Limit set on interest rates of loans for social housing
This regulation of loan interest rates for social housing is part of the contents put forward for comments by the Ministry of Construction in the draft Decree on social housing development and management, and has attracted a lot of attention from public opinion.
The Ministry of Construction (MOC) is drafting a regulation which stipulates the interest rate of loans for social housing cannot exceed 50 per cent of the average lending interest rate of commercial banks in the same period.
This regulation is among the proposed provisions for public feedback in the MOC's draft Decree on social housing development and management, attracting attention from the public.
Passed by the National Assembly in November 2023, the Housing Law has 13 chapters, including one chapter (Chapter VI) regulating social housing policies. The Prime Minister has assigned the Ministry of Construction to preside over and coordinate with ministries, branches and localities to develop a draft Decree regulating social housing development and management.
Based on the programmes and plans for social housing development in each period approved by competent authorities, the State Budget will provide interest rate compensation to credit institutions designated by the State to lend to subjects participating in investment in social housing construction and provide preferential loans to beneficiaries of social housing support policies.
In addition, the Government will also use ODA loans and foreign concessional loans to re-lend to designated credit institutions for commune housing loans according to regulations.
The State's preferential loan support will be through the Bank for Social Policies or credit institutions designated by the State to purchase, lease-purchase social housing, housing for the People's Armed forces or self-build or renovate and repair houses (Clause 5, Article 77), or borrow preferential loans through the Bank for Social Policies to develop social housing (Clause 4, Article 117).
Preferential loan capital through the Bank for Social Policies will be based on the annual plan approved by competent authorities. The State Budget will provide 100 per cent of the capital for the Bank for Social Policies to carry out lending for beneficiaries according to regulations.
Based on the annual plan approved by competent authorities, the State Budget will allocate 50 per cent of the capital. The Bank for Social Policies meets 50 per cent of capital from borrowers' savings deposits and mobilised capital. The State budget will compensate the difference in interest rates and management fees for the Bank for Social Policies according to regulations to lend to specified subjects.
According to Cấn Văn Lực, chief economist of BIDV Bank, the Government needs to set up a social housing development fund to have sustainable and truly preferential interest rates, more suitable to the needs of home buyers and social housing developers and businesses renovating old apartments.
“Loan interest rates from social housing development funds are normally half the average commercial loan interest rate on the market, which is appropriate. This fund should be mobilised from many different resources and budget capital will act as bait capital, which some countries such as Korea and Singapore have done,” said Lực.
Sharing the same opinion, Lê Hoàng Châu, Chairman of Hồ Chí Minh City Real Estate Association, also said that preferential credit packages for social housing often have low-interest rates for investors, buyers and renters, and 50 per cent of the commercial loan interest rate is a reasonable level. For example, the current preferential interest rate is 4.8-5 per cent per year and this preferential interest rate is determined annually.
“Therefore, if there is a supply of social housing, buyers and renters of social housing will certainly expect and choose this preferential loan level to buy or rent social housing. Currently, low-income people in urban areas are looking forward to preferential credit policies on social housing and enough supply to meet demand,” said Châu. — VNS
