Social housing projects wait for capital

Social housing demand is currently very high but supply is limited due to a shortage of incentive policies and funds allocation for implementing preferential housing loans, which have hindered project development for the last past.

A social housing project developed by a private enterprise in HCMC (Photo: SGGP)

A social housing project developed by a private enterprise in HCMC (Photo: SGGP)

The Ministry of Construction reported that social housing demand approximates 440,000 apartments in the phase from 2011-2020. Of these, HCMC needs about 134,000, Hanoi 110,000, Binh Duong 41,250 and Dong Nai 36,700 apartments. Although the country has paid attention to social housing development, so far only 248 projects have been implemented nationwide with the total floor area of over 5 million square meters, meeting 41.1 percent of the plan for the phase of 2015-2020 and providing 100,000 apartments for low and middle income households.

HCMC has developed 39 social housing projects supplying 44,701 apartments. Of these, 20,000 apartments are likely to be built this year.

Talking about difficulties in implementing social housing policies, HCMC Real Estate Association (HoREA) said that localities have not abided by regulations to plan separate areas to build social housing projects for lease or lease purchase in combination with low cost commercial housing projects.

In addition, social housing projects are exempt from paying land use fee. In fact many investors have already paid the fee for the social housing land fund they have but there is no regulation on land use fee refund for investors.

Moreover, there is neither process on construction investment procedures for social housing projects at the Housing Law nor an abridged process for projects using apartment building designs. Similarly there are no regulations on bidding norms to select investors for social housing projects using the land fund under the state management and this has resulted in waste.

Decree 100/2015 of the Government stipulates that profit earned from a social housing project does not exceed 10 percent of total investment cost, which the association said unreasonable. The profit ceiling has caused businesses uninterested in social housing projects. In fact, they must pay lots of nameless costs while site clearance expenditure has not been correctly and sufficiently calculated into the total investment cost. This has caused loss for investors.

Chairman of HoREA Le Hoang Chau said that the State should control planning, work quality and especially selling price of social housing apartments to encourage businesses’ innovation instead of framing profit like that.

Social housing projects wait for Gov’t credit package

According to the Ministry of Construction, the main cause for the sluggish development of social housing projects is that funds has not been allocated to make up the amount of interest on preferential loans, which credit institutions provided for implementation of social housing projects. 

Statistics from localities show that currently there area 206 projects providing168,700 apartments over the total area of 8.44 million square meters have been behind schedule or halted. One of the main reasons is that the state budget has not been allocated to implement social housing support policies as per the Housing Law 2014 and Decree 100/2015 of the Government.

Limited funds has hindered social housing projects’ implementation, so supply has been far behind demand. Social housing developers have spent their money on doing procedures on land use right transfer and building projects without assistance from the preferential credit source.

Although commercial banks have provided loans, social housing investors and home buyers still have to get loans with commercial rate so they have faced difficulties in paying debts and interest.

The fact shows that commercial banks can mobilize an extra of VND33 from social capital sources for one dong spent from the State budget. Hence if the Government spends VND2 trillion (US$86.03 million) to make up interest for four commercial banks, this amount of money will become an important capital source helping the banks mobilize about VND60 trillion ($2.58 billion) from social sources for social housing projects and buyers.

The Government has recently decided to supplement VND2 trillion ($86 million) for four commercial banks namely Vietcombank, VietinBank, BIDV, Agribank to implement preferential housing loans.

Real estate firms believed that the above move by the Government is a positive change and a good news for the real estate market in general and the housing segment in particular.

In addition, the Government has required to continue loaning half done social housing projects. This is expected to bring hundreds of social housing projects back to the market.

The Ministry of Construction has proposed the Government to lower interest rate for social housing loans, from 4.8 percent as per Decree 100/2015 of the Government to about 4 percent, accounting for 50 percent of the average interest rate of commercial banks.

By Phan Le - Translated by Phuong Ho

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