Nguyen Thu Hai, from Ha Dong district, Hanoi, said she has been looking to buy social housing for the last year, but it has been difficult to satisfy the requirements to access the projects. The biggest problem was that she could not access preferential credit programs with low interest rates like the Government's VND30 trillion package.

“We are eligible to buy social housing. But if we cannot get preferential loans from banks, we will have financial problems,” she said.

Many commercial banks said they were offering very attractive preferential credit packages, but the best preferential interest rate is as high as 8 percent per annum, while the average interest rate of the packages is 11 percent, which is a financial burden on borrowers.

Nguyen Thi Nga in Hanoi, who wants to buy an apartment at a social housing project in Thanh Tri district, is facing the same problem.

Nga has only VND500 million and has to borrow VND700 million to buy a 60 square meter apartment with two bedrooms. If she gets a commercial loan, she will have to pay VND10 million a month in both principal and interest in the first year and for 10 years.

“We cannot pay such a big sum of money every month. The financial burden would be lighter if we could borrow money at a preferential interest rate,” she said.

“Only middle income earners or richer people can afford apartments priced from VND20 million per square meter or more,” she said.

Previously, with the VND30 trillion credit package, social housing projects had to be priced at below VND15 million per square meter. As the disbursement of the package has ended, these project prices are on the rise. Social housing developers now are required to only have a profit of no more than 10 percent.

Meanwhile, realtors cannot access bank loans to develop projects. The developer of a project in Hoai Duc district had to halt construction for a long time as the preferential credit package has ended.

The developer of a housing project in Quoc Oai district complained that products have not been selling. The project has been completed but buyers no longer want to buy as they can no longer borrow money at preferential interest rates.

According to the Ministry of Construction, 1.7 million urban residents are having accommodation problems and 1.7 million workers want to have stable accommodations. As such, it is necessary to build 700,000 low-cost apartments to satisfy demand.

According to the Ministry of Construction, 1.7 million urban residents are having accommodation problems and 1.7 million workers want to have stable accommodations. As such, it is necessary to build 700,000 low-cost apartments to satisfy demand.

Only 248 social housing projects with a construction scale of 103,500 apartments and 264 projects with 216,500 apartments had been completed as of the third quarter in 2020. This means that the number of social housing products available can satisfy less than 50 percent of demand.

Access to loans

Policies allowing people to borrow money at preferential interest rates exist, but it is almost impossible to access the loans.

In 2017, the Bank for Social Policies (BSP) got an additional VND2 trillion in capital, a part of which was reserved to implement the social housing development policy, including VND1.262 trillion for social housing product purchases and leasing.

In April 2020, the Government and the National Assembly Standing Committee agreed to allocate VND3 trillion more to implement the policy. Of this amount, VND1 trillion was allocated to the Bank for Social Policies and VND2 trillion to four state-owned commercial banks.

But BSP has yet to provide loans to social housing projects, including projects for leasing. Meanwhile, the four commercial banks, Vietcombank, VietinBank, Agribank and BIDV, still don’t have capital to provide to project developers because they have not been refinanced or have not received an interest rate subsidy.

In the last five years, all social housing project developers have used commercial loans to execute their projects with interest rates of 9 percent per annum.

The high interest rates are taken into account when pricing social housing products, which explains why these products have high prices of VND18-20 million per square meter, which is higher than the unit price of VND13-15 million per square meter seen in the 2011-2015 period.

Experts analyzing the disbursement of the VND30 trillion preferential credit package in 2013-2016 found that with every dong of refinancing and interest rate subsidy from the state budget, commercial banks could mobilize 31 dong more, creating a large capital source for home buyers.

They pointed out that the social housing segment won’t be able to develop if there is no long-term strategy with powerful financial sources and the active participation of local authorities.

The Ho Chi Minh City Real Estate Association has asked the State Bank of Vietnam to submit to the PM a plan on providing loans at a preferential interest rate of 4.8 percent per annum, to be applied to both social housing and low-cost commercial project developers and buyers. In the long term, an interest rate of 3-3.5 percent should be considered. 

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