The VND100 trillion credit package proposed by the Ministry of Construction is expected to create a boost for the social housing market.
Old packagesluggish
The Government approved the implementation of the Project "Investing in the construction of at least 1 million social housing units for low-income earners and industrial park workers in the 2021-2025 period" in early April 2023. The project's goal is to complete more than 1 million apartments nationwide by 2030. Of which, 428,000 units will be built in the 2021-2025 period and 634,200 units will be built in the 2025-2030 period.
To implement the project, the State Bank has allocated VND120,000 billion at four joint-stock commercial banks designated by the State, with a lending interest rate of 8.7% per year for investors and 8.2% per year for buyers and renters of social housing. However, this interest rate is not fixed but is adjusted by the State Bank every 6 months.
With the State Bank stipulating an interest rate only 1.5 - 2% lower per year than the general level for medium and long-term loans, commercial banks TP Bank, VP Bank, MB Bank, Techcom Bank and HD Bank have submitted applications to participate, increasing the interest rate support capital to VND 145,000 billion.
However, after nearly 20 months of implementation, this credit package has been very sluggish because the regulations issued by the State Bank are not suitable for both investors and home buyers. By early September 2024, the State Bank decided to lower the interest rate to 7%/year for investors and 6.5%/year for home buyers.
Ms. Nguyen Thi Thu in Tran Phu Ward (Hai Duong City), a garment worker, said: “The interest rate is still too high for people who want to buy a house like us. Like my husband and I, with a family income of about 15 million VND/month, it is very difficult to save money to buy a house in the city, so we have to borrow from the bank. The interest rate of 6.5%/year is too high for my family to afford.”
According to the report of the Ministry of Construction, by the end of the third quarter of 2024, only 34/63 localities had documents announcing 83 projects eligible for preferential loans on the Electronic Information Portal. The total outstanding loan balance disbursed was VND 1,783 billion, of which enterprises borrowed VND 1,633 billion, home buyers borrowed VND 150 billion, accounting for only about 1.1% of the total registered capital for support.
In Hai Duong, to implement the above project, the province has also issued the Project on Social Housing Development in the province for the period 2023-2030. According to the project, Hai Duong plans to invest in the construction of at least 15,920 apartments. In the period 2023-2025, the province plans to complete and start construction of more than 6,800 social housing apartments.
Up to now, only BIDV Hai Duong has received the loan application of Thanh Dong Real Estate Investment Joint Stock Company, requesting the bank to provide a credit of 200 billion VND to invest in the Social Housing Project in the new urban area in the south of Hai Duong City (phase 2). Up to now, the above credit amount has not been approved for disbursement, which means that Hai Duong has not spent a single penny from the above credit package.
Is the new package possible?
Social housing is a major policy of the Party and the State. This is even more clearly demonstrated through the determination to amend and supplement the Housing Law, the Land Law and a number of decrees guiding the implementation with synchronization and unification of regulations for social housing. However, the mechanisms for preferential credit sources for social housing development still have many shortcomings, namely the lack of "seed capital" or the existence of such sources but with somewhat strict regulations, so that the subjects cannot or have difficulty accessing them.
“Decree 100/2024/ND-CP of the Government stipulates the capital level, preferential interest rates, terms and disbursement of loans for social housing projects (7.92%/year for social housing investors for sale, lease-purchase; 6.6% for projects for lease only), has created conditions for investors to access preferential credit sources to implement the project. However, in Official Dispatch 4524/NHCS-TDSV dated August 1, 2024 of the Vietnam Bank for Social Policies, based on Decree 100/2024/ND-CP for home buyers, the loan interest rate of 6.6%/year is high,” said Vice Chairman of Hai Duong Real Estate Association Nguyen Duc Quan.
Given the above situation, the preferential capital of 100,000 billion VND that the Ministry of Construction is proposing for social housing will expand the preferential capital source to develop this housing segment. Accordingly, the interest rate of this preferential credit package will be equal to the interest rate for poor households as decided by the Prime Minister in each period; the disbursement period will be until the credit package is fully disbursed, but not exceeding December 31, 2030.
Many people believe that the proposal of the Ministry of Construction is a breakthrough because it expands the source of development capital and creates opportunities for social housing buyers. “It is necessary to clarify the regulations on lending interest rates for this credit package, in which home buyers are the center and should be prioritized. If the lending interest rate of the VND100,000 billion credit package is equal to the lending interest rate for poor households decided by the Prime Minister in each period, based on Decree 100/2024/ND-CP at 6.6%/year, it will be difficult to encourage people to borrow money to buy social housing at the present time, because the lending interest rate according to Decision 486/2023/QD-TTg before was only 4.8%/year,” Mr. Quan added.
For those who want to buy social housing, the application of the interest rate according to Decision 486 of the Prime Minister will be a motivation for them to strive to own a social house. “I propose that the Government consider allowing the continued implementation of the regulation on the lending interest rate of 4.8%/year according to the Prime Minister's decision. Currently, the Vietnam Bank for Social Policies is lending under the housing support program for the poor with an interest rate of 3%/year. If the lending interest rate for people buying or renting social housing is 3-4.8%/year, we will have easier access to social housing than at present,” Ms. Thu added.
Reducing interest rates to the lowest possible level will encourage home buyers, stimulate the market, and motivate investors to accelerate project implementation.
In addition, it is necessary to carefully study regulations on conditions and lending interest rates suitable to people's actual conditions, to avoid lessons from the VND120,000 billion credit package.
Furthermore, the telegram dated February 10 of Prime Minister Pham Minh Chinh directed to remove difficulties and promote the implementation of social housing projects. The 28th session of the 17th Hai Duong Provincial People's Council also passed a Resolution on the mechanism to support the implementation of social housing investment projects in Hai Duong province until 2030.
With the above drastic solutions, it is expected that the social housing market will flourish in the coming time.
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