Recently, Vietnam’s Ministry of Construction has signed an MoU with the Vietnam Development Bank, under which the bank will provide a credit package of VND 2,000 billion at a low interest rate to finance building houses for low-income people and for workers.
According to the Ministry of Construction, this credit package has the same interest rate as that of preferential loans of the Government from Vietnam Development Bank, which will be a basis for enterprises operating in real estate field to expect a new cheap capital resource from banks, to develop a house network for low income people.
Current progress of building social housing projects is very slow. As planned in 2011, 42 projects of low income houses were licensed, which must have offered accommodation for about 73,000 people, however, due to slow progress of building, only 1 percent of plan was implemented.
In the difficult period of the real estate market, while most of segments are suffering a low liquidity, the development of low income houses with preferential loans is attracting enterprises’ concern. At the signing ceremony, apart from representatives of Ministry of Construction, many construction enterprises also took part in the ceremony. It is considered a positive signal for this segment which was ignored by enterprises because of low returns.
Many construction enterprises said that the limitation in developing low income housing was resulted from lack of capital. According to regulations, owners of low income housing projects can get loans at a preferential interest rate from Vietnam Development Bank, however, when series of projects were commenced building, the demand of capital jumped sharply to thousands of billion VND, the bank could only offer several hundreds of billion VND and disbursed slowly and rarely. Therefore, in order to have projects implemented on schedule, project owners must get loans from other banks at interest rate of 19-20 percent.
Moreover, tax exemption and reduction are not fully implemented, according to many enterprises, taxes were exempted and reduced by the Government only in the first year, in the following years, tax exemption and reduction are in the jurisdiction of higher authorities, therefore they must wait to have the decision. Project owners even have to bear high costs of compensation for ground clearance to build social houses.
This may be the reason why prices of low income houses are pushed up too high compared to the social meaning that the program wants to bring, which causes the situation that houses are completed but low income people cannot afford to buy one.
Many enterprises hope that their difficulties will be removed after the signing ceremony. Several enterprises confirmed at the ceremony that house prices may be reduced from 12-18 percent. Even several investors committed to keep low income house prices to be under VND 10 million/square meter. The more participation of construction enterprises is, the higher hope for a reduction of prices of apartments and houses for workers will be.
Despite positive impacts, many people have a question: Loans for low income houses have not been restricted, why did enterprises not promote earlier a large, meaningful program but they must wait until the real estate market is difficult, enterprises are at the edge of bankruptcy…to have first ideas? So what is the motivation of enterprises and banks? It must not be a total voluntary, but their own survival.
Although profit rate of low income housing is required to be under 10 percent, in the context of capital shortage and low liquidity of real estate enterprises, if possessing capital to complete projects, as well as finding out consumers for their products to improve liquidity, getting a profit rate of under 10 percent is considered a big opportunity for enterprises. Not to mention, constructing social houses is also a chance for them to promote their names.
As for banks, while not finding out reliable addresses to disburse their capital, for a long time purchasing governmental bonds at a low interest rate has become a solution for them. Therefore, the coordination between Ministry of Construction and banks will create an exit door both to enterprises and banks in the current condition.
Luong Tuan
Vietnamese
