Blockages make building social housing 'twice as difficult'

Chain Blockage

Mr. Le Huu Nghia, Director of Le Thanh Company - a company specializing in social housing (NOXH) in Ho Chi Minh City, commented: In the past, the Government has had many mechanisms and policies to develop NOXH. However, these incentives have made it difficult for investors, making the procedures and number of applications more and more difficult than commercial housing (NOTM) projects. For example, according to current regulations, NOXH projects are given incentives of 1.5 times higher in construction density, land use coefficient, and population size compared to NOTM approved by competent state agencies in the 1/2,000 scale planning. However, the reality is that almost all NOXH projects have been transferred from NOTM, so they are not suitable for the 1/2,000 planning. To be suitable to enjoy incentives, the 1/2,000 planning and the 1/500 planning must be adjusted. However, planning adjustment is extremely difficult.

Many bottlenecks make the social housing construction program achieve very low results.

"In Ho Chi Minh City, Resolution 98 requires the state to adjust the 1/2,000 and 1/500 planning to help social housing projects enjoy incentives and be consistent with the planning. Meanwhile, Decree 31 stipulates that social housing projects must be consistent with the detailed planning to be granted investment policies and recognized as investors. But the Department of Planning and Investment does not follow Resolution 98, so it is still "stuck". If there is no Resolution 98, the Department of Planning and Architecture will never approve the adjustment of the 1/500 planning for enterprises. That means in other localities without Resolution 98 like in Ho Chi Minh City, the procedures are not doubled but "stuck". Therefore, the Department of Construction in the localities must approve the adjustment of the 1/2,000 planning and then must approve the 1/500 planning for enterprises", Mr. Nghia cited and emphasized: "Social housing projects created by enterprises themselves Land fund establishment is almost stuck right from the procedure of approving investment policy at the same time as approving investors due to the inadequacies of Decree 31.

Talking to Thanh Nien , most enterprises reflected another bottleneck: according to the law, enterprises doing social housing are exempted from land use fees. However, according to the 2014 Housing Law and the 2013 Land Law currently in effect, to exempt land use fees for enterprises, the state must first calculate land use fees and issue a notice of the amount of land use fees that enterprises must pay. Only then will enterprises be exempted from land use fees, not exempted from the beginning. Meanwhile, the calculation of land use fees has been stuck in most localities in the past, even for NOTM projects. This has caused social housing projects to be "twice as stuck" as NOTM projects. "From the beginning, land use fees should be exempted for social housing projects instead of having to add the step of calculating land use fees, issuing a notice, and then being exempted from land use fees," one enterprise suggested.

Credit is also blocked.

As a company specializing in social housing, Mr. Minh Hoang, General Director of the Social Housing Investment and Development Joint Stock Company, complained that the law stipulates that social housing investors are not allowed to mortgage their own land to borrow capital for social housing, while it is allowed for NOTM. Therefore, in the recent past, no company has been able to use this land to borrow capital. "These ironies stem from the fact that social housing enterprises are exempted from land use fees. While land use fees are only a part of the project, to carry out the project, enterprises must buy land, pay for leveling, construction, etc., so not being able to mortgage that land to borrow money to implement the project is unreasonable, causing disadvantages for social housing enterprises compared to enterprises doing NOTM", Mr. Hoang analyzed and recommended: "In the draft Decrees guiding the Housing Law (amended), the Land Law (amended) on the development and management of social housing, it is necessary to allow investors to mortgage the social housing project itself, at least in cases where the investor has agreed to receive land use rights or is currently holding land use rights. Because currently, investors must mortgage other assets to be able to borrow credit capital to implement social housing projects. This has caused many difficulties for enterprises when carrying out social housing projects and helped reduce housing prices".

Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, affirmed: Not only administrative procedures, credit for social housing is also blocked. Since 2015, no investor has enjoyed preferential credit policies. Without incentives, all social housing investors have to borrow commercial packages to build, so prices are still high. For example, Vietcombank lends Nam Long 9%/year to build social housing and all customers also have to borrow at 9%/year. Although this interest rate is very preferential compared to loans to build social housing, it is too high compared to customers' income. To reduce interest, investors support 2%/year for customers, but this support is only for the first 2 years. Therefore, the state needs to arrange a medium-term budget source to subsidize interest rates for 4 commercial banks: Vietinbank, Vietcombank, Agribank, BIDV participating in the social housing policy. At the same time, recapitalize the Social Policy Bank to implement the current preferential interest rate policy of 4.8%/year.

"The National Assembly Standing Committee should consider allocating medium-term state budget capital to implement the social housing policy, to recapitalize the Vietnam Bank for Social Policies or to subsidize interest rates for four commercial banks designated by the State Bank to implement the preferential social housing credit policy," Mr. Chau suggested, adding that the VND120,000 billion credit package voluntarily contributed by several commercial banks with interest rates 1.5 - 2% lower than the normal commercial loan interest rate for a period of 3 years. This interest rate has a positive effect on investors because they previously had to borrow at interest rates of up to 12%/year. However, the VND120,000 billion credit package is not suitable for buyers and renters of social housing, not only because they have to pay a high interest rate of 7.5%/year and are only applied for a period of 5 years, but these interest rates are also adjusted every 6 months. After the preferential period, the interest rate is agreed and "floating", so buyers and renters of social housing are "uneasy" and afraid to borrow. Therefore, the Ministry of Construction continues to restore the proposal of a credit package of 110,000 billion VND, interest rate of 4.8 - 5%, maximum loan term of 25 years.

The results of social housing are very low.

The bottlenecks in administrative procedures and capital have prevented the implementation of the social housing development plan in the past from reaching its target. Specifically, in the 2016 - 2020 period, the whole country only achieved about 41%. Of which, although Ho Chi Minh City achieved 75% of the plan, the actual number was only 15,000 social housing units (an average of 3,000 units/year), which did not meet the huge demand. In the 2021 - 2025 period, the whole country has only completed 72 social housing projects, with 38,128 apartments, reaching nearly 9% of the plan. Of which, Ho Chi Minh City has only completed and put into use 2 projects, with 623 apartments (transferred from the 2016 - 2020 period) and has started 7 projects, with 4,996 apartments, but due to legal problems, construction has almost not been able to be implemented.

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