Housing Opportunities for Low-Income People

The situation of oversupplying on the real estate market is now more intense than ever. Particularly, in Hanoi there are about 5,790 inventory apartments and 3,483 plots of low-rise housing.

 

The conflict between demand and supply in the property market gradually has lowered the confidence of consumers. While many people do not have houses, the number of unsold apartments is increasing. Generally, apartment prices are too high compared with people's real incomes.

 

To overcome these difficulties, Hanoi’s authority has guided the implementation of 14 social housing projects in order to make it possible for people with low and middle income to buy houses. By this time, five social housing projects have been completed with 2,978 apartments available; the remaining eight projects with 11,678 apartments in total are still in the process of deployment. Simultaneously with the construction of the apartments for low-income people, Hanoi city has also directed the investors to review current housing funds to consider adjustments to suit the needs of local people and solve the current inventory problems.

 

Hanoi will also conduct a housing saving fund and build a real estate investment trust fund to support people in need of home loans and housing transfer. This is considered the most feasible solution helping investors to solve the inventory problem. Moreover, people have houses to stay. Demand stimulus will be the key to success for the real estate market which has been "frozen" for more than a year.

 

At the seminar on working out solutions for the real estate market, jointly conducted by the Ministry of Construction, the Hanoi People's Committee and the real estate business organizations, Minister of Construction Mr Trinh Dinh Dung said that to solve the demand stimulus issue of the current real estate market, social housing solution is, in fact, the most effective and beneficial solution for the people, businesses and the state. Minister Trinh Dinh Dung said that Vietnam needs to control and stabilise the market. If necessary, we will stop a number of projects to assess the feasibility to plan the future development of the property market. Housing needs of low-income people and civil servants are very large, thus housing development need to focus on these objects."

 

To encourage investments in the housing segment for low-income people, the Ministry of Construction regulates that social housing projects will be entitled to VAT at 55 percent instead of 10 percent as before, income tax of businesses will decrease from 20 percent to 10 percent. These new mechanisms can be applied from the second quarter of 2013.

 

Currently the development of social housing is facing several difficulties due to the fact that land for the development of these projects is very limited, even in project planning, construction licensing and land allocation.

 

According to Deputy Minister of Construction Nguyen Tran Nam, to develop social housing, Hanoi needs to use at least 20 percent of the total land area. Rights to buy and rent social houses should be extended to those having great contribution in war time; officials, civil servants, employees, officers, and professional soldiers of the armed forces; workers in industrial parks, industrial clusters and production and service facilities outside industrial parks; low-income people, and students having housing problems in urban areas.

 

In the spirit of the draft, in addition to the above requirements, people who rent and buy houses must have a permanent residence certificate or a labour contract with a term of one year or more and have paid social insurance in the locality where they rent house. They also have to pay 20 percent of the total value of the house in the first payment.

 

Hanoi is also carrying out research and establishing housing saving funds and an experimental model of real estate investment trust fund to support people in buying and transferring houses.

 

About this solution, Deputy Minister Nguyen Tran Nam said: "I firmly believe that when a saving housing fund is formed and operated in Vietnam, it will be a very good tool to reduce the burden of the State. Moreover, it can mobilise resources from society, from the people who help each other. Those who have income difficulties have to find ways to increase their savings in a legal manner to solve their housing problems."

 

In addition to policies supported by the Ministry of Construction, financial packages for home loans, preferential interest rates from banking systems including the Bank for Investment and Development of Vietnam (BDIV) and Agribank for those who wish to buy a home in current time are positively supporting home buyers, creating trust for the people. Specifically, (BIDV) has committed that over the next three years, it will spend about VND10,000 billion each year supporting social housing development with preferential interest rates, of which VND6,500 billion is spent for home buyers. Accordingly, those who are eligible for social housing will be able to lend up to 70 percent of the house’s total value with the interest rate equal to the saving deposit rate within 15 years.