Investors uninterested in social housing in HCMC

Twenty percent of young households in Ho Chi Minh City are in need of apartments or houses priced less than VND1 billion (US$45,000) each. However, only few social housing projects have been implemented because of unattractive mechanisms to investors.

Nearly completed HQC Plaza social housing project in An Phu Tay commune, Binh Chanh district, HCMC (Photo: SGGP)

After the Government issued a decree on social housing development program early 2013, it caused a movement of changing commercial housing projects into social type ones by investors. Transport Engineering Construction and Business Investment Company 584 even registered to convert all of its eight projects into social housing.
However, the number of social housing projects has gone gradually for recent years.

Only few have been implemented such as HQC Plaza in An Phu Tay commune, Binh Chanh district invested by Hoang Quan Company. The project is nearly completed with 1,750 apartments priced at VND14.5 million (US$ 700) per square meter.

The project of Thu Thiem Investment Company has 304 apartments of 40-60 square meter flats in Thao Dien ward, District 2.
Two other property developers Tan Binh Real Estate Company and Quoc Cuong Gia Lai have got loans from the VND30 trillion (US$1.34 billion) credit package to carry out their projects.

The package has been disbursed inconsiderably with 26 percent nationwide. It is only 10 percent in HCMC.

HCMC has planned to sell 3,000 apartments under social housing projects. However, only four projects have been opened for sale with 376 apartments in Districts 6, 8, Go Vap and Tan Binh.
According to the HCMC Real Estate Association, the social housing development program has been unattractive with complicated mechanisms for change of commercial housing projects into social.
For bank loans, investors must get many signatures from provincial people’s committees to the Ministry of Construction, the State Bank of Vietnam and commercial banks. House buyers have met with difficulties in proving their income level to get assistances from the credit package.
Moreover, investors have faced with land price escalation. Investor of a project in Thao Dien ward bought 1,900 square meters at only VND2.5 million per one square meter in 2004.
However, the price now increases to VND12 million per one square meter in the land price list ruled by the city People Committee and up to VND20 million at market price. This has raised difficulties in calculating apartment price as it will be unfavorable to the investor if calculations base on the old price of VND2.5 million.
Chairman of the association Le Hoang Chau said that the Government should focus on two types of social housing including house for rent and hire-purchase because of limited budget.

The build-then-sell type should have own mechanisms to lure local and international investors.
At present, many commercial housing projects have the price of less than VND15 million per square meter.
If the Government assists investors in VAT and business income taxes and land use fee, the price will reduce to suit low income households, he said, adding that should be considered as a social housing type under PPP (Public Private Partnership) model.

By Luong Thien – Translated by Hai Mien

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