Many difficulties
On a plot of land of nearly 300 square meters in Ung Hoe commune (Ninh Giang), Ha Thi Linh’s family will build a two-story house in just a few months. Although the foundation has been completed and the first floor is being prepared, Linh’s family has not yet completed the bank loan application.
“My family contacted the transaction office of a large bank in the province to ask about loan documents. To borrow a preferential interest rate credit package for the purpose of building a house, a construction permit issued by the district People's Committee is required,” said Ms. Linh.
Some banks in the province are implementing preferential credit packages for house construction, with relatively low interest rates, around 6%/year in the first 2 years; loan term is up to 20 years, even 25 years depending on the bank. The principal amount to be paid monthly after being divided equally over the entire loan term is therefore also low. With Ms. Linh's family's need to borrow 1 billion VND in 20 years, in the first 2 years the total amount to be paid is more than 9 million VND for the first month, then gradually decreasing. "This is an expense that is suitable for my family's financial capacity. If I borrow under another credit package, the principal and interest to be paid monthly will be higher, due to the short loan term. Therefore, my family is urgently completing the construction permit to borrow capital," Ms. Linh said.
There are not many people like Ms. Linh who are willing to complete the construction permit application in rural areas. According to regulations, in urban areas, people must apply for a construction permit before building a house. Meanwhile, houses in rural areas with a scale of less than 7 floors do not need to apply for this permit. Therefore, mentioning the need to apply for a permit from the government makes many people in rural areas not interested in the credit products specifically for building houses as mentioned above.
Completing a 1-storey Thai-roofed house at the end of 2023 after 7 months of construction and completion, Mr. Nguyen Quang Tam's family in Tuan Viet commune (Kim Thanh) did not borrow any bank loans. "The total cost of construction and completion is more than 2 billion VND, but because my family partly has savings from before, partly borrowed from relatives and friends, we do not have to borrow from the bank. In fact, if I cannot borrow money from relatives, I do not dare to build a house, because I do not want to borrow from the bank. I am always afraid of having a debt hanging over my head. If my work is interrupted for some reason and I do not have money to pay the debt, I do not know how to manage," Mr. Tam shared.
Multiple solutions
The biggest difficulty in increasing credit for rural housing construction is people's fear. Low-interest loan packages but requiring construction permits make people reluctant to apply, even though the time and procedures for applying for permits are relatively simple. With higher-interest loan packages but not requiring permits, people are hesitant about the monthly payment. Therefore, at most commercial banks, credit growth for housing loan packages is always lower than other credit packages.
Another channel for home building loans is from the Social Policy Bank system. Although the interest rate is the lowest in the banking system, at 4.8%/year, the maximum loan amount is 500 million VND, suitable for the needs of rural people, the biggest difficulty is the loan application. To get a loan, the borrower must be named on the land use right certificate and must borrow to build a house on that land.
In rural areas, parents often give their children a piece of land to build a house, often only verbally. If the land title transfer procedures have not been completed, those in need cannot borrow. Furthermore, many people in rural areas have to pay personal income tax even though they do not have surplus income, because the taxable income is not calculated properly. Therefore, many people cannot borrow policy loans because they are excluded from the loan target.
“It is estimated that for every 10 loans, only 1 is for building a house. Therefore, to achieve the overall credit growth target, we must carefully study the loan needs of customers in rural areas, from which we can advise on suitable loan packages,” said Ms. Nguyen Hong Nhung, Head of BIDV Thanh Dong Personal Customer Department.
Evaluating the growth quality of each loan package and finding advantages to target customers is also a solution applied by many banks. Ms. Nguyen Thi Quynh Diep, Head of Personal Customer Department of Agribank Hai Duong, said that each area, from urban to rural areas, needs its own credit growth solution. “To increase credit growth in rural areas, flexible management is required in each program and loan product. We often aim for credit packages or preferential interest rate packages serving consumption, production, and small-scale business, with a maximum loan amount of VND500 million, loan term from 1-5 years; at the same time, we promote lending through a number of mass organizations. Particularly for home construction loan packages, we often provide specific advice on interest rates, helping customers better understand the loan term, repayment amount, and are ready to support whenever customers need it,” Ms. Diep said.
HA KIENSource
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