HANOI: Buyers and renters of social housing are wary of the high interest rates for loans under the 125 trillion dong package for developing social housing and worker housing projects, the Vietnam Chamber of Commerce and Industry (VCCI) warns.

According to the HCM City Real Estate Association’s (HoREA) report sent to the VCCI, the main concern is high- interest rates for preferential loans under the credit package for social-housing buyers and renters.

The preferential interest rate is 7.5% per year for a five-year loan. In addition, this interest rate is adjusted every six months and after the preferential period, the banks will apply negotiable interest rates that are surely higher than the preferential rate.

The association has proposed that the State Bank of Vietnam include two more groups for the loans from the 125 trillion dong package. They include buyers of commercial housing priced at 3.5 billion dong per unit or less and owners who borrow to build new or renovate/upgrade houses for workers to rent.

Le Hoang Chau, HoREA’s chairman, recommended that the Construction Ministry continue to restore a 110 trillion dong credit package with an interest rate of 4.8%-5% per year and loan term of 25 years that the ministry proposed last year for developing at least one million social-housing units in the 2021-2030 period.

At the same time, in the draft decree on social-housing development and management, it is necessary to increase the profit to 15%, instead of 10% before, for enterprises creating their land funds.

In addition, businesses can also mortgage their social-housing projects when borrowing capital.

At present, investors have to mortgage other assets to borrow loans from the credit package, affecting the building progress of the project, Chau said.

The association has also proposed a reduction of 70% in value added tax and corporate income tax to encourage the development of more social housing projects for lease.

After one year of providing credit from the credit package for social-housing development, the disbursement is still very low at 955 billion dong, according to the State Bank of Vietnam. The disbursements include 415 billion dong for six new projects and 540 million dong for new home buyers in two projects.

Since July 2023, local governments have seen 68 eligible projects taking loans from the programme. Some 28 provinces and cities have seen social, worker housing and apartment renovation projects.

The support package was kicked off in April last year with the aim to provide loans with preferential rates at 1.5%-2% lower than the medium and long-term lending rates to developers of social housing and home buyers, following the government’s resolution on March 11 regarding solutions to remove difficulties and promote the safe, healthy and sustainable development of the real estate market.

Four state-owned commercial banks are involved in the disbursement of the package which will run until 2030. Recently, one more bank was included in the scheme.

Meanwhile, some projects are still encountering legal problems, site clearance and change of land use issues. Those factors have made banks not grant loans.

For home buyers, the regulations on beneficiaries are still complicated, making it difficult for them to get preferential loans.

Tran Ngoc Anh, deputy general-director of construction materials company Viglacera, said regulations for buying social housing are still limiting, causing difficulties in attracting investments for social-housing projects.

 - ANN