$1.4b housing loan package faces hurdles
$1.4b housing loan package faces hurdles
On May 28 the Housing and Urban Development Cor-poration and Viet Nam BIC jointly broke ground for a social housing project in Ha Noi's Linh Dam new urban area.
It is the first of its kind to be developed with credit from the Government's VND30 trillion (US$1.42 billion) bank loan package to stimulate the property market and resolve lenders' bad debts.
Under the programme homebuyers and developers can borrow at 6 per cent interest for a period of up to 10 years.
The construction ministry estimates that by 2015 the country's urban areas will have 1.74 million people with less than 5 square metres of housing and another 1.7 million without housing.
The VND30-trillion package is expected to help buy around 40,000 social-housing apartments, propping up the low-cost housing segment and causing a spillover effect on other segments.
While it generally looks like a sound programme, there are some issues that need to be sorted out.
There is the question whether it is possible to address the financial needs of both people who want to buy housing and realty firms who want to develop projects.
According to a ministry circular, public officials and civil servants and workers with low incomes can borrow if they fulfill just one condition – they do not own a house or live in houses of less than five metres per person.
But things are not so straightforward at the implementation level.
Some banks have not started yet, saying that they are awaiting guidelines from head office.
Others have started lending but impose stiff conditions that not many low-income earners can meet.
Though the State Bank of Viet Nam has said the banks can lend with or without collateral, most banks are demanding it. But then how many people without a house are likely to have other assets to offer as collateral?
There is another paradox: people who want to borrow are also required to have salaries of less than VND9 million ($428.6). But if they do get less than this, what will they live on after paying a minimum of VND7 million towards the loan?
Some other demands also pose hurdles to borrowing – they must have a permanent residence book, make a 30 per cent down payment, and show how they plan to repay.
Property developers too are finding it difficult to borrow.
Around 30 per cent of the package is earmarked for developers who convert commercial housing projects into social housing.
Fifty developers with a total of 31,000 apartments have applied so far.
But many eligible developers who have worked with the banks have failed to get a reply from them.
The central bank and the lenders should spell out information about the programme so that the beneficiaries have no trouble borrowing.
To ensure that the money goes to eligible people, the central bank and the ministry should carefully oversee the banks' lending activities.
The loan tenor for homebuyers should be increased to 20 or 30 years from just 10.
