Vietnam housing loan package unused, redtape blamed

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An apartment block in District 12, Ho Chi Minh City, which is expected to be turned into smaller houses to benefit from the central bank's cheap loan package. Photo courtesy of Tuoi Tre

A US$1.42-billion cheap loan package the central bank unveiled two months ago for housing developers and low-income people and public workers has not helped reduce the housing inventory by much, with the program mired in red tape, according to reports.

A recent study by Ho Chi Minh City-based securities firm Maybank Kim Eng found that only a small number of projects, most of them yet to get underway, have managed to register for the package by promising to switch from commercial to low-cost mode.

The package is targeted at builders and buyers of houses measuring up to 70 square meters and costing no more than VND15 million ($713) per square meter.

More than 16,000 apartments remain unsold, with tens of thousands of others having been stalled, the study found, estimating it would take four to five years for them to be sold unless demand picks up.

Tuoi Tre newspaper said many buyers and builders failed to get the loans due to the paperwork involved.

A married couple in HCMC working for the government, who began efforts to get the loan from day one, have yet to get a reply from their bank, two months after the program came into effect.

The husband, identified only as T., said they wanted to borrow VND600 billion ($28,350) from the Bank for Investment and Development of Vietnam (BIDV) to buy a VND871-million apartment in outlying Tan Phu District.

He signed an agreement with the developer after the bank said his application would be approved.

But now, when it is time to pay the second installment for the apartment, his application is still pending: the bank said it can only lend after signing a contract with the developer and an asset management company set up by the central bank recently to buy up banks' bad debts.

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"I went (to BIDV) several times in the past few days and was told everyone was too busy to talk to me. I'm really worried."

Of the five banks chosen for the program Agribank, BIDV, Vietcombank, VietinBank, Mekong Housing Bank VietinBank has received 160 mortgage applications and BIDV, 100.

Most customers said their cases are pending, with the banks saying they are checking the applications and quality of projects.

Thuy, another BIDV customer, said though she understands that subsidized loans require careful processing, there seem to be too many hassles in this case. "It makes us tired."

One major problem for mortgage applicants is they have to prove they do not already own a home, real estate companies said.

Banks require them to have local authorities certify they do not own a house, but the authorities cannot be certain about this since an applicant could have a house elsewhere, the director of one company said.

"So local authorities and banks keep passing the buck to each other, and people suffer."

The central bank told the Ho Chi Minh City Real Estate Association (HoREA) that the first stage of the package would focus on developers and that individuals would be focused on later.

But developers too face difficulties in scaling down their apartments to less than 70 square meters to borrow from the package.

The director of a Ho Chi Minh City developer said he has gone to various agencies "up north down south" and asked to turn some of his company's apartments into smaller ones. "But my application is still pending."

Developer An Phu JSC, which is trying to reduce its 120-150-square-meter units into those of 60-70 square meters, said it has been made to run from one office to another.

"We have not even asked to borrow from the package yet," its general director Vo Thanh Hung said.

"We just decided that smaller houses would sell better."

The tardiness has prevented his company from proceeding with the work yet.

The Ministry of Construction and the State Bank of Vietnam said that by mid-July around VND11 billion has been lent to 56 individuals and nearly VND118 billion to low-cost housing developer Vicoland in central Vietnam and VND540 billion to Ho Chi Minh City-based Hoang Quan JSC. 

Le Hoang Chau, chairman of HoREA, called this "disappointing" since demand was high.

The procedures for lending are not transparent or consistent, he said. 

"Every place is doing in its own way."

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