Social housing development in Hai Duong: Final article - Housing prices will be more fair and equal

Policy support

“The new point of the Housing Law 2023 is that investors do not have to carry out procedures to determine land prices, calculate land use fees, exempt land rents, and do not have to carry out procedures to request exemption of land use fees and land rents for land plots implementing social housing projects,” said Mr. Giap Van Tiep, Head of Sales Department of Newland Investment Joint Stock Company, Hai Duong branch.

According to Mr. Tiep, previously the average time for carrying out procedures to request exemption of land use fees and land rents often took several months. With the new regulations, it will help investors save a significant amount of time, organization and management costs related to some stages of completing the documents.

The second new point, which is also considered a great incentive for investors of social housing projects, is the abolition of the regulation that "investors must reserve at least 20% of the social housing area in the project for rent; this housing can only be sold to tenants according to regulations on selling social housing after a 5-year rental period". Simply put, with the old regulation, for example, with a social housing project of 1,000 apartments, the investor must reserve at least 200 apartments for rent, and can only sell this number of apartments after 5 years. With the new regulation, 1,000 social housing apartments that meet the conditions for being put into business will be allowed to be sold immediately.

According to regulations, social housing project investors are entitled to a fixed profit of the entire project not exceeding 10% of the total investment cost and the selling price of social housing apartments approved by the provincial People's Committee. Profits are distributed equally to each apartment, so if they have to "cut" 20% of the number of apartments for rent, it will affect the capital turnover as well as the financial indicators of the investor, even causing the investor to have a long-term capital backlog. Therefore, from the investor's perspective, being able to sell all social housing apartments will help the sales time to be quick, proactive, and recover capital quickly. From there, they will have the conditions to invest in implementing new projects.

The 2023 Law on Real Estate Business, effective from August 1, tightens the situation of dividing plots and selling land. Specifically in Hai Duong, real estate project investors in wards of Hai Duong City and Chi Linh are not allowed to transfer land use rights that have been invested in technical infrastructure to individuals to build their own houses. That is, real estate project investors must build houses for sale. The price of finished real estate is certainly higher than the price of land. The narrowing margin between profits and investment costs of real estate projects may promote the trend of developing social housing from investors.

Social housing prices will be fairer

To find the answer to the question of social housing prices, it is necessary to first understand the formula for calculating the selling price. According to the Housing Law 2023 and Decree 100/2024/ND-CP detailing a number of articles of the Housing Law 2023 on the development and management of social housing, the selling price of social housing invested in construction not using public investment capital or trade union finance is determined for each square meter of basic apartment according to the formula equal to the total construction investment cost plus the standard profit.

Compared to the previous regulation, this formula is basically unchanged. The biggest change is the regulation on reserving a maximum of 20% of the total land area in a social housing project for investment in service business, trade or commercial housing.

Previously, investors were allowed to reserve 20% of the total land area for housing construction within the scope of the social housing construction project to invest in the construction of commercial business buildings, including high-rise or low-rise commercial housing to offset investment costs, contributing to reducing the selling price, rental price, and hire-purchase price of social housing and reducing the cost of management and operation services of social housing after investment. This means that the 20% area for commercial business will be directly offset against the selling price of social housing.

With current regulations, the above 20% area is divided into 2 cases. If the investor builds a service or commercial business, it will have to account separately and the construction investment cost cannot be included in the price of social housing. In the case of investing in the construction of commercial housing, the investor must pay land use fees for this area. Thus, there is no longer a regulation that the commercial land in a social housing project can be used to support a reduction in the selling price of social housing.

The selling price of social housing at this time can be said to no longer be supported, depending on the total construction investment cost, that is, the cost of raw materials, labor, interest, inflation, etc. Therefore, the increase in these costs will increase the price of social housing and vice versa.

According to Mr. Van Huu Hoa, Director of Thanh Dong Real Estate Joint Stock Company, Hai Duong branch, in essence, the price calculation formula and input factors have not changed compared to before. However, the land price list is built according to market principles, so it tends to be higher than before, urban areas are higher than rural areas, large cities are higher than provinces. "If the 20% commercial area is used to subsidize social housing prices, it will create a situation where social housing prices in large cities are lower than in provinces, in urban areas are lower than in rural areas, and there will be an unevenness in prices in each location and region. The new regulation separating this area from the social housing price will create fairness, making social housing prices less dependent on urban or rural factors, while improving the efficiency of state management and increasing land budget revenue," Mr. Hoa analyzed.