Corporate leaders offer insight into Vietnam's social housing investment landscape

Vietnam's prime ministerial Decision 388/QD-TTg, dated April 3, 2023, approved a scheme to have at least 1 million social housing units built for low-income earners and industrial park workers in the period 2021-2030.

At a seminar hosted by The Investor on Tuesday, corporate leaders explained why they are reluctant to invest in social housing, despite the country's enormous demand, and recommended solutions.

Tran Cong Tuong, general director of Capital House

Investors are very excited about the National Assembly's upcoming resolution which will introduce many breakthrough mechanisms for investment in social housing.

We hope that ministries and other state agencies will boldly remove obstacles related to land resources for social housing, which can come from existing land funds that have not been used.

In some localities, some land funds earmarked for resettlement or other purposes that have not been put into use can be used for social housing. This is feasible and can be done immediately, helping to expand land funds for social housing quickly.

The resolution or following guidelines are expected to specify the types of exemption from construction permits and basic construction criteria.

In practice, we see difficulties in identifying who are "low-income earners". On this issue, localities have not reached a consensus; clarity will help investors approach customers.

Vu Quoc Huy, deputy general director of Taseco Land

We see that the state is building strong and drastic policies to help disadvantaged and low-income people access housing and have better living conditions.

The National Assembly's draft resolution on investment in social housing has many new points, shortening administrative procedures.

Currently, investment procecedures are related to many ministries, state agencies, and local administrations. We hope that when the resolution is passed, they will reduce paperwork and quickly issue certificates to home buyers.

Vu Xuan Dung, chairman of Viconship

A solution proposed by the Ministry of Construction is establishing a National Housing Fund. We understand that such a fund will use both state budget and money from investors and the community.

I think the financial solution is not urgent. The procedural process is what concerns businesses and affects the progress of projects.

The draft resolution says some companies can be appointed to be investors, instead of going through bidding, with costs audited. This is a favorable new rule for the social housing market. Shortening the project approval/appraisal process is also an anticipated new point.

I also think we should expand the scope of buyers. In some localities, defining who are "low-income earners" to buy social housing is not consistent.

Moreover, ones need to have monthly income of less than VND15 million ($578,150) to be eligible buyers. That means they will have only VND7 million left to cover their living expenses after spending about VND7-8 million ($308,340) to pay off the principal of a social housing loan.

Le Viet Hai, chairman of Hoa Binh Construction Group

People must prove they are "low-income earners", while at the same time proving their ability to repay the debt in a short period of time. That's the root cause of the problem.

The value of the house is large compared to the income. If this problem is not solved, the solution related to land use fees or interest rates will help boost the development of social housing, but will not help to achieve the government's target [building at least 1 million social housing units for low-income earners and industrial park workers in the period 2021-2030].

In my opinion, state support is needed but it must be consistent with the market mechanism. We target poor households but also need to address the housing needs of near-poor households.

In short, we should follow the market mechanism to solve this problem. There need state support and home loan interest rates to ensure that products brought to the market are consumed and reach the right people with the right needs and financial capacity.

Profits of investors should be controlled. If they sell a unit for VND1 billion ($38,550, but the cost is only VND500 million, they can have a profit of 20%. The remaining VND400 million should be paid back to the social housing development fund.

Tran Anh Thang, deputy general director of Eximbank

If the two parallel issues of procedures and policies are not resolved, capital sources will be blocked.

There are two funding sources: investors and home buyers. Regarding investors, banks have been stuck in procedures as investors cannot fulfil legal procedures related to land allocation and investment policies.

The blockage has been quite long. At Eximbank, some businesses have asked for loans since 2023, but not yet been lent. In addition, banks have difficulty determining the selling price of investors.

Regarding loans for social housing buyers, the state currently has a package of VND145,000 billion ($5.59 billion). Eximbank has not registered to lend via this package, but is offering a total credit limit of over VND5,000 billion ($192.6 million) for social housing projects. We have disbursed nearly VND1,100 billion.

Currently, commercial banks are following the government's policies in supporting interest rates and lending. Social housing buyers want to borrow at an interest rate of 2-3%. Banks can offer such interest rates.

But we cannot lend much because we are mobilizing medium and long-term deposits at an interest rate of 5.5-6% and short-term deposits at about 4-5%.

Loans for social housing purchases must be about 20-25 years, but banks are using short-term capital for medium and long-term lending. We face difficulties and do not have enough resources to do that.

In addition to the legal framework, we propose the State Bank of Vietnam have a separate credit mechanism when banks participate in lending to social housing projects. In addition, the central bank should have a separate mechanism regarding loan terms and principal and interest grace periods.

The SBV stipulates that for banks that register to participate in the VND145,000 billion package, their social housing loans will not be counted in their credit growth calculation. We propose that the central bank allow commercial banks that lend social housing projects to have that lending excluded from credit growth calculations.

Vietnam's prime ministerial Decision 388/QD-TTg, dated April 3, 2023, approved a scheme to have at least 1 million social housing units built for low-income earners and industrial park workers in the period 2021-2030.

However, according to Ministry of Construction data, since 2021, the country has had only 657 social housing projects implemented.

By 2025, the number of completed units only reached 15.6% of the target. The government has also allocated a package of VND120 trillion ($4.62 billion) to support social housing policies, but the disbursement is very slow.

It is expected that the National Assembly resolution with many breakthrough mechanisms for investment in social housing will be approved on May 29.