Unblocking credit sources for social housing

Therefore, unlocking credit capital for lending to serve social housing development is considered an important task of credit institutions as well as the current banking system.

Customers transact at Tien Phong Commercial Joint Stock Bank *. Photo: Quang Thai*

Current status of 3 social housing credit programs

According to Deputy Governor of the State Bank Pham Quang Dung, the State Bank is currently assigned to implement 3 credit programs related to social housing development. Specifically, with the 120,000 billion VND program, up to now, 9 banks have registered to participate with an amount of 145,000 billion VND, higher than the limit of 120,000 billion VND.

The second program being implemented is credit for people under 35 years old. The third program is for social housing loans under Decree No. 100/2024/ND-CP (dated July 26, 2024) of the Government detailing a number of articles of the Housing Law on the development and management of social housing (the maximum loan amount is 80% of the value of the contract for purchase or hire-purchase of social housing, the interest rate is equivalent to the interest rate for loans to poor households).

For the 120,000 billion VND credit package alone, the State Bank has requested credit institutions six times to lower lending interest rates, from the initial 8.7%/year to 6.4%/year for investors and 5.9%/year for home buyers, even lower than the lending rate for poor households (about 6.6%/year).

As a result, commercial banks committed to disbursing VND8,300 billion for 41 social housing projects, which is only about 5.7%. In addition, the Social Policy Bank has outstanding social housing loans under Decree 100 reaching over VND19,000 billion.

It is known that 9 banks participating in the credit program for social housing worth 145 trillion VND include: Agribank , VietinBank, Vietcombank, BIDV, HDBank, VPBank, Techcombank, TPBank and MB. Accordingly, these banks have their own preferential policies for people under 35 years old when borrowing money to buy social housing with preferential interest rates, commonly 1% lower per year than the average medium- and long-term lending interest rate in VND of 4 state-owned commercial banks (Agribank, BIDV, Vietcombank and VietinBank) and according to the requirements and policies set by the State Bank (re-announcement of interest rates every 6 months).

With preferential programs for customers under 35 years old and those who need loans to buy, build/repair houses, commercial banks are actively participating including MB, HDBank, BIDV, Sacombank,SHB , ACB….

Need to adjust lending rates

Consulting on interest rates for customers at the Vietnam Joint Stock Commercial Bank for Investment and Development. *Photo: Do Tam*

Despite achieving certain results, the disbursement rate of credit programs supporting social housing development has not been really promoted due to many bottlenecks. If credit policies only stop at lowering interest rates without a mechanism to support implementation, it will be very difficult to access capital. The implementation of many loan packages is a positive signal, but if the root cause from the supply side is not solved, preferential credit policies will also be difficult to promote effectiveness.

Experts say that there are still many barriers to implementing preferential loan programs for social housing. Specifically, the supply of social housing is still lacking and does not meet demand. Scarce land funds, complicated legal procedures, low profits, make many investors not interested. The project approval process is slow, not creating a product scale large enough to attract the market. Not to mention the difficulties related to the criteria for determining borrowers, because the maximum income to be eligible for a loan is 15 million VND/month for individuals, 30 million VND/month for households, which is not suitable for the reality in many localities.

Therefore, many experts recommend that the State Bank readjust income criteria and reconsider lending interest rates, because the 6.6%/year rate applied by the Social Policy Bank is higher than lending interest rates at some commercial banks.

On the borrower side, interest rates for social housing loans in the VND120 trillion package as well as credit for young people under 35 years old are still high and unstable, making it difficult for most low-income people to access.

Proposing to bring social housing credit packages to borrowers, experts also said that the Government needs to provide capital to commercial banks with very low preferential interest rates, maximum about 3%/year, so that banks can re-lend at about 5%/year. The banking system needs to meet 3 factors at the same time: stable interest rates in the long term, transparent loan procedures and a strict monitoring mechanism to prevent profiteering. That is, it is necessary to redefine the relationship between the 3 factors of capital - project - borrower and more importantly, shorten the approval process, apply digital technology to manage records, reduce paperwork...

Recently, the Ministry of Construction also proposed to reduce preferential loan interest rates for buyers and renters of social housing. Currently, the applied interest rate is 6.6%/year, equal to the lending interest rate for poor households in each period. However, this rate is higher than many other preferential credit programs, causing many borrowers to have difficulty balancing costs.

According to the Ministry of Construction, the interest rate for loans to buy or lease social housing should be reduced to 5.4% per year. For loans to build, renovate or repair houses, the interest rate will continue to be applied according to the lending rate for poor households, depending on each period, as prescribed by the Prime Minister.

Source: https://hanoimoi.vn/khoi-thong-nguon-tin-dung-cho-nha-o-xa-hoi-716171.html