Dearth of loans to knee-cap social housing

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According to the Ministry of Construction (MoC), of the 300 registered projects for building residential areas for lowly-paid people, just five projects obtained loans worth VND740.3 billion ($35.7 million).

Viglacera, developer of a low-end residential complex in Hanoi’s Gia Lam district Dang Xa new urban area, reportedly got VND391.3 billion ($19 million) in preferred loans from the Vietnam Development Bank (VDB) for executing the project. However, it could only disburse VND10 billion ($48,000) from the loans.

“We completed building three floors with investment costs of over VND200 billion ($9.6 million), meanwhile just around VND10 billion was disbursed from VDB’s loan. Low capital disbursement was due to mechanism-related problems. Besides, as Hanoi authorities did not grant land use right certificates to social housing projects, developers could not mortgage the project’s land at banks to borrow loans,” said a Viglacera representative.

Another developer, the Vietnam Housing and Urban Development Holding Corporation (HUD), has a development pipeline of scores of social housing projects covering 400,000 square metres with 5,000 housing units at Thanh Lam-Dai Thinh 2 residential complex in  Hanoi’s Me Linh area, Dang Xa complex in Gia Lam district, and many other low-end residential blocks across the country.

According to HUD’s general director Nguyen Dang Nam, the largest hurdle to social housing developers was getting access to preferred capital sources as regulated by the government. In his mind, there were a bunch of factors why it was so difficult to be eligible for VDB preferred loans. Some of them were lack of collateral or legal procedure entanglements.

To help address the capital dilemma at social housing projects, the MoC’s Housing and Property Market Management Department has proposed two schemes for submission to the MoC.

In the first scheme, the government helps subsidise 4 per cent of the loan interest  earmarked for social housing projects in two years with capital taken from the national foreign currency reserves with support amount of around VND717 billion ($34.6 million).

Besides, trusted local banks will raise VND7.6 trillion ($367 million) for social housing projects in addition to developers’ capital of VND1.3 trillion ($62.8 million).

In the second scheme, social housing projects are eligible for specific credit packages with payment terms of at most 10 years.

In respect to housing projects to lease industrial zone workers and students the loan duration will be 15 years at most, with the lending terms of each project to be defined by commercial banks and fund management councils.

Of 110 registered housing projects for industrial zone workers for 2009-2015 worth VND25.554 trillion ($1.23 billion) only 24 projects got off the ground with a total capitalisation of VND2.6 trillion ($125.6 million).

Of 189 registered housing projects worth VND28.550 trillion ($1.37 billion) for low-paid people from 2009-2015, just 37 projects began construction valued at VND3.6 trillion ($14 million).