinBank) – Dang Van Ngu Transaction Office – Dong
2.2.1 Legal bases of real estate appraisal at VietinBank
The appraisal of real estate at VietinBank complies with the following legal documents:
- Law No 11/2012/QH13 on prices
Accounting and customer service department
- Decree No.89/2013/ND-CP detailing implementation the price Law on appraisal of prices
- Circular No 38/2014/TT-BTC dated March 28, 2014 elaborating several Decree 89/2013/ND-CP providing guidance on implementation of the Price Law on valuation
- Circular No 158/2014/TT-BTC dated October 27, 2014 promulgating
Vietnamese valuation standard No 01, 02, 03 and 04
- Circular No 28/2015/TT-BTC dated March 06, 2015 promulgating
Vietnam’s valuation standard No 05, 06 and 07
- Circular No 126/2015/TT-BTC dated August 20, 2015 promulgating
Vietnam’s valuation standard No 08, 09 and 10
- Circular No 145/2016/TT-BTC dated October 06, 2016 promulgating
- Land law No 45/2013/QH13 dated November 29, 2013
- Law No 65/2014/QH13 dated November 25, 2014, on housing
- Decree No 43/2014/ND-CP dated May 15, 2014, detailing a number of articles of the Land Law
- Decree No 44/2014/ND-CP dated May 15, 2014, regulations on land prices
- Decree No 45/2014/ND-CP dated May 15, 2014, providing the collection of land use levy
- Decree No 46/2014/ND-CP dated May 15, 2014, regulations on collection of land rent and water surface rent
- Decree No 47/2014/ND-CP dated May 15, 2014, regulations on compensation, support, and resettlement upon land expropriation by the State
2.2.2 Current situation of real estate appraisal at Vietnam Joint Stock
Commercial Bank for Industry and Trade (VietinBank) – Dang Van Ngu Transaction Office – Dong Da Branch
2.2.2.1 Process of real estate appraisal at Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) – Dang Van Ngu Transaction Office – Dong Da Branch
- The real estate appraisal process in the transaction office basically follow
Step 1: General identification of real estate as a basis for valuation
In this step, after receiving customers’ loan request, appraisers need to clarify the basic legal, economic and physical characteristics of the assets
The valuation department's primary goal is to facilitate credit provision to customers via mortgages By clearly defining the purpose of valuation, the process can be streamlined, allowing for the selection of the most suitable valuation methods.
To accurately assess real estate, it is essential to clearly define the criteria for valuation The pricing department must establish specific assumptions and conditions that guide this evaluation process.
- Requirements and purposes of securing loans through mortgaged real estate
- Legal restrictions, use of real estate as mortgage loan
- Rights and obligations of the pricing department under the transaction contract
- Restrictions on information related to mortgaged real estate
The setting of restrictions and constraints of the appraisal department must be based on policies in accordance with the applicable laws and regulations
After identifying the constraints associated with real estate valuation, the valuation officer must establish an appropriate timeline for the process Setting a clear timeframe not only facilitates a swift and organized valuation but also enhances the credibility of the valuation activities.
The timing for property valuation should be established promptly after the appraisal contract is signed, ensuring that the evaluation of the real estate's value aligns with the contract's permitted scope.
- Determining the basic value of real estate
At step 1, VietinBank emphasizes the importance of appraisers having a comprehensive understanding of real estate valuation and the timeline for conducting appraisals This knowledge provides appraisers with a foundational basis for performing accurate real estate assessments.
Once the valuation date is established, the next step involves creating a valuation plan that outlines the necessary tasks, their specific timelines, and the overall duration required for the valuation process.
The content of the plan must include the following basic tasks:
- Identify appropriate supply and demand factors with functions, characteristics and rights attached to real estate needed to be valued in the market
- Identify documents collected about the real estate, documents about comparable real estates
- Identify and examine sources of data, ensure that they are reliable and must be verified
- Develop research progress, determine the order of data collection and analysis, and allowable duration of the order to be performed
After completing the second step, the appraisers have basically grasped the contents of the work as well as the order of collecting information about these contents
Step 3: Field survey, collect information
Field surveys play a crucial role in real estate valuation, as the data gathered from the actual properties being assessed directly influences the final valuation outcomes.
When conducting site surveys, appraisers must gather detailed information about the real estate's actual location, compare it with the registration map, and accurately describe the property's legal description Key aspects to survey in the field include the property's boundaries, zoning regulations, and any relevant environmental factors.
- Exterior and interior details of real estate including land area and architectural structures This information needs to be directly measured and appraised by appraisers
- Considering the surrounding scenery, infrastructure of the area (water supply and drainage, telecommunications, electricity, roads )
- Type of architecture, structure, modernity, age of works, status of maintenance, repair
Appraisals for ongoing projects should be conducted alongside field site surveys and comprehensive reports from investors and contractors involved in the construction process.
- During the survey process, to have full evidence for the valuation, appraisers can take pictures of real estate in different forms and directions
The valuation department must gather comprehensive information beyond field survey data, focusing on various aspects related to real estate This includes essential details surrounding the property to ensure accurate assessments.
- Information related to the cost of formation, cost of construction, usage history and income of comparable properties
- Information about market supply and demand factors, market participants, dynamics of buyers and potential sellers in the market
- Information about the legal status of real estate
- Information, data on economy, society, environment, factors affecting the specific value of real estate (address, cadastral map, planning, administrative border, infrastructure floor )
Effective real estate valuation requires gathering data from multiple sources, including historical purchase records, current asking prices, sales strategies, market conditions, payment methods, and transaction volumes Additionally, practical insights from field observations, interviews with real estate firms and related services, information from banks and credit institutions, press releases, and legal documentation are essential for an accurate assessment.
The analysis of information gathered from various field records is crucial for accurate valuation results After collecting data from diverse sources, it is meticulously classified and evaluated, ensuring that the analysis reflects the true value of the information The precision of this analysis significantly influences the overall outcomes of the valuation process.
An analysis of the real estate market characteristics involves examining the nature and behavior of market participants, including their age, education level, and income distribution within supply and demand groups Additionally, the expansion of the real estate valuation market segment for potential buyers is crucial Each of these factors will be evaluated collectively to provide a comprehensive understanding of the market dynamics.
When analyzing real estate information, it's essential to evaluate supply and demand trends in the market This involves assessing the fluctuations in these two factors, which ultimately influence the pricing of comparable properties Understanding these trends is crucial for accurately valuing real estate.
The pricing department needs specific pricing considering real estate use in various aspects including:
- The rationality, feasibility of using real estate, considering the surrounding environment, the correlation between current use and future use
- Material and technical suitability for real estate use, identification and description of economic characteristics and usefulness of real estate in need of valuation
- The legitimacy of the property used, separately under contract, in accordance with the law
- Financial feasibility: Analyzing the potential use efficiency of real estate to be valued in generating income, considering market value and capitalization values of RE
- Maximum efficiency of using real estate: Considering maximum productivity, maintenance costs, the costs incurred allow the real estate to be used most effectively
Appraisers at VietinBank are required to possess a high level of expertise, as they must accurately interpret current information while analyzing data across various fields When evaluating real estate structures, they adopt a technician's perspective, while market analysis requires a market analyst's approach Additionally, understanding customer psychology is essential for effective customer analysis Continuous cultivation and improvement of these skills are integral to the valuation staff's operations.
Step 5: Determine the value of real estate in need of valuation
Evaluate the real estate appraisal at Vietnam Joint Stock Commercial Bank
In recent years, VietinBank has experienced substantial growth in its lending activities, enhancing both the quantity and quality of its services This progress has solidified VietinBank's position within the banking industry, particularly among commercial banks.
VietinBank has earned customer trust through its effective lending policies, particularly in real estate mortgage appraisals, which enhance client confidence The bank ensures stable credit growth, quality, and liquidity to meet customer demands, demonstrating its commitment to careful implementation By developing a robust appraisal process, training credit officers, and taking responsibility for evaluating secured assets, VietinBank continuously improves its credit and lending activities Despite challenges such as the need for high specialization and time constraints, the bank actively involves other departments to prevent inaccurate property valuations Drawing from past experiences in managing bad debts, VietinBank remains dedicated to refining its appraisal process.
VietinBank officers have recognized the critical importance of real estate appraisal, leading to a significant enhancement in the quality of appraisal activities This underscores the necessity of conducting appraisals prior to contract signing and securing transactions The implementation of stricter procedures has facilitated easier appraisal processes for VietinBank officers, effectively reducing lending risks, lowering the bad debt rate, and ensuring the bank's liquidity By adhering to a clear appraisal process and leveraging the professional expertise of credit officers, appraisal results are increasingly aligning with market conditions, thereby minimizing unexpected risks.
VietinBank's frequent reassessment of appraisals ensures that loans remain on track and that their status is consistently updated This proactive approach allows the bank to effectively manage loan performance and address any potential issues promptly.
55 real estate price, customers will be required to supply more secured assets or decrease the customer loans in order to ensure the rate of secured assets/total loans
Depending on the conditions of each customer, VietinBank credit officers will have flexible implementation and adjust the differentiation to be suitable with
VietinBank employs a scientific appraisal process for credit evaluation, ensuring full alignment with customer needs For complex real estate types, credit officers tailor their assessments by considering various factors, including location, size, and regional characteristics.
VietinBank aims to enhance its lending activities, particularly in real estate mortgage appraisal, by addressing existing limitations and challenges Despite the bank's focus on implementing effective appraisal processes to meet customer needs and improve competitiveness, some difficulties remain unavoidable To overcome these obstacles, it is crucial for VietinBank to evaluate these limitations thoroughly, enabling the development of strategic solutions that will improve the efficiency and effectiveness of its lending operations in the future.
The valuation of real estate for loans at Dang Van Ngu Transaction Office still reveals following limitations: a In terms of regulatory environment
The application of legal documents faces significant challenges, particularly due to inconsistencies in market prices and state-issued land price brackets, which hinder effective valuation method selection and implementation Additionally, the limitations in human resources further complicate the process, impacting overall efficiency and accuracy in legal compliance.
Despite the transaction office's long-standing operations, the number of appraisers remains limited This scarcity of human resources forces officers to juggle multiple responsibilities, including signing contracts, gathering information, analyzing data, and surveying the current state of assets.
Investigating prices is crucial in the valuation process, as limited timeframes for executing contracts can hinder efficiency The absence of specialization in this area negatively affects appraisal outcomes, highlighting the importance of accurate real estate information.
The Vietnamese real estate market significantly impacts property valuations, yet it suffers from a lack of transparency and limited information availability This scarcity of reliable transaction data complicates the process for appraisers, often resulting in inaccurate valuations when employing comparative methods Furthermore, the absence of strict control and management over market information exacerbates these challenges, highlighting the need for improved data accuracy and transparency in the valuation process.
In terms of implementation process
The company's valuation process aligns with standard appraisal procedures outlined in legal documents, yet it faces limitations in key areas, particularly during the market survey and information collection stages.
In terms of application methods
Accurate real estate appraisal relies heavily on gathering detailed information about comparable properties; however, this process can be challenging due to various factors Often, appraisers must select properties that may not closely resemble the subject property, resulting in the necessity for multiple adjustments This can ultimately compromise the precision of the appraised value for the subject real estate.
In addition, when adjusting for comparison factors, the adjustment ratio is often calculated based on the appraisers' individual experience which affects appraisal results and increases comparison errors
The current description of the construction structure on the property is vague and lacks specificity, particularly regarding the condition of the subject property Key details about the property's structure are omitted, and the assessment fails to address the damage levels of certain areas This oversight significantly impacts the evaluation of the remaining quality of the construction on the land.
Utilities typically rely on price brackets and indexes outlined in legal documents for their calculations, rather than considering current market prices for raw materials and labor costs This approach often results in inaccuracies in assessing the value of new construction projects.
The calculation of depreciation value for works is often limited, as appraisers frequently rely on personal experience and focus solely on natural depreciation, neglecting the impact of economic depreciation caused by obsolescence.
SOLUTIONS TO ENHANCE THE REAL ESTATE APPRAISAL
Development orientation of VietinBank
Key measures for orientation of the VietinBank’s business operations in 2021 are as follows:
First, promoting further sustainable growth by scale, increasing accessibility of banking and financial services, and improving the business climate
Implement credit growth strategies that align with fund expansion, prioritizing manufacturing and production sectors that support government policies Emphasize credit activities in green and environmentally friendly areas, as directed by the State Bank of Vietnam, to promote green growth and sustainable development.
- Continue to deliver and provide relief measures and support to pandemic and disasteraffected customers as directed by the government and the SBV
To achieve sustainable growth, we prioritize lending that supports production and business activities within the SME and Retail customer segments Our strategy emphasizes increasing the proportion of high-margin products while maintaining reasonable risk weights, ensuring a balanced approach to growth and profitability.
Enhancing the bank's performance in large corporate and FDI customer segments is crucial for targeting profitable prospective clients This approach not only opens avenues for cross-selling and upselling various products and services but also strengthens overall customer relationships, driving sustainable growth for the bank.
- Further promoting a shift in credit structure by currency toward an increased proportion of loans in VND, focusing on expansion of new customer base in parallel with screening existing customers
- Mapping strategic locations/industries/sectors; giving priority in allocation of resources to key areas, especially Hanoi and Ho Chi Minh City Strongly promoting
61 the role of the Southern Customer Center in delivery of VietinBank’s region-based development strategy
Second, increasing the proportion of non-credit income (particularly service fee income) in the Bank’s total income; Thoroughly improving the quality of the
Bank’s products and services, promoting transaction banking and investment banking operations
- Adopting flexible pricing and interest rates policies to increase service fee income, especially income from card products, trade finance, e-banking, bancasurance
- Expanding customer base with transactions related to export-oriented processing zones/enterprises as part of value chains of large FDI customers, customers with international payments - trade finance
- Promoting the cross-selling, and upselling to potential customers with high product holdings
- Promoting the cross-selling of structured products associated with the payment service platforms, increasing the efficiency of cross-selling, sales by value chain, and by bundled products
- Paying particular attention to communication and marketing of key products on multiple channels, for consistent visibility of service quality and brand identity of VietinBank
- Expanding the partnership with domestic and international financial institutions Continuing to maintain the Bank’s position as the market leader in terms of FX trading turnover and profits
- Expanding the Bank’s risk appetite and scale of interest rate and commodity derivatives to promote the Bank’s competitiveness
Third, concentrating resources on promoting the growth of deposits; particularly low-cost funds
- Adopting flexible measures in managing fund scale and utilization in relevance to optimal roadmap to meet liquidity ratios as prescribed by the State Bank of
Enhancing products and services for effective customer cash flow management is essential, alongside promoting the growth of electronic banking channels Additionally, offering preferential product packages and encouraging the adoption of new payment accounts will significantly improve user engagement and satisfaction.
- Optimizing advance payment systems, platforms and services and products
Developing a payments ecosystem of multi-functions and utilities
To enhance asset quality, it is essential to prioritize the recovery of bad debts by effectively utilizing resources and implementing existing policies and mechanisms This approach aims to accelerate the recovery of both bad and written-off debts, ensuring a thorough and flexible strategy for optimal results.
Fifth, improving the efficiency of risk management, ensuring compliance and safety in operations, promoting business development in association with strict control of credit quality
- Strictly complying with relevant regulations, and direction of SBV Strictly enforcing the regulations and procedures; and raising sense of personal accountability with special focus on promoting staff ethics
Implement stringent credit controls in high-risk areas to enhance consumer lending risk management Maintain rigorous oversight of foreign currency loans in accordance with government and SBV directives to effectively manage and mitigate potential risks.
“dollarized state” of the economy
- Continuing to drastically revamp processes and procedures to facilitate businesses and individuals’ access to banking services, while ensuring strictness and safety
- Enforcing strict compliance with the set risk limits, performing regular evaluation and identification of customers and industries/sectors with potential risks for anticipation of timely and appropriate response
Enhancing the coordination between front-office units responsible for credit approval and risk control is essential for effectively mitigating special mention debts (Group 2 debts) and reducing bad debts.
- Consolidating the quality of internal control and inspection, improving the capacity, effectiveness and efficiency of the function
Sixth, promoting cost efficiency, further securing the positive jaw; control ling CIR, continuing to raise labor productivity
- Promoting the application of information technology, increasing automation, improving the quality of personnel, reforming procedures, processes, and streamlining paperwork, reducing turnaround time, focusing resources on customer care services
- Deploying practical cost savings across the bank, ensuring that costs are properly spent for the best performance
Seventh, simultaneously performing alternative capital increase measures to improve the Bank’s financial capability
- Closely following up with relevant units on the capital increase plan which is pending for approval by competent authorities
- Continuing measures of proactive regulation for a reasonable credit growth rate, issuance of subordinated bonds, divestment from some of the Bank’s subsidiaries, and maintaining an optimal portfolio of RWAs
- Performing control over RWAs; implementing risk-based pricing (RBP) mechanism and evaluation of risk-based performance
Eighth, consolidating the organizational model, improving the quality of human resources, focusing on communication, raising the sense of compliance with corporate cultural values of VietinBank
- Further consolidating the operating model, streamlining functions to keep up with business activities
- Effectively adopting human resources tools and policies, supplementing people for frontoffice units, improving personnel quality and labor productivity
- Radically enforcing 5 core values of VietinBank’s corporate culture, nurturing and promoting the sense of constant innovation and creativity
Ninth, boosting technological application and digitalization in all activities
- Developing non-cash payment solutions according to guidelines of the
Government and the State Bank of Vietnam
- Enhancing the application of new technologies to ensure safety, security and increase utility for customers
- Ensuring adequate technical infrastructure, system safety and security in support of digital transformation at VietinBank
In 2020, VietinBank embarked on its midterm business plan for 2021-2023, leveraging its previous achievements to seize opportunities and tackle challenges The bank is committed to achieving its goals and attaining further successes, reinforcing its position as a leading state-owned commercial bank while significantly contributing to the advancement of the banking sector and the national socio-economic landscape.
Solutions to enhance the real estate appraisal at VietinBank
a Solutions to overcome limitations of regulatory environment
To enhance customer confidence in the appraisal sector and bolster the bank's reputation in valuation, it is essential to establish a comprehensive and scientifically sound legal framework that ensures accurate and credible appraisal results.
To establish a scientifically organized legal system, companies must allocate a designated space or apartment for the storage of all legal documents This requires a systematic arrangement of the documents, ensuring they are categorized effectively for easy access and management.
To enhance the effectiveness of appraisers, it is essential to focus on specific fields of expertise Regularly updating relevant documents and removing outdated materials is crucial to prevent misapplication Implementing strategies to improve human resources will further support appraisers in maintaining accuracy and efficiency in their evaluations.
In any economic organization, the human factor is crucial for its existence, particularly in the real estate valuation sector The professional qualifications and work ethics of the staff significantly influence the quality of business operations within transaction offices.
The training and retraining of real estate valuation staff is crucial for enhancing their professional skills and understanding of relevant laws and policies Banks should implement specialized training programs for appraisers, including refresher courses to keep them updated By assigning staff to specific fields such as townhouses, factories, and farmland, they can develop a deeper market insight Additionally, fostering a healthy and enjoyable work environment will motivate employees to perform their tasks with enthusiasm and effectiveness Improving the quality of information regarding real estate is essential for informed decision-making in the industry.
The information element is really necessary because it directly determines the price
In order to have high accuracy valuation results, it is necessary to have high quality information, which is expressed in completeness, clarity, timeliness, suitability and testability
To ensure comprehensive evaluations, it is essential to gather relevant information, including comparable market transactions for effective analysis and adjustment, legal documents, and general insights into the economy, politics, culture, and society This thorough approach aids appraisers in avoiding the oversight of crucial details.
To ensure reliable comparative information, data should be collected from at least three comparable sources, including field surveys, specialized agencies, banks, government entities, the internet, and newspapers Identifying these sources is crucial for verifying the information's reliability After gathering the data, appraisal officers must carefully examine it to confirm its accuracy and dependability Additionally, implementing solutions to improve the quality of application methods and processes is essential for effective outcomes.
In terms of implementation process
The real estate valuation process at the Dang Van Ngu Transaction Office is crucial for effective lending Adhering strictly to the appraisal procedures is essential to enhance efficiency and minimize costs for both the bank and its clients This diligence helps mitigate risks and reduces the likelihood of errors by appraisal officers, fostering customer trust in the valuation outcomes Appraisal officers must follow the comprehensive steps outlined by VietinBank without omitting any stages, as this is vital for ensuring professionalism and accuracy in valuations Additionally, it is important to thoroughly review all documents used in the valuation to confirm their reliability The appraisal process should also clearly outline the adjustment basis, adjustment rates, and methods for adjusting comparable factors, all of which must be explicitly detailed in the appraisal report.
The appraisal process assesses the current value of mortgaged real estate without considering future factors that may influence its worth Understanding market price trends is crucial yet challenging to achieve To enhance appraisal accuracy, transaction offices should establish a dedicated department to analyze real estate market trends, collaborating with experts and reputable organizations in the field This approach will enable appraisers to provide more precise and relevant valuation results.
In terms of application methods
To accurately assess real estate value, operators must gather comprehensive market information on the property and comparable assets at the time of valuation It is essential to clearly cite the sources of this information and apply the appropriate adjustment ratios in accordance with Vietnam's Valuation Standards or statistically derived ratios, minimizing subjective influences Additionally, ensuring the reliability and accuracy of the market data is crucial for a credible valuation process.
When calculating the value of new construction, it is necessary to update the appropriate construction unit price
The company should also collect a lot of information about the unit price of materials, labor costs, and design costs from construction companies
To accurately assess depreciation, appraisers must gather detailed information on specific features like stairs and walls Additionally, it is crucial for appraisers to consider both economic depreciation and functional obsolescence when determining property value.
Appraisers must select an appropriate discount rate that reflects current market conditions Additionally, it is essential for appraisers to regularly recalculate the discount rate for each period to ensure that the valuation results are both accurate and reasonable.
Real estate valuation plays a crucial role in enhancing credit efficiency and assessing bank risk levels Despite its importance, the appraisal process in banks encounters significant challenges and limitations To elevate the quality of real estate appraisal, it is essential to assess the current landscape and implement effective solutions This approach will not only improve appraisal accuracy but also foster the growth of real estate valuation practices in Vietnam.
Vietinbank has made significant strides in real estate valuation in Vietnam since its inception This thesis evaluates the appraisal theories and current practices, focusing on the methods and organization of appraisals at the Dang Van Ngu Transaction Office during an internship It highlights both the achievements and limitations encountered, along with their underlying causes Additionally, the thesis proposes key solutions to enhance the real estate valuation process at the Dang Van Ngu Transaction Office moving forward.
1 Nguyen Minh Duc (2018), Công tác thẩm định giá bất động sản thế chấp phục vụ cho vay tại Ngân hàng TMCP Kỹ thương Việt Nam Techcombank
2 Nguyen Thi Thu Phuong (2016), Hoàn thiện công tác định giá bất động sản làm tài sản đảm bảo phục vụ cho vay tại Ngân hàng Thương mại cổ phần Sài Gòn
Thương tín - Chi nhánh Thăng Long