Urgent need to build social housing - Final article: Adding new mechanisms

According to the forecast of the Ministry of Construction, the demand for housing in the period of 2021 - 2030 will continue to increase, especially in urban areas. The urban population ratio is currently about 40% and will increase to about 45% by 2030. With the current population growth rate and housing demand, about 70 million square meters of urban housing must be added each year.

In particular, the potential and room for development of the social housing segment in Vietnam is still large. However, in reality, the policies are not really attractive, so most real estate businesses are still "indifferent" to this segment. People and businesses are expecting a series of newly issued policies to help remove procedural and financial obstacles to promote the development of social housing.

Mr. Nguyen Hoang Nam - General Director of G-Home:

At present, if an investor wants to build social housing, the enterprise must set aside 20% of the apartment fund for rent and only after 5 years is it allowed to sell. Currently, to develop social housing, enterprises have to spend very high costs, while the rental price cannot be high because there is a "framework".

All selling and rental prices of social housing are publicly available on the Department of Construction portal of the localities where the projects are located. The estimated rental price of social housing in Hanoi and Ho Chi Minh City is around 100,000 VND/m2/month. In other provinces and cities, it is around 30,000 - 50,000 VND/m2/month.

Not to mention, to rent social housing, the tenant must meet many conditions; even at least rent for a period of 1 year. In addition, the regulation stipulates that once enjoying the social housing policy, one cannot enjoy it a second time. Therefore, if the tenant officially rents for 1 month, he or she will not be able to buy social housing in the future.

Many countries in the world have successfully and widely implemented the model of businesses building rental housing because their long-term capital costs are cheap. Businesses only have to borrow at an interest rate of about 3%, so they can easily invest, and then when they rent out, they can still earn profits.

Meanwhile, in Vietnam, businesses are currently having to access capital with interest rates of around 12-15% and always have to have reserve fees, so the implementation costs are increased. With the current financial mechanism, there is no source of money to support businesses when interest rates and input costs are very high.

Meanwhile, the profit margin of enterprises is only 10%, on average, each year only achieves a profit of 2%/year. This makes it difficult to attract enterprises to invest in building social housing.

Ms. Duong Thuy Dung - Senior Director of CBRE Vietnam:

From 2021 onwards, the investment capital rate for social housing construction applies the same investment capital rate for commercial housing construction of the Ministry of Construction. However, on July 13, 2022, the Ministry of Construction issued Decision No. 610/QD-BXD on announcing the investment capital rate for construction works and the total construction price of structural components of works in 2021.

Accordingly, the Ministry of Construction has issued a framework for investment capital for construction of social housing projects in the form of apartments. Through review, the investment capital for construction of social housing projects is about 25% lower than the investment capital for construction of commercial apartments.

Thus, social housing projects to be built from 2021 will refer to and apply the investment capital rate issued by the Ministry of Construction when developing pricing plans, accordingly, the investment capital rate for social housing construction is lower than that for commercial housing. However, if we want to ensure good quality and build model social housing areas, the investment rate needs to increase.

Currently, not only social housing but also the development costs of all real estate products in Vietnam are high. So, the problem that needs to be solved is how investors can avoid losses and make profits in their business activities.

While the demand for housing in the market is still very high, especially in the "affordable" segment or especially social housing. Therefore, businesses should also closely follow the market, be able to seize opportunities and launch products that are not too costly. In addition, experience in some countries around the world shows that instead of offering apartments for sale to buyers, investors allow people to rent for a period of 1 - 3 years, in the rental agreement, there is a clause allowing them to buy. Thus, during those 3 years, people in need will have more opportunities to accumulate and choose.

Mr. Le Hoang Chau - Chairman of Ho Chi Minh City Real Estate Association:

According to Decree No. 100/2015/ND-CP, investors of social housing projects are allowed to increase the construction density or land use coefficient to a maximum of 1.5 times the standard. However, in the latest draft Decree on the development and management of social housing, the Ministry of Construction has removed this provision.

The draft Decree on the development and management of social housing needs to add a provision that allows social housing project investors to adjust the construction density or land use coefficient up to a maximum of 1.5 times compared to construction standards and regulations. This is to ensure feasibility and encourage investors to negotiate land use rights or have land use rights to implement social housing projects.

This is also one of the policy mechanisms to attract investors. Investors of social housing projects should be allowed to adjust the construction density or land use coefficient up to a maximum of 1.5 times compared to the current construction standards and regulations issued by competent authorities in cases of bidding to select investors where the land plot or land area only has a 1/2000 scale zoning plan or in cases where investors currently have the right to use the land to implement social housing projects.

Because, without this policy mechanism, investors will choose to use the land they have to implement commercial housing projects, which are easier and more effective, instead of implementing social housing projects that are bound by many regulations.

Besides, while the State does not have available land funds to develop social housing, it is necessary to encourage investors to negotiate on their own land use rights or have land use rights to implement social housing projects.

According to VNA

Source: https://doanhnghiepvn.vn/kinh-te/cap-thiet-xay-dung-nha-o-xa-hoi-bai-cuoi-them-co-che-moi/20240813042623478