Outlines offered to ensure full social housing mortgage loans

Outlines offered to ensure full social housing mortgage loans

The Ministry of Construction has proposed a number of adjustments to social housing loan policies, including lower interest rates and longer loan tenures, following a joint proposal submitted by Vingroup and Techcombank.

The proposal outlines a new credit package for social housing buyers with more favourable terms than the current VND120 trillion ($4.7 billion) incentive programme administered by four state-owned commercial banks.

Eligible borrowers under the package include legal entities and individuals purchasing various projects, Photo: Dung Minh

One of the most notable elements in the proposal is the recommendation that commercial banks offer interest rates to social housing buyers equivalent to those applied by the Vietnam Bank for Social Policies.

These rates currently stand at about 4.8 per cent per annum, fixed for the first five years. In addition, the loan term could be extended up to 30 years, with the purchased home serving as collateral.

The two banks also propose that all individuals who meet eligibility criteria for social housing, as verified and confirmed by project developers, be allowed to access the loans. Most significantly, the loan could cover up to 100 per cent of the value of the social housing purchase contract.

To facilitate this initiative, Techcombank has also proposed that the State Bank of Vietnam (SBV) consider granting additional credit growth quotas beyond standard limits. This would enable credit institutions to expand lending while generating income to offset the cost of providing concessional interest rates to homebuyers.

Speaking to VIR, Nguyen Luu, a private broker in Ho Chi Minh City, said that despite its preferential nature, the interest rate under the existing package remains relatively high, discouraging both developers and buyers.

“Of particular concern is the floating rate mechanism after the initial five-year period, which raises fears among buyers, especially given that past rates have surged as high as 14–15 per cent per annum,” Luu said.

The newly proposed package, with its lower interest rate, longer loan tenure, and potential for full-value loans, is seen as a much better fit for the needs of social housing buyers.

According to the Ministry of Construction, the existing package offers loans to homebuyers at 7.5 per cent per annum, and to social housing developers at 8 per cent per annum. These preferential rates apply for five years, and the SBV adjusts the rates every six months based on the average lending rate of the four participating state-owned banks.

At a mid-year meeting in 2024, Deputy Governor of the SBV Dao Minh Tu announced that the package would be revised to better support homebuyers. Specifically, the loan interest rate will be at least 3 percentage points lower than the average long-term commercial lending rate of the big four banks (currently only 1.5–2 points lower), and the adjustment frequency for the interest rate will shift from every six months to every three months.

After the initial five-year period, borrowers will still enjoy preferential rates, at least 1–2 percentage points below commercial lending rates, rather than being fully subjected to floating rates as is currently the case.

Eligible borrowers under the $4.7 billion package include legal entities and individuals investing in or purchasing units in social housing projects, worker housing, or redevelopment projects for old apartment buildings listed by the Ministry of Construction.

The SBV has also encouraged banks and major economic groups to take a more active role in promoting social housing and facilitating access to home loans for low-income earners.

VIR