Complex rules, housing shortage threaten real estate loan package

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Disbursement of the government's much-vaunted VND30 trillion (US$1.43 billion) loan package for low-cost housing has been so slow that experts suspect it will fail in its main task - reviving the stagnant property market.

Since its launch in June, just VND341 billion has been disbursed, of which VND221 billion was lent to 920 individuals and the rest to four firms, according to the Ministry of Construction.

Nguyen Van Duc, vice chairman of the Ho Chi Minh City Real Estate Association, said extremely slow pace of "has helped rescue none of the property firms."

Industry insiders as well as officials say several commune administrations have not yet understood well the procedures and regulations relating to the credit package, and have delayed the attestation of home status. This has hindered homebuyers from completing procedures to access the soft loans.

Homebuyers have said that commune authorities have said they can only confirm that the buyers do not own any housing in the area within their jurisdiction, and cannot know if the latter own housing other localities or not.

Under the loan package, buyers of low-income housing, government workers, and military personnel can borrow at just six percent interest for the first three years to buy accommodation measuring less than 70 sq.m and costing no more than VND15 million per square meter.

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However, to be eligible for the loans, they should not own any housing, or have a house with less than 8 sq.m per household member.

"The barriers to home buyers in getting loans, despite being recognized and pointed out by industry insiders for a long time, have not yet been removed. If the situation continues, the failure of the program is unavoidable," said a property expert who declined to be named.

Another reason for slow disbursement is the thin supply. Many social housing projects have only completed investment procedures so far, and are yet to begin construction, an official with the Ministry of Construction said.

Vietnam has 167 social housing projects, of which 34 apartment blocks with 19,000 units are available. The rest are under construction. 

Unable to access the preferential loans, only a few property firms have invested in social housing projects, because these yield very low profit margins.

Yet another reason for slow disbursement of the loan package is banks are being too cautious in lending to homebuyers over bad debt concerns, said Pham Sy Liem, vice chairman of the Vietnam Construction Federation.

Economist Bui Kien Thanh said: "I have not seen any positive impacts from the policy on the stagnant property market. Unless regulations are amended to facilitate homebuyers, the program will fail to achieve its target."

"In fact, we need more comprehensive measures so that millions of Vietnamese who need accommodation can buy houses," he said.

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