Social housing is expected to get more expensive soon as investors have not received preferential interest rates for loans, experts have said.

The Ministry of Construction has allowed investors to factor in the normal interest rate of loans into selling prices, which may cause prices to exceed those of commercial housing projects, reported Tien phong (Vanguard) newspaper.

According to regulations on social housing policies issued in 2011, enterprises that develop social housing projects are exempt from land use tax and enjoy preferential interest rates for loans for the projects.

Then in 2013, the State provided a credit package of VND30 trillion (US$1.32 billion) to loan 70 per cent of credit for apartment buyers and 30 per cent for investors of the projects at low interest rates, the moves which stimulated the social housing market..

With those policies, social housing projects were sold at VND10 million per sq.m.

After the package ended on June 30, 2016, the Government announced a policy of preferential interest rates for investors of social housing projects.

Under this policy, enterprises can take State loans from the Social Policy Bank or credit organisations designated by the State. However, this policy has yet to be implemented.

Therefore, Binh Tan Consumer Goods Production Co, Ltd has asked the Ministry of Construction for support as the company has borrowed capital from banks at interest rates of 6.9 per cent for the first year and 9-10 per cent per year from the second year to complete its social housing projects after the VND30 trillion package ended.

With the high interest rate, the company could not continue developing the project and sell apartments at low prices.

However, the ministry replied that investors who used commercial loans could factor the high interest rate into the selling and rental price of apartments.

Thus, apartments in social housing projects can now be sold at commercial prices, leading to prices in projects like Tam Trinh and Rice City Song Hong in Ha Noi to increase to more than VND15 million per sq.m.

Nguyen Chi Dung, deputy director of Ha Noi Construction Department, said there is no ceiling price for social housing apartments, though legally investor’s profits from a social housing project can not exceed 10 per cent of total investment in the project.

However, social housing projects have enjoyed many incentives so the selling price has often been lower than in commercial housing projects with similar levels of investment, Dung said.

Investors of social housing projects have proposed ceiling prices for the projects and are waiting on approval from city authorities, he said.

Tran Ngoc Hung, chairman of the Viet Nam Construction Association, said the State should encourage enterprises to build cheap, small apartments without tax incentives, and instead convert tax revenue paid by investors in the projects to a fund for poor buyers. The State can then offer loans from the fund at low interest rates, even zero interest in the first year and 1-2 per cent from the second year.

The State should let enterprises compete according to market rules, Hung said. All tax revenue paid by investors’ projects should be converted into loans for buyers that need social housing instead of being used to support firms that build the houses.

According to a Ministry of Construction report, the Ministry of Planning and Investment is building a plan to allocate funds from the Bank for Social Policies to provide loans for buying social houses.

Meanwhile, the Construction Ministry has asked the bank to create favourable conditions for low-income people and labourers in industrial zones to take loans as soon as possible. — VNS