Central bank's affordable-housing program gets mixed welcome

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The State Bank of Vietnam plans to lend at low interest rates for buying and building affordable housing.

In a draft circular, the central bank has said it will earmark VND30 trillion (US$1.43 billion) for refinancing five banks at 4.5 percent interest, half the official refinancing rate starting from April 15.

The five lenders Agribank, BIDV, MHB, Vietcombank, and Vietinbank will provide loans for up to 10 years at an initial interest rate of 6 percent.

Low-income earners and government workers can borrow to lease-purchase social housing or commercial housing of less than 70 square meters and costing less than VND15 million per square meter.

Speaking to Thanh Nien, Nguyen Viet Manh, head the central bank's credit department, said home buyers should move quickly since the interest would only remain at 6 percent for three years.

It would still remain below the market rate afterwards, he said, however.

The central bank cannot bring down the rate any further since it had to consider many factors.

Pham Sy Liem, vice chairman of the Vietnam Construction Federation, said the government should consider offering preferential rates for a longer period to engender faith in its housing policy.

The three-year period is too short compared with other countries where banks offer low rates for 10 or even 20 years, he said.

The policy also stipulates that developers of affordable housing, including those who change their projects from commercial to social housing, can get the low interest rate for five years.

Some analysts opposed the plan, saying it would provide the real-estate sector undeserving help and create unhealthy competition between property companies.

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Nguoi Lao Dong newspaper quoted economist Nguyen Tri Hieu as saying that since bank loans to corporates carry interest rates of 10 percent and above, it would be unfair for only property firms to get loans at 6 percent.

Nguyen Van Duc, deputy director of property firm Dat Lanh, said the central bank should help home buyers rather than developers.

Property companies would scramble for the loan, resulting in unfair competition since some companies would resort to bribery or using influence, he said.

Duc also wondered if the credit would be used as intended since some developers would choose to repay existing debts or plow it into other businesses. 

The central bank's credit department said the property industry needs support to develop the social housing sector which is underserved in Vietnam.

Local governments and the Ministry of Construction would be careful in making loan approvals, it claimed.

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