PM orders lower interest rates, term extension for social housing loans

Prime Minister Pham Minh Chinh has asked the State Bank of Vietnam to design credit packages for social housing buyers with interest rates 3-5 percentage points lower than popular lending rates.

The terms of such social housing credit packages should be extended to 10-15 years, Chinh noted while presiding over a meeting on Friday on developing at least one million social houses for low-income earners and industrial workers in 2021-2030.

The government chief asked the State Bank of Vietnam (SBV), or the central bank, to arrange credit for both homebuyers and sellers. The Ministry of Finance has to mull creating a social housing fund and report on it by June 30, in addition to guiding localities in issuing bonds for social housing development, Chinh ordered.

The Ministry of Construction was asked to weigh converting the use purposes of unoccupied resettlement housing projects into social housing ones, he suggested.

The prime minister demanded developers publicize social housing projects to facilitate buyers’ access to social housing.

Since 2021, as many as 503 social housing projects with a total of 418,200 apartments have been initiated, of which 75 with 39,884 apartments have been completed.

Regarding the social housing-focused $120 trillion ($4.72 billion) credit package, only VND1.14 trillion ($45 million), or 0.95% of the total amount, has been disbursed to developers and buyers since its launch last year.

Talking to The Investor about social housing development, Nguyen Hoang, a real estate expert, 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 are unappealing as they are not significantly lower than those for commercial housing developments, Hoang indicated, adding that these rates should be lower or at least equal to savings interest rates.

He recommended converting the VND120 trillion package into an affordable housing loan one, akin to the VND30 trillion ($1.18 billion) program launched in 2013. As such, lending rates for apartments priced at a maximum of VND3 billion ($117,880) each and VND50 million ($1,960)/square meter should be set equal to deposit interest rates, thus encouraging investors to further focus on high-demand affordable apartments and easing pressure on social housing expectations.