Removing interest rate barriers, stimulating demand for loans to buy social housing

Many causes have been identified. In addition to legal and procedural problems, interest rates are also a barrier that makes it difficult for people to access this preferential capital source.

Faced with this reality, the State Bank is seeking opinions from relevant ministries, departments and agencies on a draft Resolution to adjust the contents of the VND120 trillion credit package in the direction of further reducing lending interest rates for home buyers. This move is expected to stimulate credit demand, boost program disbursement, and contribute to the implementation of the Project of 1 million social housing apartments in the 2021-2030 period.

Removing interest rate barriers

According to the latest announcement at the regular Government press conference in July held in Hanoi, the State Bank is reporting to the Government a draft Resolution adjusting the content of the preferential credit program for social housing loans in the direction of reducing interest rates for home buyers by 3-5% compared to the average medium and long-term interest rates of commercial banks, while the interest rate support level for investors remains the same at 1.5-2%.

Updated to the end of July 2024, the total amount disbursed by banks is VND 1,344 billion, including VND 1,295 billion for investors in 12 projects and VND 49 billion for home buyers in 5 projects.

Of the total VND1,344 billion disbursed to investors and homebuyers, the Bank for Agriculture and Rural Development of Vietnam (Agribank) led in disbursement with nearly VND650 billion for project investors and more than VND40 billion for social housing buyers.

A bank representative said that in the second quarter of 2024 alone, Agribank approved credit for 3 social housing projects and increased disbursement by more than VND 150 billion to projects and homebuyers. It is expected that in the coming time, Agribank will continue to provide credit of more than VND 1,500 billion to 5 new social housing projects in the localities: Binh Dinh, Hai Phong, Lam Dong and Thai Nguyen.

At the same time, Agribank will continue to proactively approach new social housing projects according to the approved list of the Ministry of Construction, thereby accompanying and supporting enterprises with investment and construction capital; stepping up propaganda so that many people can access preferential capital to buy social housing as soon as the policy of reducing interest rates for home buyers by 3-5% takes effect.

Previously, the interest rate factor was mentioned as one of the limitations that made it difficult for both social housing buyers and businesses developing this type of real estate to access capital.

Mr. Nguyen Van Thanh Huy, Deputy General Director of Becamex Corporation, assessed that the interest rate of the 120 trillion VND credit package for workers is still high and the loan period is short. Therefore, if the loan period is extended, it will create more favorable conditions for workers to own social housing.

Discussing this issue, Mr. Do Thanh Son, Deputy General Director of Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) explained that the nature of the 120 trillion VND package is a credit package from the bank's commercial capital source, without support from the state budget, in which the basis for confirming the lending interest rate and the average commercial lending interest rate of 4 state-owned commercial banks.

"Therefore, although commercial banks prioritize resources for the program, the interest rates for investors and home buyers are still not attractive enough compared to support programs from the state budget," Mr. Son emphasized.

Expanding loan package size

According to the Standing Deputy Governor of the State Bank of Vietnam, Dao Minh Tu, in addition to the four state-owned commercial banks (BIDV, VietinBank, Agribank and Vietcombank), four more joint-stock commercial banks have registered to participate in the VND120 trillion credit package. The scale of each bank's registration is VND5 trillion, expanding the preferential capital source for social housing loans to VND140 trillion.

The Deputy Governor also said that in addition to further reducing lending rates for homebuyers, the State Bank also proposed to shorten the periodic interest rate adjustment period to 3 months instead of 6 months as at present. Notably, after the 5-year preferential period, the bank will continue to offer preferential interest rates to borrowers at a rate 1-2% lower than the minimum commercial interest rate instead of the current floating rate. The lending policy for investors will remain the same.

Deputy Minister Bui Xuan Dung, representing the Ministry of Construction, said that the ministry has issued a document agreeing with the State Bank's proposal to facilitate access to preferential capital sources. At the same time, the Deputy Minister requested the State Bank to direct and encourage commercial banks to participate in lending in the VND120,000 billion support package and loosen credit, creating conditions for banks to carry out research procedures, consider increasing loan terms with preferential interest rates 3-5% lower than normal loans so that low-income people and industrial park workers can access capital.

In addition, in order to make the program more attractive, expand capital sources and obtain truly preferential interest rates, Mr. Do Thanh Son proposed that the Government consider establishing a social housing development fund with preferential capital, mobilized from many different sources and the budget capital plays a key role. On the basis of this capital source, the lending interest rate can be considered lower than the normal commercial lending interest rate on the market.

"VietinBank commits to continue to resolutely, strongly, and effectively implement solutions to accompany and support social housing investment enterprises and home buyers," Mr. Do Thanh Son affirmed.

Based on Resolution 33/NQ-CP dated March 11, 2023 of the Government, the State Bank has announced the lending interest rate from the implementation of this credit package until June 30, 2023 is 8.5%/year for investors and 8.2% for home buyers. From July 1 to December 31, 2023, the lending interest rate has decreased by 0.5%/year compared to before, i.e. 8.2%/year for investors and 7.7%/year for home buyers.

As of December 25, 2023, the State Bank continued to announce the lending interest rate applicable from January 1 to June 30, 2024 at 8%/year for investors and 7.5%/year for home buyers. Thus, compared to the time of implementing this credit package, the interest rate has decreased by a total of 0.7%/year.

At a working session with leaders of the State Bank and leaders of several ministries and branches on monetary policy management, Prime Minister Pham Minh Chinh welcomed the State Bank's proposal to increase the credit package of 120 trillion VND for preferential loans for the development of social housing and workers' housing to 140 trillion VND with increased loan terms and lower interest rates.

The Prime Minister stated that this is a humane policy to help the poor have homes, so there must be appropriate and reasonable policies for people to access this credit package, especially when four laws on land and housing have just come into effect.