End of property support package worries homebuyers

Urban developments in HCM City. Homebuyers are concerned about rising loan costs as the terms the government's property support package will end soon.- File Photo

The package was launched on June 1, 2013, and the State Bank of Việt Nam (SBV) announced in Circular No 11/2013/TT-NHNN that the programme would be completed 36 months from the mentioned date, according to local media.

Home buyers fear that once the support package ends the interest rates might rise to match current market rates, which might hit them financially.

The package has been disbursed to assist low-income homebuyers and prop up an ailing realty market that faced very high inventories.

The annual preferential interest rate for loans in this programme was lowered to 5 per cent during the last three years, after it was initially set at 6 per cent.

A customer, whose first name is Liên, signed a contract to buy a commercial apartment in HCM City’s District 8 with a committed loan of VNĐ800 million ($35,500) from the support package. The investor planned to transfer the apartment to her sometime in mid-2017.

Liên told Thanh niên (Young People) online that she had received loans worth more than VNĐ470 million ($20,900) out of the committed amount, with the 5 per cent interest rate, following progress of the apartment project.

There was a high possibility that she would be able to get the remaining fund after June 1, and the interest rate would then be set by commercial banks under a commercial contract. She expected the new rate to be significantly higher.

The problem is that Liên only learnt about such a change in interest rates recently through media reports. She was not told about this when deciding to buy the apartment. “I am very anxious now,” she said.

Another homebuyer at the Hưng Ngân project in HCM City’s District 12 said she only dared to borrow loans in the belief that the entire money committed in the lending contract was subject to the preferential interest rate.

“I was not the only one who thought so, most other people did too. We are frightened to hear the latest news,” she told Thanh niên.

SBV Credit Department Director Nguyễn Tiến Đông said it is true that the 5 per cent interest rate will no longer be applied for homebuyers benefiting from the support package after June 1, in accordance with the central bank’s circular.

Industry insiders said as the support package is aimed at customers with low and middle incomes, paying interest rates at market rates will be a burden for them.

Although regulations related to the package have been in place since 2013, neither customers scrutinised them, nor property investors and banks provided their customers with clear information when signing contracts.

“Real estate trading floors and brokerages, an even banks, have intentionally ignored explaining the regulations [to their customers] to sign contracts that benefit them more. Eventually, homebuyers will suffer the maximum damage,” financial expert Nguyễn Trí Hiếu told news website xaluan.vn.

However, only commercial homebuyers will be subject to the change in interest rates after June 1, according to HCM City Real Estate Association Chairman Lê Hoàng Châu.

Châu said the available regulations enable buyers of social houses and commercial property priced less than VNĐ1.05 billion ($46,700) to seek funding from the programme.

Social homebuyers, who receive funding from the package through the Việt Nam Bank for Social Policies, will see no changes.

However, he said social funding has been minor compared to commercial funding.

The Ministry of Construction reported earlier this year that the total loans committed within the support programme reached about VNĐ27 trillion ($1.2 billion), or 90 per cent of the VNĐ30 trillion package, as of December 31, 2015.

About VNĐ17.7 trillion ($787.1 million), or some 60 per cent of the package, was disbursed as of the end of last year.

Of the VNĐ17.7 trillion, social funding reached nearly VNĐ4 trillion, while commercial funding for home purchase, construction and repair made up the remaining value.

Châu suggested that the government should either continue to maintain the preferential interest rate for the remaining disbursements of the support programme, or extend the time for implementation of the package.

“By doing this, we can avoid creating problems and spreading panic among people,” he said.

Đinh Duy Trinh, managing director of Bản Việt Land Company, reportedly suggested removing the date of maturity for the package.

“Any preferential policy must assure justice to all relevant parties. Would it be fair for those who managed a contract for loans now and saw no advantage from it from June 1, 2016? They even found it very hard to be eligible for such loans,” he said.

In the meantime, some homebuyers have urged investors to speed up progress of property projects, which is needed for faster loan disbursement, so that they can enjoy more benefits from the support package, the Việt Nam Television reported.

Banks with State capital, including Agribank, BIDV and Vietcombank, along with Vietinbank, have mainly been responsible for the disbursement of the property support package, according to Đông.