|A residential area for workers in Dong Anh District, Ha Noi. Property investors prefer apartments for sale over rental housing, despite the huge demand for the latter, particularly among low-income earners in urban areas. — VNA/VNS Photo Tuan Anh
HA NOI (VNS)— The Ministry of Construction has asked the Prime Minister to approve a pilot programme to convert commercial housing projects into social rental housing.
Since the Law on Housing took effect in 2006, developers have been encouraged to focus on housing for low-income earners, according to Deputy Minister Nguyen Tran Nam.
However, there were no specific incentives to invest in rental housing, despite the huge demand – particularly among low- income earners in urban areas, who could not afford to buy homes.
Real estate companies preferred to focus on houses for sale because rental properties had lower investment efficiency and it took a longer time for capital to return to the investor, Nam said.
As a result, most rental housing, such as dormitories for university students and workers at industrial zones, is funded by the State.
Rental housing makes up 6.3 per cent of total housing across the country, according to the ministry. In Ha Noi, 14 per cent of housing is for rent and in HCM City that figure has reached 19 per cent, while in other cities it hovers around five per cent.
A national housing strategy approved in 2011 aims to raise the proportion of rental housing to 20 per cent by 2015 and 30 per cent by 2020.
The conversion of commercial houses for sale into social houses for rent would help meet the demand for rental housing and warm up Viet Nam's gloomy real estate market, where there is a high inventory of commercial housing, deputy minister Nam said.
Under the ministry's proposal, low-income earners will get bank loans worth 80 per cent of the rental housing contract if they pay the whole rental in full or loans worth 50 per cent of the rental contract if they pay monthly.
They will also be offered preferential loans to buy the houses if investors decide to sell them. Investors of rental housing projects for workers in industrial zones will be exempted from land use fees. Investors of such projects in urban areas can pay land lease fees yearly instead of paying them in full at the beginning of the lease.
Moreover, they will see a reduction in corporate taxes from 25 per cent of revenue generated from renting activities to 10 per cent and get preferential bank loans worth up to 70 per cent of the project value.
The Construction Ministry has selected five commercial housing projects for the pilot programme.
The projects are Bee Home 1 and 2 in HCM City's Tan Binh and Go Vap districts (CT Group), housing for workers in northern Bac Ninh Province's Tien Son and Yen Phong Industrial Zones (Viglacera) and housing for workers and Binh Minh Trade Centre in southern Vinh Long Province (Hoang Quan Consulting). The ministry proposed that the maximum rent for workers in industrial zones should be VND35,000 per square metre per month. This means that if four workers shared a 40sq. m apartment, each would pay about VND350,000 (US$16).
The rent for low-income households in urban areas would be VND65,000 per sq. m per month because investors still have to pay land use and land lease fees.
Vice chairman of Viet Nam Real Estate Association Nguyen Ngoc Thanh said that converting commercial housing projects to social housing and houses for sale to houses for rent was a smart move that would offer low-income earners more choices in accommodations.
For a long time, the demand for low-income rental housing was satisfied by individual homeowners renting out space, particularly around universities and industrial zones. But Thanh noted that almost all such houses failed to meet national housing standards, often creating slum areas where living conditions were poor.
"Rental projects planned by capable investors would provide better living standards for low-income earners," Thanh said.
However, he wondered about the feasibility of imposing a ceiling rent. In State-funded projects, the Government could impose a maximum rent, but in commercial projects, Thanh said, "the market and quality of the products" should "decide their prices".
Tran Quang Hanh, 28, an office employee from northern Thai Binh Province, has been a renter in Ha Noi for eight years – since he was a student.
"I shared a 15sq. m room in a garret with two friends. Each of us paid around VND600,000 for housing each month," he said, noting that it was in the suburban district of Thanh Tri where things were not too expensive.
He said he and his roommates usually rented from individual homeowners instead of companies or housing brokers.
"I don't expect to access social housing projects because of the complicated procedures," he said.
Housing projects to undergo impact reports
The conversion of commercial housing projects into houses for low-income earners will be publicised, director of the Ha Noi Department of Construction Nguyen The Hung said.
Responding to concern that the conversion could overload urban infrastructure, Hung said that before granting conversion licences to the projects, officials of the department and the Planning and Architecture Department would review the project planning, ensuring safety and convenience for residents.
The city People's Committee has permitted three commercial projects to be converted into low-income projects to reduce the stockpile in the real estate market. These include the Trung Van housing area in Tu Liem District, the 35-floor building in Song Da, the urban area in Ha Dong District and the AZ Thang Long Ha Noi residential complexes.
After being converted, each apartment will have an area between 40 and 70 square metres and be sold for VND15 million (US$714) per square metre. — VNS