Carefully calculate the loan interest rate.

Against this backdrop, the Ministry of Construction recently proposed a 100,000 billion VND preferential loan package in the draft Resolution on preferential capital for social housing development, which is expected to create a breakthrough for the social housing segment.

Obstacles in credit disbursement

In early April 2023, in Decision 338/QD-TTg, the Government approved the implementation of the Project "Investing in the construction of at least 1 million social housing units for low-income earners and industrial park workers in the period 2021 - 2025". The goal is to strive for a total of approximately 1,062,200 completed housing units by 2030. Of these, 428,000 units will be completed in the 2021 - 2025 period, and 634,200 units in the 2025 - 2030 period.

The Ministry of Construction's proposal for a 100 trillion VND credit package is appropriate given the current shortage of funding for social housing development. (Photo: Thanh Hai)

To implement the Project, the Government has also approved the proposal of the State Bank of Vietnam (SBV) to allocate VND 120,000 billion at four state-designated commercial banks, with lending interest rates for investors at 8.7%/year and for buyers/renters of social housing at 8.2%/year. From July 1, 2023, the SBV will periodically announce the preferential lending interest rates for participating commercial banks every six months, meaning that interest rates may be subject to market fluctuations.

With the State Bank of Vietnam stipulating interest rates only 1.5-2% lower per year than the general market rate for medium- and long-term loans, a number of commercial banks (TP Bank, VP Bank, MB Bank, Techcom Bank, and HD Bank) have applied to "share the pie," registering to participate in the program with 5,000 billion VND for each bank, raising the total capital for interest rate support to 145,000 billion VND.

Unfortunately, after nearly 20 months of implementation, this credit package has been rejected by the public because the regulations set by the State Bank of Vietnam (SBV) are not suitable for their financial capabilities. Therefore, after much deliberation, in early September 2024, the SBV decided to lower the interest rate to 7% per year for developers and 6.5% per year for homebuyers.

However, according to assessments, the interest rate stipulated is still too high for homebuyers, which is why this credit package remains unpopular to date. This is evidenced in the detailed report of the Ministry of Construction on the implementation of the 120,000 billion VND preferential credit package for social housing.

Specifically, as of the end of Q3/2024, only 34 out of 63 localities had published documents on their electronic portals listing 83 projects eligible for preferential loans. The total disbursed loan balance was VND 1,783 billion (of which corporate customers accounted for VND 1,633 billion; homebuyers accounted for VND 150 billion), representing approximately 1.1% of the total registered support capital.

“The implementation of social housing projects is currently facing many difficulties. In the third quarter of 2024 alone, the whole country had 8 projects underway, with a scale of 4,960 units; 3 projects received investment approval, with a scale of 2,676 units; and only 1 project was partially completed, with a scale of 200 units. According to reports from localities, from 2021 to the end of the third quarter of 2024, the whole country completed 79 social housing projects, with a scale of 42,414 units; 131 projects have commenced construction, with a scale of 111,687 units,” – Hoang Hai, Director of the Department of Housing and Real Estate Market Management (Ministry of Construction), informed.

Priority should be given to homebuyers.

Based on aggregated data from the Ministry of Construction, only over 143,000 social housing units have been completed or are under construction nationwide so far. Therefore, the target of 428,000 units for the 2021-2025 period in the Project is almost impossible to achieve, as only a "miracle" could complete 258,000 new units in less than 13 months. The dream of owning a home for low-income earners and workers will be further delayed.

According to Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), social housing is a major policy of the Party and the State. This is further demonstrated by the determination to amend and supplement the 2023 Housing Law, the 2024 Land Law, and several guiding decrees, ensuring uniformity and consistency in regulations for social housing.

However, the mechanisms for preferential credit sources for social housing development still have many shortcomings that are cause for concern, namely the lack of "seed capital" or, if available, the regulations are somewhat strict, making it difficult or impossible for eligible individuals to access.

“Government Decree 100/2024/ND-CP stipulates the capital level, preferential interest rates, terms, and disbursement of loans for social housing projects (7.92%/year for social housing investors selling or lease-purchasing; 6.6% for projects only leasing), creating favorable conditions for investors to access preferential credit sources to implement projects. However, in Official Letter 4524/NHCS-TDSV dated August 1, 2024, from the Social Policy Bank, based on Decree 100/2024/ND-CP, the lending interest rate of 6.6%/year for homebuyers is considered high,” Mr. Le Hoang Chau stated.

Given the above situation, in order to expand the preferential capital sources for social housing development, the draft Resolution on preferential capital sources for social housing development, which the Ministry of Construction is currently seeking opinions from ministries and agencies before submitting it to the Government for promulgation, proposes implementing a preferential loan package of 100,000 billion VND from bond capital sources, applicable for 5 years. This is the first time the Ministry of Construction has proposed applying a social housing package through bond issuance.

Accordingly, the interest rate on this preferential credit package will be equal to the interest rate for loans to poor households as determined by the Prime Minister in each period; the disbursement period will continue until the entire credit package is disbursed, but not exceeding December 31, 2030.

Discussing this matter, Nguyen The Diep, Vice Chairman of the Hanoi Real Estate Club, said that the Ministry of Construction's proposal in the draft Resolution on preferential capital sources for social housing development is groundbreaking because it expands development capital sources and creates opportunities for social housing buyers. However, it is also necessary to clarify the regulations on interest rates for this credit package, in which homebuyers are at the center and should be given priority.

"If the interest rate for the 100 trillion VND credit package is the same as the interest rate for loans to poor households as decided by the Prime Minister in each period, based on Decree 100/2024/ND-CP, which is 6.6%/year, it will still be difficult to encourage people to borrow money to buy social housing at the present time, because the lending interest rate according to Decision 486/2023/QD-TTg was only 4.8%/year," said Mr. Nguyen The Diep.

Sharing the same view, Chairman of HoREA Le Hoang Chau suggested that the Government consider allowing the continued implementation of the lending interest rate regulation of 4.8%/year as stipulated in Decision 486/2023/QD-TTg of the Prime Minister. Currently, the Social Policy Bank is implementing the "loan program to support poor households with housing" at an interest rate of 3%/year, so it would be best to apply a lending interest rate of 3-4.8%/year for those buying or renting social housing, to encourage homebuyers, stimulate the market, and create motivation for investors to accelerate project implementation.

 

The Ministry of Construction's proposal for a 100,000 billion VND credit package is very appropriate given the current shortage of capital for social housing development. However, lessons must be learned from the obvious experience of the 120,000 billion VND credit package under Resolution 33/2023/NQ-CP, which failed to attract borrowers. Specifically, regulations regarding loan conditions and interest rates need to be carefully studied to ensure they are suitable for the actual circumstances of the people.

Dr. Nguyen Huy Thanh - Financial expert

Source: https://kinhtedothi.vn/tinh-ky-muc-lai-suat-cho-vay.html