To create opportunities for low-income people to buy houses, recently, State Bank Deputy Governor Nguyen Dong Tien said that the State Bank is collecting opinions on the draft on giving loans for low income homebuyers, which will be issued in the first quarter of 2013. Specifically, the interest rate will be 6 percent a year with a loan term of 10 years.
Opportunities for low-income people
Under Resolution 02 of the Government, the credit flow into the property market in 2013 will be in the low-priced housing segment, including mainly social houses and commercial houses whose area don’t exceed 70 square meters, priced at less than VND15 million per square meter. Accordingly, the State Bank will spend about VND20,000 to 40,000 billion for loans for home buyers.
According to many economists, that the State Bank applies the home loan interest rate of 6 percent a year for those with low incomes is completely in accordance with the afford ability of home buyers. This stimulus move not only focuses on housing for low-income people but also leverage on the already stagnant economy during the past year due to the impact from the freeze of the market property.
The release of inventory in the property market is facing many difficulties, which causes the increase of bad debt rate. Mr Pham Sy Liem, Vice Chairman of the Vietnam Construction Association shared that supply surpluses demand is the reason of inventory problem. To solve this problem, it is necessary to increase the total market demand, especially that of the average and low-income people. This is the basis for the Government to make reasonable policies to increase purchasing power. The interest rate of 6 percent year lasting from 15 to 20 years is reasonable. Currently, the State Bank only agreed to loan in 10 years. However, this still fits the ability of the majority of low-income people. If a buyer borrows VND600 million, with an annual interest rate of 6 percent a year, he will only have to pay the interest money of about VND 5 million per month. This is not so difficult to the majority of people.
Ho Chi Minh City and Hanoi are the two cities with high population density and largest demand for housing in the country. According to the latest report on income in these two cities, the average income families with two employees is VND15 million a month (about VND180 million a year). Accordingly, with the annual saving is of about 30 percent of the total income (about VND60 million), if they borrow VND500 million with the interest rate of 6 percent a year as the State Bank stipulates, homebuyers can use VND30 million a year to pay for the loan interest and the remaining VND30 million to pay for the principle amount.
What insiders say?
The plan to reduce the interest rate of the State Bank is getting many mixed opinions. According to Mr Chu Hung Thang, Head of Customer Relations Department of the North Asia Bank, it’s positive to only look at the interest rate of 6 percent a year. However it is very difficult to put this draft into reality. In fact, low-income people only get loans with preferential interest rates from state-owned banks and policy banks. If the plan is implemented, the immediate beneficiaries are investors since, whoever purchases the houses, they still benefit.
Evaluating the stability of the property market, Mr Thang said that the lowering of interest rates in order to stimulate new market only solves a small part of the real estate market. The rest of the existing problems so long has yet to be resolved.
Mr Nguyen Hai Hung, Director of Bac Son Business Development and Investment Corporation also said that price of house for low-income people, based on the income level of the people, should be reduced to VND6 million a square meter and area to approximately 70 square meters. Policies are available but the difficult part is to determine who are low-income people. Mr Hung also said that, if the solution is applied effectively, the market demand will increase dramatically. Accordingly, liquidity will increase, which is a good sign for the real estate market this year.
On the macro level, Mr Hung said that to solve the difficulties of the current real estate market, we cannot only rely on the reduction of interest rates of loans for people with low income since the amount of inventory on the real estate market is still very large, majority of which are high-end apartments. Housing segment for low-income people is just on draft in 2013 and will suit upcoming projects well.
Luong Tuan
Vietnamese
