What interest rate is suitable for social housing loans?

At the Conference on Overcoming Difficulties and Promoting Social Housing Development recently held, Mr. Ho Hung Anh - Chairman of Vietnam Technological and Commercial Joint Stock Bank (Techcombank) said that to develop social housing, there must be harmony among the state, enterprises, and people. Enterprises must also proactively support their employees.

"Currently, Techcombank has been working with some enterprises. They are very proactive in supporting employees with interest rates. Some industrial zone enterprises proactively offer their land funds to build social housing," Mr. Hung Anh said.

The Chairman of Techcombank also mentioned that the bank has submitted a plan to the State Bank of Vietnam proposing to create a common mechanism for commercial banks to participate. "We propose a package of about 30,000 billion VND for loans with a fixed interest rate of 4.8% for 5 years, similar to the Social Policy Bank; we propose the State Bank to consider credit frameworks, interest rate policy compensation, and risks. Clearly, this segment is a risky one. This is one of the reasons why banks hesitate to lend," Mr. Hung Anh said.

In this way, Techcombank will be responsible for the risks related to lending to customers as with normal customers, not subject to conditions for social housing loans.

Regarding the term, Mr. Hung Anh also shared that the bank is willing to lend for 20 - 30 years depending on the repayment capacity of customers and investors.

Currently, homebuyers have options to borrow for social housing purchases, as stipulated in Decree No. 100/2015/ND-CP of the Government. The interest rate for loans from the Social Policy Bank for housing purchases in 2024 is 4.8% per year. Or borrow at 7.5% interest rate from commercial banks under the 120,000 billion VND program, as regulated by Resolution 33/NQ-CP.

However, many opinions suggest that since the State Bank has regulated deposit interest rates to around 6%, the interest rate of the 120,000 billion VND credit package should also be reduced accordingly.

According to observations from DDDN, on March 19, the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) issued a new interest rate table, adjusting all terms, reducing by 0.1–0.3 percentage points. Accordingly, the interest rate for savings deposits with a term of 12–18 months decreased by 0.1 percentage point, from 4.8% per year to 4.7% per year.

In the past week, many banks have had multiple adjustments to savings interest rates. At Agribank, the bank's interest rate for 1-2 month terms is only 1.6% per year, for 3 - 5 month terms, it is only 1.9% per year, and for 12 - 18 month terms, it is only 4.7% per year. Meanwhile, at ACB, the 12-month term decreased by 0.1 percentage point, down to 4.7% per year for deposits under 200 million VND.

PGBank also officially adjusted the savings interest rate by 0.1-0.3 percentage points for terms ranging from 1-18 months. Accordingly, the interest rate for PGBank savings decreased by 0.3 percentage points for terms of 1-3 months: 2.6% (1 month), 2.7% (2 months), and 3% per year (3 months). Previously, MBBank also announced a new interest rate table. Accordingly, the bank reduced by 0.1-0.2 percentage points for deposit terms from 1-36 months.

According to the perspective of Mr. Nguyen Duy Phuong, Director of Investment at DG Capital, if it's preferential lending for the purpose of supporting low-income people to buy social housing, it should be maintained at a level lower than or equal to the deposit interest rates of banks. A preferential loan interest rate of up to 7.5% per year is not substantial. The average deposit interest rate of people at commercial banks is currently about 4% per year, so it's unreasonable for low-income individuals to borrow to buy houses with a preferential loan interest rate of 7.5% per year.

"The preferential loan interest rate for social housing buyers from the 120,000 billion VND package should be maintained at around 5% per year. This interest rate level also needs to be maintained stable for a long time to support the people," Mr. Phuong suggested.

According to Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), the 120,000 billion VND credit package stipulates that the interest rate of this package, lower by 1.5-2% than normal commercial loans, has supported buyers and tenants of social housing and investors to some extent, but it is "not actually preferential credit" because it is still higher than the previous social housing loan rates. The preferential period is also short (5 years) and the interest rate is adjusted every 6 months, causing uncertainty for borrowers.

The unit recommended that the Ministry of Construction propose the 110,000 billion VND package again, with an interest rate of 4.8-5% per year for social housing development. This 110,000 billion VND package was previously proposed by the Ministry of Construction to the Government and the National Assembly in February 2023. In which, the preferential interest rate for social housing loans is 4.8-5% per year applied for 2023 and the maximum loan term is 25 years (similar to the previous 30,000 billion VND package). At the same time, about 50% of this package will be allocated to developers of social housing projects, social housing loans; the remaining is for buyers, tenants of social housing, and workers' housing.

The initial idea was that this package would be funded from capital restructuring, provided to commercial banks for lending, but later, the Ministry of Construction stated that it did not propose this option.