According to latest figures, as of March 15, banks have lent nearly 1.322 trillion VND (62.1 million USD) to over 3,000 home-buyers and pledged to provide nearly 2.9 trillion VND (136.3 million USD) for another 3,000 individual clients.
Not long ago the Ministry of Construction (MOC) proposed that the Prime Minister should relax some regulations to make the loans more accessible, thereby quickening the pace of disbursement.
One of the barriers blocking home-buyers from borrowing is collateral. Nguyen Ngoc Lan, a health worker in Hanoi’s Dong Da district, said “We don’t have enough money to buy homes so we have to think about borrowing from banks. But they want us to put up something valuable as collateral for loans. How can we get valuable properties to be used as collateral when we don’t have much money?” Meanwhile, banks do not accept homes that will be bought in the future with their loans as collateral, which is effectively preventing many from enjoying the benefit of this programme.
Deputy Minister of Construction Nguyen Tran Nam said the circular signed between the MOC, the State Bank of Vietnam (SBV), the Ministry of Justice and the Ministry of Natural Resources and Environment, effective from April 21, will remove one of the biggest bottlenecks when permitting home buyers to put up their future homes as collateral for bank loans. The circular will be issued along with a number of other regulations to prevent the, already high, ratio of bad debt from rising.
The new circular lays the foundation for banks to speed up their lending as contracts to buy social housing and commercial housing will have similar terms and conditions with the only difference being that the interest rates are lower for social housing. Both types of housing have to comply with relevant procedures and regulations.
Luong Van Cuong, a resident in Ho Chi Minh City’s District 9, said this move is worth celebrating but was still in doubt, “Even when banks use future homes as collateral, we can’t borrow. With an income of just 5 million VND (235 USD) each month, how can we convince banks that we can pay back.”
Deputy Minister Nguyen Tran Nam said that problems arising during the disbursement of this loan package are being gradually removed. Although the pace of disbursement is slow, the MOC still does not want to rush because it wants the loans to be brought to those who really need. Nevertheless, after discussions with the SBV, the MOC has proposed the Prime Minister make amendments to some regulations, including extending the payment term from 10 years to 15 years for home buyers, relaxing restrictions on who can borrow and including more commercial banks in the programme.
The limited supply of social housing is one of the primary reasons behind slow disbursement. The solution, therefore, is increasing the supply of affordable housing. In addition to social housing projects under construction, Vietnam has about another 57 projects that are in the process of converting from commercial to social housing with around 35,000 apartments. There are also another 62 projects which are being modified, with the number of apartment expected to rise from 32,000 to 40,000. Most of these projects are located in Hanoi and Ho Chi Minh City.
The Hanoi municipal People's Committee has issued 13 decisions approving the conversion of three commercial housing projects to social housing and ten others for structural modification. Ho Chi Minh City authorities have also agreed to convert five commercial housing projects into social housing, adjust four projects, and turn one project into a hospital.
According to the SBV, the Ministry of Transport has announced a list of 81 projects eligible to access the 30 trillion VND credit package but many projects have yet completed legal procedures, making it impossible for commercial banks to give loans and make disbursement.
Chairman of the Ho Chi Minh City Real Estate Association Le Hoang Chau said that the stagnancy is due to the lack of drastic measures and close co-ordination between ministries, sectors and localities. Many property enterprises have submitted files for the conversion of their housing projects for over a year but have not received reply. Chairman Chau suggested the Ho Chi Minh City's People Committee define clearly the criteria necessary to be met to allow the conversion of commercial projects into social housing and for the restructure of apartments, so that property enterprises could actively seek solutions to solve their hindrances.
Director of Phuc Khang Construction and Investment Corporation, Luu Thi Thanh Mau said that property companies need the elimination of bottlenecks in administrative procedures. Intricate and prolonged administrative procedures often push real estate prices up and put property enterprises in difficult positions, thus causing financial difficulties for home-buyers. In previous years, a housing project only took about seven months to complete administrative procedures but now it takes three to five years or even seven years to finish. Thus, if 50-70% of administrative procedures are cut, each project will take one year to complete procedures and housing prices will certainly be reduced significantly.
Facing lots of obstacles, real estate enterprises are waiting and hope for more preferential policies from the Government but Deputy Minister Nguyen Tran Nam affirmed that the 30 trillion VND credit package aims to assist low-income earners with housing difficulties to have access to preferential loans to buy homes but it is not a rescue package for the real estate market.
The conversion of commercial housing projects into social housing, which are in high demand, is too sluggish because of cautiousness from the banking sector, the low disbursement of loans and the stagnancy of authorised agencies.
Currently, the SBV and the MOC are asking localities to simplify administrative formalities, shorten the approval time of housing projects and speed up project progress to increase the supply of social housing and commercial apartments below 70 sq.m and priced under 15 million VND per sq.m.
In the coming time, the MOC will continue co-ordinating with the SBV, ministries and sectors to accelerate the progress of lending to meet the expectations of the public. At the same time, the MOC suggests the Government do not grant investment licenses to new commercial housing projects and new urban areas projects in 2014 to reduce the pressure on the real estate market.
It is hoped that the implementation of adopted policies as well as policies to be issued in the future will create impetus to disburse the loan package and facilitate the access to this package.-VNA
