Gov't should launch alternative to unviable $4.7 bln social housing credit package: expert

The Vietnamese government ought to launch a comprehensive housing financial strategy as an alternative to the social housing-focused $120 trillion ($4.72 billion) credit package, which has been disbursed at a snail's pace, said Le Xuan Nghia, a member of the National Financial and Monetary Policy Advisory Council.

Nghia made his recommendation because only VND646 billion ($25.3 million) out of the $120 trillion credit package, or 5.4%, has been allocated for social housing development since its launch last year.

With such a low disbursement rate, as of the first quarter of 2024, 37,868 social houses had been completed, up 4.3% from late 2023, but reaching only 8.9% of the 2021-2025 target of 428,000 units.

The credit package has been offered by commercial banks to support the local real estate market, including the social housing segment, but the banks are not obligated to inject capital into the market, the expert explained.

Giving solutions for mobilizing capital for the real estate market, Nghia recommended that the $120 trillion credit package should be scrapped due to its inefficiency. Instead, he proposed that the government develop a comprehensive housing financial strategy covering all segments, not just social housing, and lower interest rates for social housing loans.

He also suggested that the government should study how other countries, such as Singapore, have successfully promoted their housing markets. For instance, Singaporean citizens are eligible for a fixed 2.5% loan interest rate for 30-36 years when purchasing a house. This means that buyers only pay an interest rate of 2.5%, with the government subsidizing the remaining interest.

Echoing Nghia’s opinions, Nguyen Hoang, a real estate specialist, attributed the stagnant credit allocation and limited social housing supply to regulatory obstacles, modest profits from social housing projects, and the lack of land designated for social housing development.

Moreover, interest rates for social housing loans seem unappealing as they are not dramatically lower than those for commercial housing development, Hoang indicated, adding that these rates should be lower or at least equal to savings interest rates.

Le Hoang Chau, president of the Ho Chi Minh City Real Estate Association (HoREA), emphasized that the $120 trillion credit package should be regarded as a commercial credit line with interest rates 1.5-2% lower than standard rates. Additionally, the terms of five years for homebuyers and three years for developers are deemed too short, suitable primarily for mid-sized projects, Chau noted.

According to the Vietnam Association of Realtors (VARS), demand for social housing is estimated at 1.24 million units in 2021-2025 and 1.16 million in 2025-2030. As of end-Q1, 127 social housing projects had commenced construction, with 107,896 units.