Interest rates on social housing loans remain high, many low-income people do not dare to 'put down money'

Mr. Vu Quang Minh (from Hung Yen ) said that after many years of working, he and his wife saved about 400 million VND. He planned to buy a social housing house for 1.5 billion VND, borrowing 70%, equivalent to about 1.1 billion VND.

Mr. Quang learned about the 1,200 billion VND loan package over 20 years with an interest rate of 8.2%. Calculating, each month he has to pay 10 - 13 million VND in principal and interest.

“ My wife and I earn less than 20 million/month. Now, if we buy a house and pay bank interest, it will not be enough to cover living expenses and raise two children. Having a house is a blessing, but we do not have the strength to bear the debt. We do not know when we will be able to pay it off ,” Mr. Minh worried.

Ms. Nguyen Thi Nhan (Hoang Mai, Hanoi ) also shared that although she is eligible to buy social housing, she is still worried about the interest rate of the 120,000 billion VND credit package.

According to experts, the interest rate for loans to buy social housing under the 120,000 billion VND package is still not really preferential. (Illustration photo)

" With an income of less than 11 million VND/month, I have to struggle to cover family living expenses and pay for school fees for my two children. The interest rate of 8.2%/year from a loan of 500 million VND is too high, making it impossible for me to buy social housing ," said Ms. Nhan.

Currently, the preferential credit package of VND120,000 billion for investors and home buyers of social housing and worker housing projects is applying a 2%/year lower interest rate compared to the commercial interest rate, with a disbursement period until the end of 2030, mobilized from capital sources of 4 State-owned commercial banks. Accordingly, the interest rate of 8.2%/year applies to buyers and renters of social housing, worker housing, housing in projects to renovate and rebuild apartment buildings... and 8.7%/year applies to investors of social housing projects, worker housing, projects to renovate and rebuild apartment buildings.

According to Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), the interest rate of this credit package, although preferential, is still too high compared to the financial capacity of low-income people in urban areas.

For example, if you want to buy a social housing apartment worth 1 billion VND, you need to pay 20% in advance (200 million VND) and borrow 80% (800 million VND) with an interest rate of 8.2%/year. With that loan amount, the borrower must pay an average of 5.46 million VND/month in the first year (not to mention having to pay part of the principal).

At the same time, according to Mr. Chau, with the regulation of "applying a preferential loan interest rate for a period of 5 years" and the loan interest rate when the preferential period ends, commercial banks and customers will negotiate and agree on it themselves, making many people hesitant to borrow capital.

" The 5-year preferential period is too short, not consistent with the nature of the preferential credit policy on social housing, which requires loans at low interest rates and for a long period, while the 2014 Housing Law stipulates a maximum preferential loan period of 25 years ," Mr. Chau commented.

The Chairman of HoREA realized that it is likely that after the preferential period ends, social housing buyers will have to borrow at normal commercial interest rates, and this will be a "burden" for borrowers who are low-income earners and workers.

Therefore, HoREA proposed that the Ministry of Construction continue to study and propose a preferential credit package of VND 110,000 billion (equal to about 30% of the capital demand to implement the Program of 1 million social housing units in the period of 2021-2030) under the mechanism of "recapitalization, interest rate subsidy" so that buyers and renters of social housing can borrow at a preferential interest rate of about 4.8-5%/year for a maximum period of 25 years.

Also commenting on the interest rate for loans to buy social housing, Dr. Le Xuan Nghia, former Vice Chairman of the National Finance Committee, said that in reality, the interest rate of 8.7% for investors and 8.2% for home buyers is not attractive.

According to Mr. Nghia, the lending interest rate for investors should be applied according to the market interest rate minus 2%, and for home buyers it should be the market interest rate minus 5%; in which, the 5% deduction is directly funded by the budget for commercial banks.

Similarly, economist Nguyen Tri Hieu said that the "120,000 billion VND credit package for investors and home buyers of social housing and worker housing projects" should be renamed "a preferential interest rate loan program of 120,000 billion VND".

In more detail, Mr. Hieu said that the credit support package must have regulations on how long the loan period is: 5 years, 10 years or 20 years? Regarding interest rates, the preferential interest rate is only valid for 5 years, meaning that 5 years after the interest rate agreed between the borrower and the lender. So, who can guarantee that the interest rate after 5 years will be lower than the current interest rate? Floating interest rates will pose risks for both borrowers and lenders, with the borrower being the risk of default and the lender being the risk of debt collection.

" It can be seen that this 120,000 billion VND is not "perfect" like the previous social housing loan support package. Therefore, this should only be a preferential loan program. As a support package, there must be more complete regulations and conditions ," Dr. Hieu commented.

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