BANKING ACADEMY FACULTY OF FINANCE ---------------- GRADUATION THESIS ENHANCING REAL ESTATE APPRAISAL AT VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE (VIETINBANK) – DANG VAN NGU TRANSACTION OFFICE – DONG DA BRANCH Instructor: MA. Ta Thi Bich Thuy Student Name: Le Ha My Student ID: 20A4050238 Class: K20CLCE Hanoi, 2021 17014126229551000000 BANKING ACADEMY FACUTY OF FINANCE ---------------- GRADUATION THESIS ENHANCING REAL ESTATE APPRAISAL AT VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE (VIETINBANK) – DANG VAN NGU TRANSACTION OFFICE – DONG DA BRANCH Instructor: MA. Ta Thi Bich Thuy Student Name: Le Ha My Student ID: 20A4050238 Class: K20CLCE Hanoi, 2021 DECLARATION I assure that this thesis is the product of my own work. The data and documents used in the thesis are excerpted from reliable sources and from the current appraisal activities of the bank.
All the materials used in this research have been specified in the references. i ACKNOWLEDGEMENT I would like to express my gratitude and appreciation to all the people who helped and encouraged me during the process of completing my thesis. I could not have completed it without their support. First of all, I am really thankful to my instructor MA.
Ta Thi Bich Thuy for her guidance and suggestions that helped me thoroughly understand all aspects related to the study. Secondly, I would like to express my sincere thanks to all officers at Dang Van Ngu Transaction Office in general and Ms. Pham Thuy Linh, Ms. Tran Thanh Huong in particular.
They have always enthusiastically guided, answered all my questions, supported me during the internship so that I could complete the research. Finally, I would like to thank all of my family members and my friends who have always encouraged me during the time of my writing. ii TABLES OF CONTENT DECLARATION. ii TABLES OF CONTENT.
iii LIST OF ABBREIATIONS .v LIST OF TABLES. vi LIST OF FIGURES. The necessity of the topic. Objectives of the study.
Subjects and scope of research. Structure of the thesis .2 CHAPTER 1: LITERATURE REVIEW .1 Overview of real estate. Overview of real estate appraisal .25 CHAPTER 2: REAL ESTATE APPRAISAL AT VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE (VIETINBANK) – DANG VAN NGU TRANSACTION OFFICE – DONG DA BRANCH. Introduction to Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) – Dang Van Ngu Transaction Office – Dong Da Branch.
Introduction to Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank). Introduction to Dang Van Ngu Transaction Office – Dong Da Branch. Real estate appraisal at Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) – Dang Van Ngu Transaction Office – Dong Da Branch. Legal bases of real estate appraisal at VietinBank.
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. An illustrative example of real estate appraisal at Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank). Evaluate the real estate appraisal at Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) – Dang Van Ngu Transaction Office – Dong Da Branch .57 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. Development orientation of VietinBank.
Solutions to enhance the real estate appraisal at VietinBank .69 iv LIST OF ABBREIATIONS Abbreviated name Full name Vietnam Joint Stock Commercial Bank VietinBank for Industry and Trade COMP Comparable properties VAMC Vietnam Asset Management Company International Financial Reporting IFRS Standards DCF Discounted Cash Flow v LIST OF TABLES Table Page Table 2. VietinBank business performance in 2020 29 Table 2.2: Information of compables assets 45 Table 2.3: Analysis and adjustment of similar and different factors between the subject property and the comparables 47 Table 2.4: Appraisal result 52 LIST OF FIGURES Figure Page Figure 2.1: Organizational chart of VietinBank 29 vi INTRODUCTION 1. The necessity of the topic In today's world, the banking system in Vietnam has developed quite thoroughly, which plays an important role in the circulation of capital in the economy and contributes to socio-economic development. The general operational principle of commercial banks is safety and profitability.
To ensure two principles above, commercial banks create operational process as well as compulsory requirements for all credit activities. In particular, in credit lending activities, commercial banks often require customers to have collaterals. Based on collaterals, commercial banks determine the loan and the appropriate loan amount and the collaterals are very diverse. Currently, most of the collaterals for bank loans are often real estate.
Mortgaged real estate appraisal is one of the most important operations in credit activities of commercial banks. On the one hand, from banks' perspective, the valuation not only helps the bank to determine a reasonable loan level based on calculation and prediction of potential risks but also increases the competitiveness of commercial banks in establishing reputation and attracting customers in the field of lending, improving the quality of lending activities in particular, and credit activities in general of commercial banks. From customers' perspective, the accurate and reasonable determination of the value of mortgaged real estate will accelerate capital conversion in production and business. At the same time, it will build trust for customers in the quality of operations of commercial banks.
However, the determination of loan amount based on the appraisal of real estate mortgage is unsettled both in the process and methods of implementation, leading to the sketchy results and not reflect the actual value of assets. Besides, other difficulties also affect the valuation results such as unstable real estate market causing disadvantages to the customers and the bank. Thus, the appraisal of real estate mortgage needs to be improved for higher 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 1 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. - Analyzes the current situation of mortgaged real estate valuation at Dang Van Ngu Transaction Office and indicate the achieved results, clarify the limitations and their causes in the valuation of mortgaged real estate at the transaction office. - 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.
However, this study only focuses on some key issues such as valuation organizations in banking, processes and methods are applied in appraising real estate mortgages for the purpose of bank loan. The analyzing and assessing will be focused on the process and applied methods in appraisal of mortgage real estates in VietinBank – Dang Van Ngu Transaction Office – Dong Da Branch during process 2019 – 2020. 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 3 chapters: Chapter 1.
Literature Review Chapter 2. Real estate appraisal at Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) – Dang Van Ngu Transaction Office – Dong Da Branch 2 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 3 CHAPTER 1: LITERATURE REVIEW 1.1 Overview of real estate 1. Definition of real estate Assets are classified into different types depending on the purposes of management and how they are used.
In general, assets can be divided into movables and immovables and this classification has appeared for thousands of years. Real estate is considered the major asset of each country, often accounting for about 40% of physical property of the country. The real estate market can strongly affect other markets such as the capital market and the goods and services market. Due to different legal systems and ownership regimes, each country has its own definition of real estate in accordance with its culture and economic conditions.
Although there are several and varied definitions of real estate, it can be typically understood that real estate is the land as well as any improvements associated with it in long term and be components of it, whether they are nature or artificial resources. According to Article 174, Civil Code No. 33/2005/QH1 and Article 107, Civil Code No. 91/2015/QH13, real estates are immovable properties that consist of: a) Land; b) Houses and constructions annexed to the land, including properties attached to such houses and constructions; c) Other properties annexed to the land; d) Other properties specified by law.
Characteristics of real estate There are economic characteristics of real estate that relate to how and why real estate is bought and sold. And there are physical characteristics of real estate. The physical characteristics distinguish real property from personal property. 4 Economic characteristics Scarcity This feature of real estate comes from the rarity of land due to its limited supply.
Despite the substantial amount of land having no inhabitants and not put to use, the availability of land in a particular position or of a specific quality is not limitless. The scarcity of land makes the supply of real estate smaller than the demand of it, leading to the speculation in real estate. Therefore, prices of real estate always tend to increase. Improvements Improvements built on real estate are a significant economic characteristic.
Buildings, driveways, or landscaping attaching to the land have an impact on value. In addition, the value of a particular parcel of land can be affected by improvements made on adjoining tracts. In a residential neighborhood, the quality and type of nearby homes affect the value of an individual home. Also, airports, industrial plants, and recreational facilities can influence the value of surrounding property.
Improvements to a piece of land can have either a positive or negative impact on its value. Adding a pool and landscaping to a home will increase its value. If a nuclear power plant is built, the surrounding land values will decline. When there are no improvements to the land, a new owner will have to build them himself.
This lowers the economic value of the land. Permanence of Investment Permanence of investment refers to the concept that the return on investment in real estate tends to be long-term and relatively stable. Improvements to land are made to last a long time. In fact, more buildings are torn down than fall down, a well-built structure can be razed to make way for a newer building.
As buildings are relatively permanent, they are influenced by the economic changes in the neighborhood. A real estate investor is more interested in how long a building will be economically useful than in how long the building can last. The return on the investment will be 5 realized over a period of time that is called the economic life. This determines the worth of an investment in land and improvements.
Location Location is one of the most important economic characteristics of real estate. Because land is immovable, one parcel may be considerably more valuable than a similar parcel due to the difference in the desirability of the location. People prefer a particular location because of weather, scenery and job opportunities, as well as proximity to schools, shopping or transportation. The sum of these factors that affect value is called area preference or situs.
Economic, social and governmental changes also influence a land’s situs.