Increasing profits from building social housing, are investors interested?

At the online conference to implement the Prime Minister's telegram to solve difficulties for the real estate market on the morning of November 13, a representative of the Hanoi Department of Construction said that increasing the profit margin to 15-20% is also the desire of many investors in the market.

Analyzing this proposal, the leader of a company that is preparing to build two social housing projects in Hanoi said that the maximum profit when the investor builds houses is 10% of the total investment capital. That is, if the project has an investment capital of 1,000 billion VND, the investor will make a profit of about 100 billion VND.

This person believes that controlling profits has the benefit of controlling housing at a low level. However, in reality, in the process of building social housing, there will be some risks that may occur, such as increasing material prices, inflation, increasing labor costs, etc.

“ Investors are very afraid of losing money when participating in social housing projects. Therefore, increasing profits to 15% - 20% is reasonable ,” he said.

Many experts believe that increasing profits for investors will create motivation for social housing development. (Illustration: Hoang Tho).

Sharing the same view, Dr. Nguyen Van Khoi, Chairman of the Vietnam Real Estate Association (VNREA), said that it is necessary to increase profits to 15% or give bonuses based on actual achievements in social housing development or equivalent forms to offset costs and motivate investors to continue developing the social housing segment.

Expert, Dr. Le Xuan Nghia also pointed out that the regulation that investors enjoy a maximum of 10% of profits makes them not interested in building social housing. While a social housing project takes 3-5 years to complete administrative procedures until receiving a decision to grant a construction permit, the number of procedures and documents is sometimes double that of a commercial housing project... causing a lot of costs for businesses.

Besides, issues related to land ratio, land planning, land arrangement for social housing projects have not been met.

Therefore, Mr. Le Xuan Nghia emphasized that the regulation on maximum profit for social housing development enterprises should be removed. Instead, a price frame for social housing should be issued suitable for each locality. Regarding the interest rate for investors, the market interest rate method (the average medium and long-term lending interest rate in Vietnamese Dong of state-owned commercial banks including Agribank, BIDV, Vietcombank, Vietinbank on the market in each period) should be applied minus 2%.

Economist Can Van Luc analyzed: " In the context of capital congestion, difficult access to finance, increased costs of project preparation, materials, labor, and inflation, the maximum profit of 10% according to calculations will not be profitable, even a loss, so social housing construction enterprises find it difficult to accept this limit ."

Many social housing projects are not of interest to investors. (Illustration photo)

According to Mr. Troy Griffiths, Deputy Managing Director of Savills Vietnam, in reality in Vietnam, it is not easy to find a suitable investment model that ensures harmonious benefits between parties when developing social housing projects. There are still many factors that need to be carefully considered such as: conditions for purchasing social housing, distribution methods, and regulations on transferring social housing.

In particular, the policy of supporting the development of social housing has not really attracted the majority of investors in the market if taking into account the profits generated from this product line. Faced with the economic problem, the private sector still focuses on the higher segment.

“ Suppose comparing the 10%/year profit when investing in social housing, which comes with risks during the project development process, with the fact that businesses can easily earn 9.5%/year from bank deposits, then social housing is not necessarily an attractive investment channel for businesses, ” Mr. Troy commented.

Profits increase, house prices will increase?

Regarding the proposal to increase the profit margin for businesses from the current 10% to 15% when amending the law to attract investors, at the regular Government press conference last September, Deputy Minister of Construction Nguyen Van Sinh said that in the process of amending the Housing Law in 2014, an important issue is the profit margin for businesses investing in social housing, which was also discussed thoroughly. There were many opinions on why not increase the profit margin to 15% to attract businesses to invest in developing social housing, but the Drafting Committee still kept the profit margin at 10%.

Deputy Minister Nguyen Van Sinh said that if we increase profits from 10% to 15%, we will inadvertently raise the price of houses for low-income people and make it more difficult for low-income people.

Regarding incentives for investors developing social housing, Deputy Minister Nguyen Van Sinh said that in the recent past, there have been some very clear regulations, such as regulations on land use fees, income tax exemptions, and investment loan support. In the coming time, when amending the 2014 Housing Law, the Government is also submitting to the National Assembly in the direction of "more active support" for businesses and investors.

" In which, we continue to support exemption of land use fees, support related to corporate income tax, VAT, enjoy 10% profit, as well as reserve 20% of land area to invest in commercial and service areas, to serve residents in urban areas that investors have built.

In addition, localities will support investment in technical and social infrastructure in their social housing projects ," Deputy Minister Nguyen Van Sinh informed.

Ngoc Vy

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