Unlocking VND120 Trillion Credit Program

The VND120 trillion credit initiative, aimed at the development of social housing, worker accommodations, and the renovation and reconstruction of apartment projects, has been in operation for nearly a year with a target completion date of 2030. The objective of this program is to construct a minimum of one million social housing units. However, the implementation of this initiative has encountered numerous obstacles that are currently impeding its progress.

Nguyen Xuan Bac, Deputy Director of the Credit Department under the State Bank of Vietnam (SBV), said: The SBV issued Directive 02/CT-NHNN and four directive documents to guide SBV branches and credit institutions to actively launch the VND120 trillion credit program. In its Directive 01/CT-NHNN dated January 15, 2024, the SBV continued to direct credit institutions to adopt timely and flexible solutions to drastically carry out this program.

However, to date, only 28 out of 63 Provincial People's Committees have sent documents or published the list of 68 projects qualified for the program on their electronic information portals. Some localities have announced many projects like Hanoi (six projects), Ho Chi Minh City (six projects), Bac Ninh (six projects) and Binh Dinh (five projects). Among them, 30 projects need loans while others do not because they have already been completed or have been arranged with other capital sources.

Among 30 projects that need loans, commercial banks have committed to providing VND7 trillion of credit to 15 projects. Among them, 10 projects need to be disbursed credit, including credit for developers in seven projects, credit for homebuyers in two projects and credit for both developers and homebuyers in one project. Eight developers have been pledged with VND1,965 billion and they have received VND640 billion. Home buyers in three projects were pledged to be lent VND7 billion, of which VND6 billion was disbursed.

According to the Ministry of Construction, the country has carried out 499 social housing projects with more than 411,000 apartments since 2021, with 71 completed projects with nearly 40,0000 apartments. Many localities have been active in attracting investment and promoting the start of social housing construction, including Bac Ninh province (15 projects with 6,000 apartment units), Bac Giang province (five projects with 12,475 units), Hai Phong (seven projects with 11,678 units) and Binh Duong (seven projects with 6,557 units).

However, according to Minister of Construction Nguyen Thanh Nghi, many projects are facing a lot of difficulties while many localities are carrying out projects more slowly than planned. Some even do not have new social housing projects.

Although some major localities have a huge demand for social housing, the investment for this segment remains limited relative to the program’s goals by 2025. For instance, Hanoi has three projects with 1,700 apartment units, meeting just 9% of the demand. Ho Chi Minh City has seven projects with 4,996 units, meeting 19%. Some localities have had no new social housing projects since 2021, including Vinh Phuc, Ninh Binh, Nam Dinh, Long An and Quang Ngai.

According to Deputy Minister of Construction Nguyen Van Sinh, many localities have not paid attention to developing social housing and worker housing. Many have not included housing development targets, especially social housing and worker housing, into their 5-year and annual socioeconomic development plans. They have not clearly defined land fund for social housing development in urban areas and industrial zones.

Furthermore, according to reports from SBV branches in provinces and cities, some localities have not announced borrowing portfolios under this program even though their Departments of Construction have sent written requests. Besides, some announced projects do not need credit for construction (because they have been completed or financed by other sources). After conducting project assessments, credit institutions found that some projects are still encountering nuisances in legality, site clearance, pricing and land repurposing. Legal problems are hindering credit institutions from providing loans for project investors.

On the homebuyer side, according to reports by SBV branches in provinces and cities, many projects are not eligible for opening sales because they are under foundational construction or in the contractor selection stage or yet to be started construction.

As per the SBV, expediting the VND120 trillion program necessitates the active involvement of the political system to significantly hasten the formation of housing projects for consideration by commercial banks for lending purposes. The SBV will collaborate with the Ministry of Construction to develop and issue guiding documents for the implementation of the Housing Law. Concurrently, the central bank will oversee the program’s execution to suggest necessary modifications that align with the practical realities of the situation.

Furthermore, the central bank will maintain its commitment to diligently adhere to the directives of the Government and the Prime Minister. It will actively, flexibly, and consistently manage monetary policy tools, guiding credit institutions to reduce costs and lower interest rates. This approach aims to lay the groundwork for reducing lending interest rates under the program, in accordance with Resolution 33/NQ-CP.

Simultaneously, the central bank will instruct credit institutions to accelerate the implementation of the program. It will broaden communication efforts, present and consult on program contents with eligible customers. This strategy is designed to ensure that customers are well-informed and can proactively access bank loans.

By Quynh Chi, Vietnam Business Forum