Ministry mulls incentives for developing low-income housing

The proposal it sent o­n January 15 envisages repealing land use/lease charges for developers investing in public housing and allowing them to build 50 percent more o­n a square meter of land.

Vietnam does not technically allow land ownership but grants land-use rights, which confer the same rights as freehold property.

The proposal also seeks to scrap value-added tax o­n low-income housing and lower corporate income tax for developers to 10 percent.

From January 1 this year, the corporate tax is 25 percent, down from 28 percent earlier.

But in return, the proposal requires new urban areas and commercial housing projects o­n five hectares or more to set aside at least 10 percent of the constructed area for low-cost housing.

The ministry also sought approval to allow it, the Ministry of Finance, and other agencies to “study setting up a low-income housing development fund” to provide soft loans to investors and buyers.

All employees would have to deposit 3-5 percent of their monthly salary in the fund, the ministry said in the proposal. Buyers of the cheap houses would get loans while others would get back their principals with interest upon retirement, it added.

Ministry loan plan not viable

Earlier, businesses said a Ministry of Construction draft plan to encourage developers to invest in public housing by offering them soft loans could be stymied by the stringent conditions attached to the loans.

Under the plan, o­nly companies whose low-income housing projects have already been ratified, completed site clearance, or have invested in infrastructure would be eligible for the loans.

It caps prices for social housing – at VND10 million (US$572) per square meter in special urban areas and VND7 million in other urban areas.

Property developers, who have been eyeing public housing after finding it hard to sell luxury property following the real estate slump, said such tough conditions limit their opportunities to get loans while the low prices would hit profits.

Luong Tri Thin, chairman of the Dat Xanh Real Estate Service and Construction Corporation, said with the price ceiling, public housing investors may be unable to make profits.

As for the loan proposal, there are two different suggestions. The Ministry of Planning and Investment wants the government to provide VND717 billion ($41.2 million) in two-year loans.

The developers and commercial banks will put up the remaining money.

But under this plan, buyers have to pay up for their houses when they take delivery.

The Ministry of Construction and the Bank for Investment and Development of Vietnam said this proposal was not workable since low-income earners cannot make a o­netime payment.

Instead, they suggested a repayment period of 10 years – and 15 if the developers rent out houses to workers and students.

The demand for low-cost housing is very high in places like Hanoi, Ho Chi Minh City, Binh Duong and Dong Nai provinces but very few projects have come up.

Up to 20 percent of families living in urban areas have difficulty finding accommodation, according to the Ministry of Construction.

Red tape

Deputy Minister of Construction Nguyen Tran Nam admitted that public housing investors have to go through an administrative process of 33 steps involving land, national security, construction, fire prevention and others.

He said his ministry has submitted a proposal to simplify the process and expects the government to approve it in the first quarter this year.

Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association, said the Housing Law’s stipulations that social housing blocks in Hanoi and HCMC must not be more than five or six floors high and that each unit must be 30 to 60 square meters are “outdated.”

He added that his association has asked the Ministry of Construction to modify them, pointing out it is wasteful to restrict the number of floors since land prices are high in the two cities.

Out of reach

At the current price of VND400-500 million ($22,900-28,700), public housing is out of reach for low-income earners in HCMC.

Van Duong Thanh, a government worker in Binh Tan District, said, “I hope to buy a VND500 million apartment but have o­nly VND180 million.

“If I borrow from the HCMC housing development fund, I have to pay nearly VND2.5 million a month in principal and interest. My monthly salary is o­nly VND2 million.”

Borrowers cannot get more than VND300 million and the maximum repayment period is 15 years.

Vu Minh Hong, director of Hong Ha Real Estate Company, said since a 40- square meter apartment costs not less than VND400 million, low-income people can afford to buy o­ne o­nly if they get loans for more than 20 years at less than 5 percent interest, meaning they have to pay o­nly VND1.5-2 million a month.