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Saturday, October 8, 2022

Credit package for social housing not as productive as hoped

By The Saigon Times

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HCMC – Few have benefited from the VND15 trillion credit package for social housing as there is a limited supply of low-cost homes.

The package allows low-income people to take out a home loan with an annual interest rate of 4.8%, way below market levels.

The Vietnam Bank for Social Policies said no borrower has come as social homes are unavailable.

By the end of April, only three social housing projects had been launched in Thu Duc City and Binh Chanh District, with 1,160 units.

Currently, social housing costs VND20-25 million per square meter, so the price of an average unit ranges from VND1 billion to VND1.6 billion. Home buyers can borrow up to VND900 million and have to repay it within 15 years.

However, many beneficiaries fail to meet the borrowing criteria, which requires them to be exempted from personal income tax, have a down payment equivalent to 30% of a home’s value, and haved resided in HCMC for over one year.

The shortage of affordable homes and those failing to meet the package criteria have deprived people from accessing the loan package.

Tran Hoang Quan, director of the HCMC Department of Construction, said the city is accelerating work on 10 social housing projects, including two for workers with a total of 11,000 units, Thanh Nien newspaper reported.

The Ministry of Construction said in a recent report that it is concerned over the time-consuming investment procedures and unattractive investment policies, which could hinder the project’s progress and make it difficult for low-income earners to access the program as it will end in late 2023.

Meanwhile, during a recent conference chaired by Prime Minister Pham Minh Chinh, some of Vietnam’s largest real estate developers committed to developing over one million affordable housing units. This has given workers and low-income people hope that they would own a home someday.

However, administrative procedures are impeding the construction of social homes, said Bui Xuan Huy, chairman of Novaland Group, which has committed to building 200,000 affordable apartment units.

Likewise, Le Huu Nghia, director of Lethaco., Ltd, said that a commercial housing project takes three to five years to complete, and as for a social housing project, paperwork alone would need more than three years.

Moreover, social housing projects must set aside at least 20% of their total floor area for rent, and their investors can only sell them after five years, meaning it is hard for them to recoup their investment.

Land and money are indispensable while building a house. Some developers are willing to spend their money, use their land to build a house and apply new technologies to reduce its costs. However, it is still hard for them to finish a housing project under the current mechanism, Prof. Dang Hung Vo, former deputy minister of natural resources and environment, was quoted by Thanh Nien newspaper as saying.

He noted the Government needs to formulate policies which can support both developers and low-income people.

To achieve this, Vo proposed the Government and relevant ministries speed up developing policies and dealing with the sluggish handling of administrative procedures.

Le Hoang Chau, chairman of the HCMC Real Estate Association, expressed concern over the disbursement of the VND15 trillion loan package, as housing projects showed signs of stalling and would not be completed within the validity of the package.

According to the Ministry of Labour, Invalids and Social Affairs, only 15% of the package has been disbursed so far.

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