After 5 years, interest rates for social housing loans will not be floating.

To support borrowers to buy social housing, the State Bank has just submitted to the Government a draft resolution amending the VND120,000 billion package with more incentives. Accordingly, the Government is proposed to reduce the interest rate for home loans by 3% compared to the average interest rate of 4 State-owned commercial banks (currently only 1.5 - 2% lower).

Credit package raised to 140,000 billion VND

Sharing about the VND120,000 billion credit package for social housing development, on July 23, Deputy Governor of the State Bank of Vietnam (SBV) Dao Minh Tu said: The proposed preferential rate will increase by 1% compared to the current rate of 2%. The time to determine the loan interest rate is 3 months/time, shortened by half compared to the present (currently 6 months/time).

"In addition, the preferential loan period of the program is also proposed to be 5 years, instead of 3 years. After 5 years, the loan interest rate will continue to be reduced, depending on the economic conditions at that time, but the minimum reduction is 1 - 2%/year; not that after 5 years, the loan interest rate will be floating, causing social housing borrowers to worry," Mr. Dao Minh Tu emphasized.

However, for investors, the loan policy remains the same as it is now.

With the VND120,000 billion package, according to the leader of the State Bank, there are currently 4 commercial banks with State capital participating in lending. Up to now, 4 other joint stock commercial banks have also registered to participate, with VND5,000 billion/bank. Thus, the total capital of the program reaches VND140,000 billion, an increase of VND20,000 billion compared to the scale of the initial package.

According to Mr. Le Hoang Chau - Chairman of Ho Chi Minh City Real Estate Association (HoREA), the VND120,000 billion credit package only applies preferential loan interest rates for 5 years. After 5 years, commercial banks and social housing buyers and lessees will negotiate loan interest rates, and it is almost certain that the new interest rates will be higher, so home buyers are often "afraid" and do not dare to borrow; at the same time, the State Bank stipulates that loan interest rates during the preferential period are announced periodically every 6 months, this interest rate calculation method makes home buyers even more insecure when floating interest rates.

In addition, a representative of HoREA said: The regulation stipulates that borrowers to buy or hire-purchase social housing can only borrow preferential loans once to buy one house. If they have borrowed the VND120,000 billion credit package with an interest rate of about 7.5%/year, people will lose the opportunity to borrow preferential social housing credit according to regulations with an interest rate of 4.8 - 5%/year for a maximum period of 25 years. "We recommend that the proposal of the 'VND110,000 billion credit package' for buyers and hire-purchase social housing with a preferential loan interest rate of 4.8 - 5%/year for a maximum period of 25 years be restored," Mr. Le Hoang Chau shared.

The preferential package of 120,000 billion VND for social housing development currently has a loan interest rate of 7.5%/year for home buyers, and 8%/year for social housing project investors. The preferential loan interest rate is applied for 5 years. Every 6 months, the State Bank will adjust the loan interest rate once based on the average loan interest rate of 4 commercial banks.

Disbursement of new credit package reaches 1,344 billion VND

According to the Department of Credit for Economic Sectors (SBV), up to now, this credit package has only disbursed 1,344 billion VND, of which 1,295 billion VND is for investors and 49 billion VND is for home buyers. Of which, Agribank is the bank that disburses the most.

“The bank really wants to quickly disburse the VND120,000 billion credit package, however, to disburse, there needs to be a project, and the housing construction project must follow the construction progress. The disbursement progress also depends on and must wait for many localities to announce the social housing list. Currently, only 34/63 localities have announced it,” said Ms. Ha Thu Giang, Director of the Department of Credit for Economic Sectors.

According to Ms. Ha Thu Giang, among the 78 social housing projects announced by localities, many investors do not have a need for loans. Some projects, when approached by banks, encountered legal problems (problems with site clearance procedures, not yet started construction...) so they were not eligible for bank loans.

As the direct implementing unit, BIDV representative once shared: In fact, the conditions for purchasing social housing are quite strict, so the subjects who meet the requirements are limited. Therefore, investors are not interested in implementing it because of lack of output. There are also banks concerned: Will they lend to the right subjects? Therefore, many opinions suggest that it is necessary to consider expanding the subjects who can purchase social housing to create motivation for both banks and businesses.

“The State Bank strongly encourages banks and large economic groups to promote the development of social housing, create conditions for low-income people to borrow to buy social housing, promote the development of social housing, and implement the Project "Investing in the construction of at least 1 million social housing apartments for low-income people and industrial park workers in the period of 2021 - 2030", said Deputy Governor Dao Minh Tu.

Recently, Vingroup and Techcombank jointly proposed to pilot a social housing loan package with 'dramatic' incentives such as: 4.8%/year interest rate, 30-year loan term, especially loan amount up to 100% of house value.

It is noteworthy that two "big guys" in the finance and real estate industry proposed to offer a loan interest rate for social housing buyers equal to the interest rate applied by the Social Policy Bank from time to time (currently the interest rate is about 4.8%/year and fixed for the first 5 years). The loan term is also applied up to 30 years with the collateral being the house itself. These two businesses proposed that the borrowers are individuals who are eligible to buy social housing according to the list verified and provided by the project investor. In particular, the maximum home loan amount is up to 100% of the value of the social housing purchase contract.

However, along with the proposal, Techcombank recommends: The State Bank of Vietnam considers granting additional credit growth limits compared to normal credit growth so that banks can proactively expand their business, generating income to offset the interest rate difference spent to support people to buy social housing.