Hanoi (VNA)💦 – After four months of implementing a 120 trillion VND (5.11 billion USD) credit package for investors and buyers of social homes, only 95 billion VND was disbursed, and 950 billion VND was committed for lending.

Experts said the progress was much slower than expectations due to complicated legal procedures and high lending rates.

Slow disbursement due to high lending rates

Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), said the 120 trillion VND credit package is not a preferential credit package for social housing. A preferential credit package to truly support social housing must ensure two criteria. First, the interest rates for investors, buyers and tenants-buyers of social houses are usually set at 50% of the interest rates of commercial loans. The preferential interest rates should be 4.8%-5% at present and defined annually. Second, the maturity must be long as per the Government’s Decree 49/2021/ND-CP, the maximum preferential borrowing period for buyers and tenants-buyers of social houses is 25 years and for investors is 5 years. Meanwhile, the State Bank of Vietnam (SBV) set the interest rate for buyers and tenants-buyers at 8.2% per year, which is unaffordable, Chau said.

Reasonable interest rates

Dr Nguyen Tri Hieu, a banking expert, said that the 120 trillion VND credit package is unfeasible as the lending rate of 8.2% is too high for low-income earners. Moreover, after five years, the lending rate will be negotiated between banks and customers, putting workers at risk of even higher rates. Therefore, Hieu said that support from the state budget is required to lower costs for those that need this sort of help. Regarding the implementation, he said this credit package should be applied in the same way as a 30 trillion VND housing credit package carried out in the 2013-2017 period. Accordingly, the lending rate must be fixed at around 6% per annum over 15 years. At the beginning of August, 10 provinces sent their lists of projects for access to the 120 trillion VND credit package. The 26 projects need a total of 12.8 trillion VND in loans. Accordingly, the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) already signed a credit contract to sponsor a social housing project in the northern province of Phu Tho, with a committed sum of 95 billion VND. The bank has disbursed 20.5 billion VND. The Vietnam Bank for Agricultural and Rural Development (Agribank) has also agreed to fund a project with a committed amount of 950 billion VND. The sum is expected to be disbursed in the third quarter of 2023. Other commercial banks have taken the initiative to access other projects on the lists for preferential loans. The social housing project began with Resolution 33/NQ-CP, under which the Government assigned the SBV to implement a credit package for developing homes for the poor and factory workers. The project specifications also included projects that center around renovating or re-building aging apartment blocks. The SBV was tasked with directing commercial banks, mainly Agribank, BIDV, Vietcombank and VietinBank, to make loans available for investors and buyers of social housing and renovation and construction of old apartment buildings. The credit package will offer soft loans at interest rates lower than normal market levels, which would be 1.5-2 percentage points lower than the average mid- and long-term interest rates of state-owned commercial banks. The credit package, equal to 12% of capital demand, hopes to build at least one million homes for the poor and factory workers from 2021 to 2030. The above package is part of solutions given by the Government to remove hindrances and boost the safe, healthy and sustainable development of the realty market. The project targets around 428,000 apartment units completed in the 2021-2025 period and another 634,200 in 2025-2030./.