Dream of VND30 Trillion Housing Credit Package Vanished

The VND30 trillion credit package aimed to revitalise the real estate market and help low-income earners access affordable housing. Procedural troubles slowed the progress of the package in the early stage and banks showed little interest in covering low-rate lending. The package was meant to serve as “seed capital” for a revival of the still lacklustre property market. The biggest preference - the interest rate which was about half of ordinary commercial rates – is ending with the package, and disbursements after the “closing date” will be under a new interest rate policy.

 

Borrowers who have received all the borrowed funds are already through the process, but those who have only received 20-30 per cent of the loan value may face difficulty. Their calculation based on the interest rate of 5 - 6 per cent per annum is no longer relevant and many may not be able to afford the new interest rate. There is the potential for bad debt and default risks as a result, and the societal consequences are hard to predict.

 

Commercial banks that deployed the VND30 trillion package like Vietinbank, BIDV and Agribank all said that the interest rates are based on the date of credit disbursement, not the date of contract signing. “Although customers signed contracts to borrow the money from the VND30 trillion package before June 1, 2016, they will be still imposed the new interest rate, negotiated with serving banks, if they receive the money after such date. This is clearly regulated in Circular 11 of the State Bank of Vietnam (SBV),” said a bank representative. In addition, banks confirmed that they have clearly informed all their customers of this provision. “Many customers know but they still want to borrow because of their partial low-rate disbursement earlier,” he added.

 

However, some credit agreement beneficiaries of the VND30 trillion package disagree with the banks’ interpretation. A government official who borrowed money to buy a house in Dai Kim project invested by Handico 5 showed his credit agreement with BIDV, citing that the interest rate section specified the rate of 5 per cent per annum applied in 2015 and half of the commercial interest rate in the following years. The contract did not indicate any difference in interest rates on disbursements made after June 1.

 

A credit contract is a very carefully written document approved by many levels in a bank and vetted by its attorneys-at-law. How could they omit such an important content in the agreement?

 

Indeed, as credit contracts do not have any provision on loans after June 1, banks cannot cite this point of time for explanation of the new interest rate policy.

 

Speaking in a press conference, Mr Nguyen Tien Dong, Director of the Economic Credit Department of SBV, said the SBV also confirmed the above information. He added that Article 2 of the SBV’s Circular 11/2013 on guides to loans of the VND30 trillion package already stated that the SBV’s refinancing source for commercial banks will end when this package is fully disbursed or when it reaches 36 months.

 

The provision of Circular 11 is very clear, but the deployment at commercial banks is unclear. This is a significant risk for bank-financed homebuyers. For example, for a customer who signs a contract to borrow VND600 million from a bank to buy an apartment and has now received just VND130 million of the package, the commercial interest rate on the remainder of the loan may make it unaffordable for him. All calculations based on his income at the time of contract signing become meaningless with the new interest rate policy. Many will be unable to repay their 15-year loans, resulting in the loss of their homes or bad debts for banks.

 

Financial and banking specialist Nguyen Tri Hieu said that the central bank should revise its ruling to give a happy ending to all borrowers. “It is not reasonable to hike the interest rate when the package ends,” he said. According to data from the Housing and Real Estate Management Department under the Ministry of Construction, the VND30 trillion package has lent 90 per cent of its value, but this is funding under loan contract - the actual disbursement is just 60 per cent.

 

Both social housing developers and affordable housing developers can access the credit package. Some projects have been completed within the deployment period of the package, while many are still ongoing. Thus, many developers have asked for an extension of the package deadline.