Government Tasks Ministry of Construction with New Responsibilities for Social Housing
The Government Office has recently issued a communication to the Minister of Construction regarding support for interest rates and resolving difficulties in the development of social housing.
Prime Minister’s Directive
According to the communication, the Prime Minister has tasked the Minister of Construction with leading and coordinating relevant agencies, based on the Party’s guidelines, existing legal regulations, and directives from the Prime Minister’s online conference on resolving difficulties and promoting the development of social housing. The objective is to study and propose solutions for the issuance of government bonds to support interest rates, facilitating investment and construction of social housing. The Minister of Construction is required to report the findings to the Prime Minister by April.
Support for Social Housing Development
In March 2023, following Government Resolution No. 33, the State Bank of Vietnam directed four commercial banks to commit to a 120 trillion VND support package for loans, investments, and development of social housing. The interest rate for these loans would be lower than the average commercial loan interest rate, ranging from 1.5% to 2%.
TPBank’s Commitment
During the online conference on social housing development held by the Government on March 16, 2024, TPBank announced its commitment to allocate around 5 trillion VND for loans for the development of social housing, increasing the size of the preferential package from 120 trillion VND to 125 trillion VND. However, the current challenges with the preferential loan package for social housing lie in the loan procedures and interest rates, which have not been attractive enough for homebuyers and project investors.
Progress and Limitations
According to the Ministry of Construction, up to now, 28 localities have announced a list of 68 social housing projects eligible for loans from the 120 trillion VND credit package, with a total loan demand of over 30 trillion VND. The banks have committed to providing credit for 15 projects with an amount of approximately 7 trillion VND, including 8 social housing projects in 7 localities, which have been granted loans totaling around 640 billion VND.
Challenges in Listing Eligible Projects
The Ministry of Construction believes that the publication of the list of social housing projects eligible for loan funding is still limited. Currently, there are 129 social housing projects, with a scale of 114,934 units under construction. However, only 28 localities have published a list of 68 projects eligible for the preferential credit package of 120 trillion VND. Therefore, there are 59 projects that have commenced but have not been included in the eligible loan list of the respective localities.
Limitations and Attractiveness of Interest Rates
The Ministry of Construction also points out that some social housing project investors do not meet the loan requirements, such as not having credit debt conditions or other assets to secure the credit (as social housing projects are exempt from land use fees, they do not meet the collateral requirements). Regarding interest rates and the period for enjoying preferential rates for social housing projects, although the State Bank of Vietnam has twice reduced the capital source’s interest rate of 120 trillion VND, the current interest rates of 8% per annum for investors and 7.5% for homebuyers, along with the short-term preferential interest rate period (3 years for investors and 5 years for individuals), have not been truly attractive for borrowers.
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