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Low-cost housing, ignored for long, expected to make a return this year

Update: April, 18/2022 - 08:19

 

A low-income house building in Hà Nội. — Photo tienphong.vn 

 Compiled by Thiên Lý

Hưng Thịnh Group has said that from this year it will collaborate with Đồng Tâm Group and Trường Thành Furniture Corporation to develop affordable housing in several provinces and cities, including HCM City and Long An, Bình Dương and Đồng Nai.

The joint venture will build quality houses and sell them at prices affordable to low-and medium-income people.

A spokesperson for Hưng Thịnh said the projects would supply 100,000 apartments to the HCM City market at an average price of around VNĐ25 million per square metre, while in other localities they would cost VNĐ20 million.

A joint venture between the Nam Long Group and Japan's Nishi Nippon Railroad is also developing a low-cost housing project in Long An Province, Ehome Southgate, that will provide the market with around 1,400 apartments this year.

Another real estate developer, APEC, recently set up a subsidiary (Happy City) with a legal capital of VNĐ10 trillion (US$434.2 million) that will be involved in the social housing segment.

It targets building 10 million affordable houses for 40 million people in 2021-2030.

In the first phase in 2021-25 it will build four million apartments mainly in the countries' two biggest cities, Hà Nội and HCM City.

Several real estate insiders say the low-cost and social housing markets are likely to start booming this year.

They say the big players’ return to the low-cost housing market is great news for millions of people since it means many of them will be able to access affordable housing.

It will also help make the real estate market more vibrant and healthier, especially the apartment segment.

A serious shortage of low-cost housing has plagued all localities nation-wide for a long time, which has resulted in a steady increase in housing prices and pushing low- and medium-income earners out of the housing market.

Slow development

Statistics from the Ministry of Construction show there were a total of 1,040 social housing projects in the country last year, including 507 built independently and the rest on the 20 per cent of land commercial housing projects and urban areas designated for social housing.

Of them 248 with 103,500 apartments are complete, 264 with 216,500 units are under construction and the rest have not started construction or are completing investment procedures.

The ministry said the 5.1 million square metres of completed social housing would only meet 41.1 per cent of the target set in the national housing development strategy for 2020 with a vision to 2030. Under it, the Government had planned to develop 12.5 million square metres by 2020.

It also said that the number of low-cost housing projects in Hà Nội with average prices of VNĐ25 million was really small in 2021 and mostly located very far from downtown and with poor infrastructure. Meanwhile, HCM City did not have even one such development.

Analysts said lack of funding had been one of the biggest hurdles to implementing the social housing development strategy.

It was estimated that it required around VNĐ9 trillion (US$391.3 million) to be accomplished, but only VNĐ2.16 trillion, or 20 per cent, was provided by the Việt Nam Bank for Social Policies.

A lack of unencumbered lands had also been a dampener, they said.

Only some localities had been ready to hand over such lands to developers. Consequently, several companies said they found it very difficult and costly to clear lands and they also had to cope with social and technical infrastructure limitations in the allocated areas.

All this meant their profits from these projects were low. 

Thus the question is why they want to return now to the low-cost and social housing segments they have ignored for a long time?

Analysts say the most important reason for this is the Government's determination to resolve the difficulties faced in developing social housing and housing for low- and medium-income people as several new recent policies and measures indicate.

The Government has issued several policies to encourage the development of low-cost housing and help low-and medium-income earners buy housing, which included the VNĐ30 trillion (US$1.4 billion) housing package in 2016 for low-income home buyers at preferential loans, waiver of or reduction in land-use right fees and land rentals for social housing developers and preferential credit interest rates for developers and buyers. 

A decree superseding Decree No.100/2015/Ng9-CP passed in April last year cut VAT and corporate income tax by 70 per cent for developers of social housing for rent.

It also includes new regulations on the land at commercial housing projects, urban areas and industrial zones that must be set aside for social housing, fixing it at a minimum of 20 per cent.

Prime Minister Nguyễn Xuân Phúc has instructed the Việt Nam Bank for Social Policies to lend at 4.5 per cent to people buying social housing from January 1, 2022. The decision has taken effect from April 1, 2021 to January 1, 2023.

Analysts have pointed out however that these preferential policies have proven inadequate for driving the development of housing for low- and medium-income people.

Recognising this, in January this year the National Assembly approved the Government’s socio-economic recovery programme worth nearly VNĐ350 trillion (approximately US$15 billion) over the next two years, which is expected to have direct and indirect impacts on the development of social housing.

It is expected to increase demand since more low-and medium-income earners can borrow money at low interest rates to buy houses thanks to this programme.

Some VNĐ1 trillion from the package will be provided to the Việt Nam Bank for Social Policies and VNĐ2 trillion to the four commercial banks that have been assigned to lend.

Another conducive factor for the affordable housing segment this year is the construction ministry’s recent commitments to speed up construction, especially of social housing.

It has called on city and provincial administrations to quickly approve housing development plans that are in line with the national housing development strategy with investment priority given to low-cost and social housing and to restoration and rebuilding of old buildings.

HCM City, the country’s economic hub, plans to build one million units of affordable housing to push ahead with its social housing development programmes.

To achieve this target, the city has outlined 11 plans to promote the social housing development programmes.

One of them is to use vacant land plots in industrial parks and export processing zones to build affordable accommodation for workers.

The city has already implemented a number of social housing projects for workers at the Linh Trung I and II and Tân Thuận export processing zones, Tân Tạo Industrial Park and several new industrial zones.

According to data from the municipal Department of Construction, since the end of 2019 the city has implemented 15 housing projects for workers on an area of 47 ha.

A department official said in 2022 the focus would be on resolving the obstacles faced by 18 affordable housing projects with a total number of 14,000 apartments to ensure they would be completed on schedule.

He said the city was considering several mechanisms and measures to encourage enterprises to invest in the development of affordable houses for low-income earners, including workers, people living along canals and those affected by projects to rebuild old buildings. VNS

 

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