Soft loans for social housing

The Prime Minister has issued Decision 486 authorizing the Vietnam Bank for Social Policies (VBSP) to offer a preferential lending rate of 4.8% per year to loans for buying and lease purchase of social homes and building or repairing houses.

Earlier, the Government has approved a credit program worth VND120 trillion for developing at least one million homes for the poor and workers in 2021-2030. The credit package is also meant for the renovation and construction of aging apartment buildings, available for borrowers from the beginning of April. However, it is unattractive to average income earners as its 8.2% interest rate is preventively high for them.

Though the interest rate is 1.5-2 percentage points lower than that for mid and long-term commercial loans, it may change every six months depending on commercial loan rate movements. Therefore, homebuyers may face risks if commercial loan rates edge up. Moreover, the duration of such an interest rate is five years maximum, after this period, lenders and homebuyers would have to negotiate a new interest rate. This is the main reason for residents’ reluctance to borrow, according to the HCMC Real Estate Association (HoREA).

The association has proposed the Government study a credit package worth around VND110 trillion (US$4.6 billion) in the form of financing for commercial banks to refinance social housing projects and housing projects for workers with a preferential interest rate of 4.8-5% per year for a maximum period of 25 years.