The Government began disbursing a VND30 trillion (US$1.43 billion) property market support package this month with the aim of assisting home builders in reducing inventories. A preferential interest rate of six per cent for people with low-incomes has also been implemented.

However, some people have expressed doubts over the practical effects of the package.

Former Governor of the State Bank of Viet, Cao Sy Kiem, talked to the Voice of Viet Nam (VOV) about the matter.

Why do low-income earners still face difficulties buying homes despite the Government introducing policies to develop social housing?

Cao Sy Kiem. ― Photo cafef.vn

It's because some important procedures have not been completed. Some banks say they haven't received detailed guidance from their head offices, the State Bank of Viet Nam or the Ministry of Construction.

There is a lack of agreement among the ministry, the central bank and some commercial banks on the payment methods to be applied for these homebuyers.

It is also important to point out that very few affordable houses for people earning a low-income are available at present. Many homes need to be upgraded, but there is not enough money to do this at the moment. Large cheap housing projects under construction will not be completed for at least two more years.

It will remain difficult for people to manage a social house if these problems aren't solved.

Will the VND30 trillion package be able to save real estate companies in this frozen property market?

This support is only a channel to help property firms overcome some of their difficulties. It is not a remedy to save them. Statistics show that the value of real estate inventory has grown to hundreds of trillions of dong, so VND30 trillion is insignificant.

In my opinion, the package can only save companies that currently have mortgages, allowing them to continue borrowing bank loans and building new houses to turn over their assets. It will be of no help to firms that can do nothing with their assets.

A local tenement complex for low-income people. Procedure and finance improvement is needed to boost social house trading. ― Photo vietnamnet.vn

Many property companies don't have money to pay back their debts to banks due to large inventories, resulting in an increasing number of bad debts in the economy. What is the root of the problem?

Now property bad debts are lying in high- and medium-end assets including villas and high-storey buildings with prices hitting tens of millions of dong per square metre. It's very hard to convert these developments into low-end houses, which are priced below VND14 million ($665) per square metre.

To make such conversions feasible, firms need more capital to transform and divide the assets into smaller properties. However, businesses currently find managing additional finance extremely tough.

If real estate companies continue to struggle then the bad debt situation will carry on. What is the key to solving this problem?

Enterprises must actively seek ways to sell properties to cover their debts. They can offer discounts or allow customers to pay in installments over a few years.

The State Bank is building policies to establish the Viet Nam Asset Management Company (VAMC), which will be responsible for recovering non-performing loans when it is operational. If a firm can't sell its properties, the VAMC will seize and sell them to domestic and international investors. This will help solve bad debts in the real estate sector. ― VNS