Putting pen to paper the toughest step

Vietnam’s banks cash in on the demand for urban living

To take advantage of the huge demand to live in urban areas, banks such as Techcombank, Sacombank, Vietnam Bank for Investment and Development (BIDV) have pushed housing loans, but the demographic in search of such loans, the young couple, is having trouble meeting what seem at first as manageable bank requirements.
BIDV has implemented an incentive programme that combines a savings account and eight to 10 year housing loans. Once the customer reaches 10 per cent of an apartment’s value, they will get a queuing number, and at 30 per cent will be eligible to buy an apartment and pay the remainder over eight to 10 years.
A Techcombank sales rep said last week: “If both people have a stable job, it (getting a loan) shouldn’t be difficult.”
Unfortunately, marketing staff are not credit officers, and buying an apartment in Hanoi remains riddled with difficulty.
Nguyen Le Minh, 34, commented that at first the policies seem attractive, but many young couples cannot meet all the conditions.
“The first condition to get a VND300 million loan is to have a monthly income of at least three million,” Minh told Vietnam Investment Review.
The woman actually makes VND5 million per month, but her husband, who works for the state, only makes VND1.5 million.
“The condition stipulates each person must make VND3 million, but a combined income of VND6.5 million won’t do it,” she said.
Other conditions include being married and receiving salary through the bank.
An executive of property broker Thanh Cong House and Land Agency, Minh Hoang, said the bank incentives were not incentives, and that many customers that came to the agency were keen to borrow, but few qualified.
As is often the case in Vietnam, to buy property, the customer must pay a percentage (30 to 70 per cent) of the total price upfront to the property investor before the bank will provide a loan for the remainder.
“I researched four banks and found that if a customer buys an apartment on a 20 year loan, the interest over 20 years would cost the customer as much as the apartment,” Hoang said.
In addition, on the backdrop of inflation, Hoang added, big interest will burden lenders.
The current interest rate is 1.2 per cent per month--nearly double that of savings accounts, creating a real estate market for high-income buyers, which is only compounded by increasing prices.
However, as low-income earners are being shoved out of the real estate market, many projects for low-income housing are in the works.
Last year, Asian Development Bank in Vietnam committed $30 million to a project in which the bank will funnel loans through commercial banks in the country for some 138,000 people to buy property or to upgrade existing housing.
Currently in Hanoi’s Lang, Cau Dien, Xuan La and Xuan Dinh, some 200 apartments are waiting for low-income earners to buy.
Meanwhile, the Hanoi People’s Committee is developing a programme to annually build 20,000 sqm of housing to meet the low-income earner demand. Customers will get 10-year loans and pay 70 per cent initially to investors.
Nguyen Dang Binh, deputy director of the Hanoi’s Natural Resources, Environment and Housing Department, said the department would compile a list of potential low income buyers.
Ho Chi Minh City sold 4,500 apartments for low income earners last year, 10,000 apartments will be finished this year and next.
Chinese and Korean developers have received government approval to build budget homes to sell in Ho Chi Minh City, about 50 sqm each for $10,000 to $15,000 per flat.
Municipal officials claimed the city was in need of housing accommodation for low-income people. The city approved 23 projects to build 9,300 budget homes over the next two years, but the number falls short of the forecast demand.
The city’s construction department reported the city planned to build 60,000 units to sell by installment and 10,000 units for lease to low-income earners by 2010.
The price for a budget home should be around $13,000, the department said, and buyers should pay 30 per cent of the contract value in advance and the rest by installment for up to 15 years.
A survey from the Vietnam Worker Association indicated that 31 per cent of the state’s staff had not bought housing and that they were leasing in old living quarters with unsuitable facilities.