Removing credit obstacles for social housing projects

Difficult in many ways

In early April 2023, under the direction of the State Bank, the Big 4 banks, including Agribank, Vietinbank, BIDV, and Vietcombank, issued unified instructions throughout the system to urgently implement a VND 120,000 billion credit package. This can be considered a "strategic" credit package, demonstrating the determination of the Prime Minister in directing solutions to remove obstacles and promote the real estate market in general and social housing in particular to develop safely, healthily, and sustainably.

Not stopping there, recently a joint stock commercial bank has participated in 5,000 billion VND to supplement capital for social housing loans, raising the total value of the credit package from capital voluntarily mobilized by these banks to 125,000 billion VND.

However, after more than a year of implementation, the amount disbursed from this credit package nationwide accounts for less than 1%. According to statistics from the State Bank, by the end of June 2024, commercial banks had only disbursed nearly VND 1,144 billion, including VND 1,133 billion for investors in 11 projects and VND 11 billion for home buyers in 4 projects.

In Hai Duong, this credit package has not been disbursed yet. In the list of social housing projects and worker housing projects in the province, there is one project that can access loans under the VND125,000 billion package. That is the social housing project in the new urban area in the South of Hai Duong City (sub-area 2) in Lien Hong and Gia Xuyen communes (Hai Duong City), invested by Thanh Dong Real Estate Investment Joint Stock Company. However, this project is still in the process of completing procedures to be granted a certificate of land use rights, calculating the selling price, rental price and lease-purchase of social housing. When the project is granted a certificate of land use rights and completes the calculation of the above prices, the project investor will complete all legal requirements to be able to borrow capital from the bank's VND125,000 billion credit package.

Unlike the above enterprise, Newland Investment Joint Stock Company has proactively raised capital to implement the social housing project in the Nhi Chau Ward housing project (Hai Duong City). “According to regulations, investors of social housing projects are not allowed to mortgage the land to build the project to borrow capital from banks. Therefore, to ensure project progress, we have used our own capital plus other mobilized capital with a scale of nearly 470 billion VND to implement the construction. There is absolutely no loan capital from the bank,” said Mr. Giap Van Tiep, Head of Sales Department of Newland Investment Joint Stock Company, Hai Duong branch. Thanks to that, the social housing project with 619 apartments has been completed and put into operation, serving the needs of people since the beginning of 2023.

This enterprise will soon start another social housing project in Hai Tan and Tan Hung wards (Hai Duong city). The project has a scale of 5 high-rise buildings, 15 floors/building, according to preliminary calculations, the total investment is about more than 1,000 billion VND. Although the investor has been preparing a financial plan, this is still a big challenge.

How to remove?

Not only investors, but also people have difficulty accessing bank loans to buy social housing. According to Ms. Nguyen Thi Quynh Diep, Head of Agribank's Personal Customer Department, Hai Duong Province Branch, people buying social housing can mortgage future assets, which are the apartments they intend to buy through a sales contract with the investor. "At that time, the investor, the bank, and the customer will sign a 3-party contract, the bank will disburse according to the payment schedule from the investor, the customer will commit to immediately receiving the land use rights certificate to put it in the bank to use as collateral," Ms. Diep said.

Mr. Nguyen Tuan Anh and his wife in Hai Duong City did not borrow money from the bank even though the process was quite simple. “Around mid-2023, I needed to borrow money to buy social housing. At that time, the social housing loan package had an interest rate of 8.2%/year for people. Calculating the level of debt repayment to the bank was still beyond my family's capacity. Moreover, this credit package has an interest rate adjustment period of 6 months/time, so we were also worried," Mr. Tuan Anh shared. Borrowing from the Social Policy Bank, although the interest rate was low, did not meet the conditions because Mr. Tuan Anh and his wife had paid personal income tax. Therefore, to buy a house in the social housing area in Nhi Chau, the couple used all their savings and borrowed more from friends and relatives.

At the provincial branch of the Social Policy Bank, the current interest rate for loans to buy social housing is 4.8%/year. This is an interest rate suitable for many people. However, as mentioned above, many people are hindered by the condition of “not having to pay personal income tax” so they cannot access capital.

To resolve the issue, the State Bank is studying to amend some contents of the VND125,000 billion credit package to submit to the Government for early approval. The State Bank plans to increase the scale of the loan package by encouraging the participation of many other commercial banks. Thereby increasing the total scale of capital to support people to buy social housing. In addition, the preferential interest rate will be increased so that borrowers will enjoy an interest rate of about 5%/year, 3%/year lower than the average medium and long-term loan interest rate of the group of 4 large state-owned banks.

However, borrowers will only enjoy this incentive for the first 5 years, after which the incentive will gradually decrease and will end after 10 years. Enterprises investing in social housing projects will maintain the incentive rate at a reduction of 1.5-2%/year compared to the normal loan interest rate.

Furthermore, the nature of this VND125,000 billion credit package is not a preferential social housing credit package, but only a commercial credit package with an interest rate 1.5-2%/year lower than the normal lending interest rate for investors and home buyers. Therefore, many large real estate enterprises across the country also proposed that the Ministry of Construction restore the VND110,000 billion credit package. This is a credit package with an interest rate of 4.8-5%/year, a maximum loan term of 25 years, which the Ministry of Construction proposed on February 17, 2023 to implement the social housing policy under the Housing Law 2023.

What is the interest rate of the 125,000 billion VND credit package?

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 continues 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, interest rates have decreased by a total of 0.7%/year.

Subjects eligible to buy social housing

According to Article 76 of the 2023 Housing Law, expected to be applied from August 1, 2024, 12 subjects are entitled to social housing policies, including:

1. People with meritorious services to the revolution and relatives of martyrs are eligible for housing improvement support according to the provisions of the Ordinance on Preferential Treatment for People with Meritorious Services to the Revolution.

2. Poor and near-poor households in rural areas.

3. Poor and near-poor households in rural areas frequently affected by natural disasters and climate change.

4. Poor and near-poor households in urban areas.

5. Low-income people in urban areas.

6. Workers and laborers working at enterprises, cooperatives, and cooperative unions inside and outside industrial parks.

7. Officers, professional soldiers, non-commissioned officers of the people's armed forces, police workers, civil servants, defense workers and public employees currently serving in the army; people working in cryptographic work, people working in other positions in cryptographic organizations receiving salaries from the state budget currently working.

8. Cadres, civil servants and public employees as prescribed by law on cadres, civil servants and public employees.

9. The subject has returned the official residence according to the provisions of Clause 4, Article 125 of this Law, except in cases where the official residence is revoked due to violations of the provisions of this Law.

10. Households and individuals whose land is recovered and whose houses must be cleared and demolished according to the provisions of law but have not yet received compensation from the State in the form of houses and residential land.

11. Students, university students, trainees, colleges, vocational schools, specialized schools as prescribed by law; students of public boarding schools for ethnic minorities.

12. Enterprises, cooperatives, cooperative unions in industrial parks.

In addition, Article 78 of Housing Law No. 27/2023/QH15 stipulates additional conditions on housing and income for a number of cases when buying or renting social housing.