VietNamNet Bridge – Concerns have been raised about the feasibility of the proposed housing fund for low-income earners.

Deputy Minister of Construction Nguyen Tran Nam said families would contribute 1 per cent of their monthly income to qualify for loans to buy houses.

"Those who contribute to the fund but don't apply for a loan to buy a house would have the principal returned, along with interest of 3 to 5 per cent upon retirement," Nam said.

The fund will provide home buyers with loans and also support developers involved in social housing development programmes.

"The fund would annually collect about VND10 trillion (US$481 million) from the country's 9 million low-income workers. The scheme could significantly contribute towards meeting demand for low-cost housing," he added.

He said the State budget for low-income housing projects was limited, while demand for housing was urgent, especially among low-income earners.

"Along with preferential policies from the Government, low-income earners should have the responsibility of acquiring their houses themselves. The poor could contribute a part of their monthly incomes to the fund," Nam said.

He added that it should be made compulsory for everyone to contribute to the fund because if it were only voluntary, only those who did not own a home would contribute to the scheme.

"If every employee makes a contribution to the fund over the 30 years of their working life, there should be a sufficiently large source of capital to help the poor." Nam said.

However, some raised doubts over whether the fund would actually work, and also worried about transparency.

Nguyen Van Duc, deputy director of Dat Lanh Real Estate Company, said most property developers would be reluctant to join the scheme.

He also said a contribution of just 1 per cent of a person's income would not be enough to buy housing at current market prices.

He calculated that a labourer with a monthly income of VND5 million (US$240) would contribute just VND600,000 ($29) a year to the fund. After 10 years, he would have contributed VND6 million ($288), which would not be able to pay off the loan to buy even a low-cost house.

Pham Thanh Hung, deputy director of Century Real Estate Joint Stock Company, was also sceptical the fund would work.

"The fund is a meaningful and positive policy in principle, and would be supported by the people. However, it is vitally important to have transparency when it comes to using the fund and transferring the money to low-income earners," he added.

Nguyen Van Linh, a resident in Ha Noi's Thanh Xuan District, said he hoped it would not be compulsory to contribute to the fund because he already had a house.

"We would be better off depositing our wages in a bank account because the interest collected on retirement from money deposited in the fund would not amount to much," Linh said.

He said that current social housing programmes gave preferential treatment to property developers with regard to capital, land and infrastructure.

"Businesses have always put their profits first. Low-income people have always found it difficult to benefit from these schemes."

The housing saving fund has been successfully applied in some countries such as South Korea, Singapore and China.

Pham Sy Liem, vice chairman of the Viet Nam Construction Association, said that in Singapore, employees contributed 10 per cent of their monthly wage to a social housing fund, which was matched by their employer. After contributing 20 per cent to 25 per cent of the cost of the property they wish to buy, they would be given a loan from the fund.

People who already owned a house could contribute to the fund for their children.

"Members of housing saving funds typically wait at least 12-15 years to own a house," Liem said.

The Ministry of Construction estimates that Viet Nam would need 2.5 billion sq. metres of housing to meet demand from a rising population forecast to reach 96 million by 2020.

Currently, there is just 1.4 billion sq. metres, which means the country needs to provide an additional 100 million sq. metres every year.

The ministry said about 7 million people living in urban areas were in need of low-income housing, totalling an area of about 150 million sq. metres.

The total investment would require between VND300 and VND400 trillion ($14.5-$19.4 billion).