Solving the "thirst" for capital for social housing

In the context of preferential capital for social housing development facing difficulties in disbursement, experts say the Government's issuance of government bonds to support social housing development will unlock capital for the project to build 1 million apartments from now until 2030.

The Prime Minister has just assigned the Ministry of Construction to preside over and coordinate with relevant agencies to research and propose a plan to issue government bonds (G-bonds) and support interest rates for social housing investment activities, and report to the Prime Minister in April 2024.

It takes about 850,000 billion VND to build 1 million social housing units.

According to the Ministry of Construction, to achieve the goal of building at least 1 million social housing units between now and 2030, approximately VND849,500 billion will be needed. Therefore, in addition to mobilizing resources from society, capital from the Government participating in the 1 million social housing project plays an important role.

Talking to reporters about the policy of issuing government bonds to support the development of social housing, Dr. Nguyen Tri Hieu said that in the context of the preferential credit program of 120,000 billion VND for loans for investment and purchase of social housing with interest rates 1.5 - 2% lower than the average market interest rate, it is almost impossible to disburse, the Government's policy of issuing government bonds with interest rates lower than commercial loans, longer loan terms to support people to buy social housing, and support businesses to borrow capital to build social housing is very necessary.

The government will use the money raised from issuing government bonds to lend to commercial banks, which will use this money to lend to businesses to invest in social housing projects, and to lend to people to buy social housing at low interest rates. And to support low-income people to buy social housing, the lower the interest rate, the better, but this must also be based on the mobilization interest rate of government bonds.

"If the Government issues Government bonds with an interest rate of 4-5%/year, the interest rate for social housing loans will be around 6-7%/year because it has to add 2% management costs of commercial banks. If the interest rate for mobilizing Government bonds is too low, it will not be attractive to bond investors and will not be able to mobilize capital," said Mr. Hieu.

Meanwhile, according to Dr. Le Xuan Nghia - member of the National Financial and Monetary Policy Advisory Council, the issuance of Government bonds to support social housing development should aim to issue Government bonds to finance social housing projects through lending to businesses investing in and building social housing.

For example, if the Government issues Government bonds with an interest rate of 3 - 3.5%/year, it will lend to businesses building social housing with an interest rate of about 5%/year, and the loan term can be about 20 years. Conditions for businesses to borrow Government bonds to build social housing need to be easier.

"For social housing buyers, we should create conditions for them to borrow from banks with a certain preferential interest rate, like in Singapore, only about 2.5%/year. The difference in interest rate compared to the market will be compensated by the budget," Mr. Nghia proposed.

Interest rates must be low and the term long.

According to Mr. Nghia, Vietnam should learn from China's experience of assigning local authorities to manage social housing projects to ensure that projects are built on schedule, meet quality standards, and ensure suitable living space. Local authorities will issue a price framework for social housing projects.

When the enterprise completes the social housing project, it will hand it over to the local authorities. Thus, the enterprise will not have to go through the procedures to approve home buyers and will not have to worry about distributing the houses.

Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, also said that issuing government bonds to provide capital for social housing construction is a necessary solution to increase medium- and long-term capital for social housing development.

This is a method of mobilizing long-term capital from society, both domestically and internationally, to implement a long-term program of developing social housing, meeting the housing needs of the majority of people. The issuance of government bonds for social housing is under the authority of the Government, which has been permitted by the Housing Law.

"The issue is what type of government bonds will be issued at what interest rate to attract investors. It is necessary to consider the issuance of government bonds to implement the project of building 1 million social housing units as a national target program. And the interest rate for businesses and organizations to borrow to build social housing needs to be considered at an appropriate level," Mr. Chau suggested.

According to Mr. Chau, the issuance of Government bonds for social housing should be divided into two types. The first is the 10-year term Government bonds for lending to invest in, purchase, or hire-purchase social housing. The second is the right credit grace period for social housing buyers, which is 25 years.

Most social housing projects will be repaid after a period of time. Social housing projects for sale will be repaid immediately, while social housing projects for rent will be repaid in about 5 years, and rental projects will be repaid in about 18 - 20 years.

"Therefore, the interest rate for mobilizing government bonds to develop social housing may be about 0.5% higher than the Government's issuance of government bonds to mobilize capital for infrastructure development and implementation of national target programs in recent years. If the interest rate is too high, the set target will not be achieved," said Mr. Chau.