The social housing paradox: High demand - low supply, why? – Part 2: "Gold Mine" neglected?

The social housing paradox: High demand - low supply, why? –Part 1: Buying a social house: Like dry fields waiting for water! There are policies, pri

Many difficulties make businesses lack interest in social housing.Source: Internet.

Enterprises ignored

In order to develop social housing, the State has many preferential policies such as exemption from land use fees, land rent, 50% reduction in Value Added Tax and Corporate Income Tax, and support for building technical infrastructure. project technology and credit loans with preferential interest rates, for low-income people, workers, and employees to buy, rent or lease-purchase social housing and encourage businesses to participate in development.

However, according to data from the Ministry of Construction, besides 248 completed projects, there are currently 264 projects continuing to be deployed with a scale of about 216,500 units, a total area of ​​nearly 11 million m2 but most of the 264 projects are delayed or suspended. There are 512 projects that have not been implemented or are undergoing construction investment procedures. In the past few years, the number of completed projects is very few, the supply of social housing has been low and does not meet actual needs. This result is due to the shortcomings and limitations in the law and the limited credit capital for concessional loans, complicated administrative procedures that make businesses not interested in this segment.

Representatives of the Housing Management and Real Estate Market (Ministry of Construction) said that most of the investors of projects with less than 10 hectares of land have chosen the payment method, instead of saving land funds or house funds in social housing project, leading to lack of land funds for social housing investment. At the same time, the regulation that investors of social housing projects must spend 20% of the housing fund in the project for lease, while people only register to buy, not to register, so the fund for rent in the project is left blank, causing damage to the owner, leading to less excitement about this segment.

In addition, due to the lack of preferential credit loans, social housing buyers also have to borrow at commercial interest rates, around 10% per year to buy a house, so they face many difficulties, affecting the project liquidity.

The Phu Lam project of Hai Phat Group (Hanoi) is a typical example. Thousands of apartments of this project since opening for sale at the end of 2016 and early 2017 have been in dire straits because at the same time the VND30,000 billion package ends, people no longer have a preferential credit source to buy a home.

The stagnation of apartments makes this business difficult. At that time, Hai Phat Group had to change direction, find ways to link with banks to support home buyers with loans at the interest rate of 5% per year, the rest of the loan interest, Hai Phat must support customers by itself.

The inadequacy of the profit of the social housing project also makes the investor not interested in this segment. Talking to Customs Newspaper, a representative of a social housing enterprise said there are two main factors that lead to a lack of interestfor businesses, with social housing is profit and the arrangement of 20% apartments for rent.

“All businesses want maximum profits, but the profit in social housing development is low because they are controlled not exceeding 10%, making most businesses uninterested. Not to mention, the regulations require the arrangement of 20% of apartments for rent, so this rate is quite high. The rental is difficult, the rent may not be enough to offset the cost of repairing and renovating the apartment due to damage and deterioration after five years of lease,”said the representative of this enterprise.

Capital is the big bottleneck

In addition to the above shortcomings, capital congestion has been considered the biggest bottleneck for the development of social housing in the past four years, due to the delay in allocating budget capital as a primer to implement housing policies.

This is one of the important reasons why businesses lack interest, but in this period, investors are not allowed to borrow preferential loans from the Social Policy Bank. Many private enterprises have to invest their own capital to implement the project without support from preferential credit, so the results are limited.

In Ho Chi Minh City, there are many private enterprises or individuals actively participating in the development of social housing projects with capital from enterprises, such as Nam Long, Le Thanh, Thu Thiem Investment, ThuanKieu, Van Thai, Thien Phat, Saigon Res, Hoang Quan, PhuCuong, Saigon Real Estate Corporation. Especially, Le Thanh company, Thien Phat company has invested in social housing projects with 100% rental, with private capital; Nam Long Company supports 2% interest rate for two years for apartment buyers in its social housing project.

In April 2017, the National Assembly agreed to add VND2,000 billion to the Bank for Social Policies, of which VND1,260 billion was spent to implement the policy of social housing. But because this capital source is too small, in fact, most beneficiaries of social housing have not had access to concessional loans. Up to now, the Bank for Social Policies has only allocated VND1,163 billion, while the bank's need is more than VND9,000 billion for the 2016-2020 period.

On the other hand, most localities have not allocated funds from the budget to invest in state-owned social housing projects for lease under the Law on Housing and have not used the proceeds from the fund. Up to 20% land in projects of commercial houses, new urban areas for investment in social housing development in accordance with Decree 100/2015/ ND-CP; not interested in supporting investors of social housing projects in allocating funding for construction of technical infrastructure within and outside the project in the area.

At the Annual General Meeting of Shareholders in 2020, the Chairman of the Board of Directors of Hoang Quan Real Estate Joint Stock Company said that the past five years have been the focus of failures in social housing projects by Hoang Quan. Before that, in 2014-2015, Hoang Quan Real Estate almost enjoyed the full benefits from the VND30,000 billion package of the Government. But after the VND30,000 billion credit package ended in 2016, the implementation of this enterprise's social housing projects faced many difficulties.

In addition to businesses lacking interest in social housing due to the lack of preferential loans, the market actually witnessed the paradox of social housing prices as high as commercial houses. For example, the project of social housing in Dai Mo (Nam Tu Liem, Hanoi).

In early 2020, when this project opened for sale, people were surprised when the price announced by the investor reached VND19.5 million / m2, equivalent to many commercial house projects. After that, the price was lowered by the investor to VND17.5 million / m2 (excluding VAT), but still higher than the general price. Thus, it is not only difficult to get loans with preferential interest rates, but the high prices of social houses also makes the ability to pay more and more narrow. Many opinions suggest that, because businesses have to invest their own capital to receive the transfer of land use rights and implement social housing projects without support from preferential credit, the consequence of having to borrow credit using commercial interest rates (around 10% per year), leads to an increase in the cost of social housing.

Obviously, the so-called vicious circle in social housing development has emerged. Therefore, solving concessional loans for social housing is the key, immediate and long-term solution to remove the vicious cycle for this segment.

A positive change is that in April 2020, the Government issued Resolution 41/ NQ-CP, assigned the Ministry of Planning and Investment to allocate VND3,000 billion from the state budget, of which VND1,000 billion was allocated to refinance.

Especially, VND2,000 billion is used to subsidize interest rates, allocated to four banks –Vietcombank, Vietinbank, BIDV, and Agribank – to provide loans to buy social houses. Many opinions said that the Standing Committee of the National Assembly should consider and add the "List of expenditures for implementing social housing policies" to Resolution No. 1023/ NQ-UBTVQH13 to have a budget for implementing social housing policies. On that basis, depending on the condition of the annual state budget, if possible, the Government allocates about VND2 trillion per year to support the refinancing of the Social Policy Bank, or the interest subsidy to four commercial banks appointed by the State Bank to implement social housing policy.