Challenges persist in disbursing social housing loans, urgent solutions needed
Challenges persist in disbursing social housing loans, urgent solutions needed
Despite more than a year since the implementation of the VNĐ120 trillion support package, which provides preferential loans from commercial banks to social housing developers and buyers, the incentives have fallen short of expectations, with a disbursement rate of less than one per cent of the total package.
President of the Việt Nam Association of Realtors (VARS) Nguyễn Văn Đính. — VNS Photo |
Challenges in site clearance, land use fees and cumbersome procedures also hinder access to this preferential capital.
The President of the Việt Nam Association of Realtors (VARS) Nguyễn Văn Đính talked to BNEWS about what can be done to expedite loan disbursements and meet housing needs.
In addition to legal and procedural barriers, the availability of capital sources and preferential loans for investors and home buyers is also a pressing issue that needs to be addressed. What could possible solutions be?
We believe that the government's decision to allocate the VNĐ120 trillion credit package is commendable, as every type of development requires adequate funding. We believe that this amount is sufficient to stimulate and promote the development of social housing. However, the main challenges lie in the interest rates and the complex procedures associated with accessing and borrowing from this credit package.
Currently, the lowest interest rate for developers accessing this package is 8.5 percent, while for home buyers, it stands at 8 percent.
In our view, both rates are not suitable for the target groups. For developers, the implementation process is highly challenging and time-consuming, often taking several years. Such delays significantly increase capital costs.
Furthermore, the profit margin for social housing is capped at no more than 10 per cent. This limited profit margin makes it unappealing for investors, as accessing credit at this level would render the projects financially unviable.
Regarding home buyers, we understand that their income levels are already quite low. Adding a high interest rate further burdens their challenging financial situations. Having to pay both the principal and interest every month clearly presents difficulties.
There are currently thousands of abandoned resettlement apartments, there have been suggestions they could be repurposed as social housing. What do you think?
If we consider converting resettlement housing into social housing, certain regulations need to be put in place. Resettlement housing often has larger areas to accommodate larger households, whereas social housing regulations specify smaller units of around 70sqm.
In this scenario, there should be provisions allowing for the division of these larger units into smaller apartments, which would be easier to sell and meet market demand.
However, it is important to acknowledge that some individuals may not prefer these resettlement housing options, due to factors such as distance from their workplaces or the lack of amenities in the surrounding area.
In terms of legal procedures, land availability, house prices and interest rates that you mentioned earlier, how do you propose maximising the effectiveness of the VNĐ120,000 trillion support package?
As investors, we believe that it is the responsibility of the State and the credit system to create favourable conditions for providing and ensuring capital for social housing development.
The State plays a crucial role in producing such housing, while businesses should support the State using their capabilities and functions to facilitate its development. Furthermore, it is essential to set appropriate interest rates that contribute to low construction costs and affordable selling prices for these housing units.
Regarding capital, what steps do you think real estate businesses should take to reduce financial leverage and proactively manage their long-term capital?
Currently, real estate investors in Việt Nam rely heavily on financial leverage, particularly through bank credit channels, accounting for over 60 per cent of capital sources according to statistics.
This heavy dependence on a single capital channel highlights the need to encourage alternative sources, such as promoting bonds, establishing investment funds, trust funds and development funds as effective capital channels. It is crucial to balance resources and capabilities, aligning investment and development strategies to suit available resources, rather than relying excessively on credit leverage. Businesses should also focus on improving organisational structure, business methods and product segment diversification to enhance stability and sustainability.
