This capital, according to the Ho Chi Minh City Real Estate Association (HoREA), should be used to assist enterprises that are experiencing hardships but have the potential to be rehabilitated.

HoREA stated in a document sent to the Prime Minister, the Ministry of Construction (MoC), and the State Bank of Vietnam (SBV) on June 6 that social housing (SH) buyers remain apathetic about the $5 billion credit package due to the initiative's excessive interest rates, at up to 8.2 per cent per year.

In addition, HoREA observed that the Vietnam Bank for Social Policies (VBSP) had nearly $468 million available to lend for the purchase or lease-purchase of SH due to a shortage of supply.

HoREA stated in a document, "With capital of $468 million and an average loan rate of $25,550 per unit, the VBSP can lend approximately 18,000 individuals money to purchase SH. If there is a supply of SH, purchasers and tenants will opt for a preferential loan from the VBSP at 4.8 per cent per year, so the $5 billion credit package may remain unused."

However, this preferential loan interest rate is valid for only five years. After that period, the commercial bank and the vendor will have to come to terms with the loan's interest rate, which will typically be increased. This makes homebuyers nervous and unwilling to borrow money.

As for the investors, they have not finalised contracts yet since there are no fresh initiatives and many projects are either stalled or mired in legal procedures. In fact, the fund is anticipated to be disbursed between 2023 and 2030, but after nearly two months of implementation, the SBV reported that there have been no loans issued.

To increase the efficiency of these capital sources, HoREA advised the SBV to report to the Prime Minister on the possibility of allocating a portion of a $5 billion credit package and a $1.7 billion package of 2 per cent interest rate assistance to support enterprises that are currently experiencing difficulties but have healthy long-term prospects.

In addition, HoREA recommended that the MoC keep submitting to the government and the Standing Committee of the National Assembly the proposal of a preferential credit package totalling $4.68 billion under the refinancing mechanism, with interest rate compensation from the state budget.

This decision will contribute roughly 30 per cent of the capital required to implement the development initiative for 1 million SH residences between 2021 and 2030. Based on the past experience of a $1.28 billion preferential credit package, commercial financial institutions that are engaged in compensation can mobilise significant capital and receive substantial benefits.

Vietnam Investment Review