Limit set on interest rates on loans for social housing
HANOI: The Construction Ministry (MoC) is drafting a regulation which stipulates the interest rate on loans for social housing cannot exceed 50% 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 MoC to preside over and coordinate with ministries, branches and local governments to develop a draft decree regulating social-housing development and management.

Based on the programmes and plans for social housing in each period approved by relevant authorities, the state budget will provide interest rate compensation to credit institutions designated by the state to lend to subjects participating in investment in constructing social housing and provide preferential loans to beneficiaries of social-housing support policies.

In addition, the government will also use official development assistance 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 social housing, housing for the People’s Armed forces or self-build or renovate and repair houses, or borrow preferential loans through the Bank for Social Policies to develop social housing.

Preferential loan capital through the Bank for Social Policies will be based on the annual plan approved by the relevant authorities.

The state budget will provide 100% 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 the relevant authorities, the state budget will allocate 50% of the capital. The Bank for Social Policies meets 50% of capital from borrowers’ savings deposits and mobilised capital. The state budget will compensate for the difference in interest rates and management fees for the Bank for Social Policies according to regulations to lend to specified subjects.

According to Can Van Luc, 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 South Korea and Singapore have done,” said Luc.

Sharing the same opinion, Le Hoang Chau, chairman of Ho 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% of the commercial loan rate is a reasonable level.

For example, the current preferential interest rate is 4.8%-5% a year and this preferential interest rate is determined annually. — Viet Nam News/ANN
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The Construction Ministry (MoC) is drafting a regulation which stipulates the interest rate on loans for social housing cannot exceed 50% of the average lending interest rate of commercial banks in the same period.