Worried that the 125,000 billion VND loan package for social housing will continue to be unsold

Deployed from April 2023, the VND120,000 billion preferential loan package for developing social housing and workers' housing is expected to contribute to realizing the goal of building one million social housing units by 2030. Recently, a commercial bank joined this credit package, raising the total value of this loan package to VND125,000 billion.

However, after one year of implementation, the disbursement results of this credit package are still very low. A recent report from the State Bank said that the 125,000 billion package has only disbursed 415 billion VND, or less than 1%, for 6 projects. The amount of money that commercial banks have disbursed to home buyers is only over 540 million VND for two projects.

The reason for the slow disbursement of this credit package, according to the State Bank, is that the regulations on beneficiaries are still complicated, making it difficult for people to borrow preferential loans. The Ministry of Construction also assessed that the interest rate of the preferential loan package is still high, while the loan period is short, so it has not attracted businesses and people to borrow capital. These two agencies said that some large investors have recently focused on building urban areas and high-end resorts without paying attention to investing in social housing, causing a shortage in supply.

With low disbursement results and little improvement in recent months, experts are concerned that the VND125 trillion package for social housing will continue to be unsold. Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), said the main reason is that this credit package "is not suitable for the people". Although the State Bank has adjusted the interest rate twice, currently at 8% per year for businesses and 7.5% per year for home buyers, this is still quite high. This interest rate is also adjusted every 6 months, then floated, making social housing buyers "uneasy and afraid to borrow".

Dr. Le Xuan Nghia, member of the National Financial and Monetary Policy Advisory Council, assessed that the credit policy for social housing and low-cost housing "almost failed and showed a step backward in housing development". This made the current situation of segment crisis, lack of affordable housing, and surplus of high-end housing even more serious. Mr. Nghia assessed that "we cannot rely solely on banks to push up social housing".

Sharing the same view, Mr. Nguyen Van Dinh, Chairman of the Vietnam Association of Realtors (VARS), said that banks providing preferential loans are also businesses, operating for profit. Therefore, "we cannot force them to lend at low interest rates when they borrow from others at interest rates above 5%". According to him, the delay in disbursing the VND125,000 billion package will affect the progress of completing the project to build one million social houses. In the 2021-2025 period, the whole country has only completed nearly 38,000 houses, reaching nearly 9% of the plan.

Dr. Le Xuan Nghia said the solution to "save" social housing is to establish a fund to develop this segment with preferential capital from the state budget. From there, the lending interest rate can be lowered, lower than the normal commercial lending interest rate. The budget capital will play a key role, along with many other resources being mobilized.

Mr. Le Hoang Chau proposed that the Ministry of Construction restore the VND110,000 billion credit package to achieve the goal of building at least one million social houses by 2030. This VND110,000 billion package was proposed by the Ministry of Construction to the Government and the National Assembly in February. Accordingly, the preferential interest rate for social housing loans is 4.8-5% per year, with a maximum loan term of 25 years. This package is similar to the VND30,000 billion credit package applied in the period 2013-2016.

At the same time, to improve the supply of social housing, experts believe that it is necessary to attract more businesses to participate with attractive incentive policies. Mr. Le Hoang Chau proposed that the draft decree on the development and management of social housing increase the profit margin to 15%, instead of 10% as before, applicable to businesses that create their own land funds.

Enterprises can also mortgage their social housing projects when borrowing preferential loans, including loans from the VND125,000 billion package. Because currently, investors must mortgage other assets to borrow, affecting the progress of project implementation. Mr. Chau also proposed a 70% reduction in value added tax and corporate income tax to encourage the development of many social housing projects for rent.