Although the policies of social housing construction as well as other favourable incentives given directly to the investors were issued many years ago, the progress of social housing construction is still very slow. Most social housing projects face difficulties with capital. Presently, more than 300 social housing projects in local areas are subject to a severe capital shortage.
Up to now, none of the investors of 33 urban social housing projects have managed to access preferential capital sources of Vietnam Development Bank (VDB) due to the failure to meet the requirements for risk assets, credit guarantee, etc. According to the VDB, current difficulties in preferential capital disbursement exceed the control of VDB as well as the Ministry of Construction.
Deadlock
In fact, investors often avoid social housing projects not only because of small profit but also the many difficulties in mobilizing capital sources.
To attract construction enterprises to join this area, the Government has issued many mechanisms, incentives and regulations with special priority for the investors, for example, project land use free and tax free, preferential VAT tax rates of five percent, Governmental support to invest in the technical infrastructure outside the project and exemption from business income taxes within the first four years.
In addition, pursuant to Resolution No. 18/2009/NQ-CP dated April 20, 2009 by the Government and Decisions No. 66, 67/2009/QD-TTg dated April 24, 2009 by the Prime Minister; social housing is part of priority projects to use development assistance capital from the state budget in form of preferential interest rates of the VDB.
Up to now, many housing projects for low-income people have nearly been completed with the basic elements; however, the investors have not yet received any preferential treatment of capital from the VDB. Cumbersome procedures, lengthy evaluation with the strict regulations on risk assets, credit guarantees and so on, have left the enterprises waiting anxiously without receiving any preferential loans from the Government. Meanwhile, it is impossible to delay project implementation, due to the commitment to local and social matters. Therefore, many investors accept loans from commercial banks with interest rates of up to 17 - 18 percent per year. Many social housing projects are now at risk of being unfinished because the investors have no capital.
CEO Nguyen Khac Son, from Son An Joint Stock Company of Urban Development and Investment, the investor of 408 apartments in Dong Nai, said that his Company had to advance VND 33 billion to contractors, while the total investment capital of the housing projects for low-income people in Dong Nai is VND 55 billion. "We have to get loans from commercial banks at an interest rate of 17-18 percent per year. If the VDB does not lend us the soft loans, we will continue to apply for loans and complete the building, but will return the housing project for workers to the PPC,” said Nguyen Khac Son.
In fact, loans at market rates to build social housing, the investors said, are at odds with the policy set. In this case, the construction enterprises either accept business losses for completed projects or return the housing projects to the local authority.
A more flexible policy needed
Despite no lack of confirmed funds, VDB has not been able to disburse a single cent for the investors to date. This, VDB explained, is due to the failure of the investors to meet the requirements of the loan procedures, risk assets and so on. On the other hand, Dao Dung Anh, VDB Vice General Director, said that the VDB has only received 16 projects for evaluation up to now. As for the 28 remaining projects, the investors either haven’t contacted VDB to prepare loan documents or haven’t send the records of bank loans for bank appraisal. "Apart from problems in completing documents that extend the evaluation period, the investors have also unilaterally withdrawn the loan application when the evaluation of loan documents was completed," Dao Dung Anh affirmed.
The biggest obstacle for the investors in access to the preferential capital is the failure to meet the conditions of risk assets and transactions. It is stated under the provisions of law that credit loan contracts are signed together with credit property mortgage contracts and the mortgage contracts should be registered for secured transactions. Meanwhile, investors of the social housing projects have no certificates of land use rights to make registration for security transactions. This means that they cannot use land as mortgage property to apply for loans.
Recently, at a meeting to solve problems in development loans for social housing projects between the enterprises with social housing projects and VDB and the Ministry of Construction, the investors have proposed that VDB needs a more flexible policy to disburse preferential funds, solving difficulties for enterprises. If there is more delay, the projects will not be implemented while the enterprises have to pay commercial banks for high interest rates. It may cause huge business losses and bankruptcy among the enterprises.
Before the burning of the business, VDB leadership made a commitment to determine which enterprises and/or projects can be given with preferential loans and how much. However, VDB will not commit to the time of disbursement of concessional credits if the regulations on the disbursement have not been removed. “The disbursement of preferential credit is the responsibility of the VDB, but the basic problem is due to the current mechanism in mortgage property for loan security. Therefore, even though we really want to speed up the disbursement of funds, VDB ourselves cannot break the law,” said a representative of VDB.
In this regard, Deputy Minister of Construction Nguyen Tran Nam confirmed that the Ministry would immediately work with the Ministry of Justice right after the meeting to issue a joint circular guiding the “soft” mechanism for enterprises mortgage assets on land for loans. The second plan should be the Prime Minister’s permission to issue a separate mechanism for the programme, so that the VDB has a legal basis for the needed action.
Dinh Thanh
Vietnamese
