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However, in 2016, this program has not been implemented yet, and there are not many positive signs this year. Meanwhile, due to the implementation of credit policies under Decree 100/2015 on development and management of the social housing, the draft of the mechanisms of interest rate subsidies released by the Ministry of Finance is still controversial.
In June 2016, the Prime Minister signed the Decision 1013 on interest rates for social housing loans provided by VBSP in accordance with the Decree 100. In particular, VBPS preferential interest rates for those beneficiaries stipulated in the Decree will be 4.8% per year, and the overdue debt rate is equal to 130% of the lending interest rate. This decision is valid by the end of 2016 and applies to all outstanding loans in 2016. Accordingly, in addition to the $1.32 billion package, low-income workers have the option of loans with interest rates lower than 0.2% per year. However, this program is not implemented in 2016 because there is no loan capital.
In February 2017, VBSP announced that it had developed a capital plan, of which $43 million was proposed in 2017. This loan package is for employees who are not subject to income tax, defense workers, armed forces, the urban poor. In order to lend, the bank will coordinate with local authorities and socio-political organizations to receive applications, comments and marks to select borrowers, then carry out loan procedures, credit contracts, mortgage, etc. However, the budget capital to subsidize interest rates for social housing loans has not been allocated by the Government. According to some estimates, VBSP’s funding comes from the budget that the central government provides to VBSP in accordance with the financial plan for 2017.
According to the draft of the mechanisms of interest rate subsidies released by the Ministry of Finance, VBSP is compensated for the difference in interest rates and management fees when making loans for investment or purchase in social housing, new construction or renovation and repair of houses in accordance with Decree 100 and the current regulations be applied with VBSP in the case of lending programs to support the poor and the beneficiaries.
The Ministry of Finance also mentioned two options for calculating the difference in interest rate subsidies. Option 1, the difference in interest rate subsidies is calculated by the lowest interest rate which is applicable to rural agriculture in the same period of the credit institution minus the lending interest rate stipulated in the Decree 100. Option 2, the difference in interest rate subsidies is calculated by the maximum lending interest rate in VND by credit institutions to borrowers in order to meet the demand for capital in some services announced by rural agriculture minus the interest rate as stipulated in Decree 100. Currently, the mechanisms of interest rate subsidies have not yet been finalized, and the loan source has not been specified, so the people in need still have to wait.
According to Nguyen Tri Hieu – financial specialist, neither of the two options is inappropriate. Although loans for buying social housing under the policy of the Government are good policies, the loans for rural agriculture and real estate are two different fields. Besides, because the real estate loans are long-term loans, the level of risk of the two fields are different. Accordingly, Banks neither can take the risk level of agricultural loans as a basis for real estate loans, nor can take the interest rates of agricultural loans referring to social housing loans, therefore we need to have an another option.
The most appropriate solution is to return to the old problem, the State Bank must have refinancing program for commercial banks, on the basis that commercial banks receive the low refinancing interest rate and a 1.5% margin as they do in the $1.32 billion package. Thus, banks also enjoy a portion of interest rates, and the applicable interest rates are also based on the refinancing interest rate. The interest rates are also consistent with the support policy to purchase social housing. The interest rates in other businesses are not standard to reference.
Nguyen Tri Hieu also said that the issue of preferential interest rates for buying social housing is a big problem. If this is the policy of the Government, it really should rely on a fiscal policy of the Government, and the State Bank only concerns about monetary policy. That is the tricky point so The Ministry of Finance must solve it. Meanwhile, the Ministry of Construction proposed that the interest rate subsidies really should be set at 3% per year. Thus, at present, the interest rate which credit institutions received after being compensated is expected to be 4.5-5% plus 3% by 7.5-8% per year, and it still lower than the level of interest rates of medium and long-term loans for priority sectors (9-10.5% per year as proposed by the State Bank in Document 184 to the Prime Minister in 2016). This will facilitate the State Bank to actively make the initiative plan to balance capital without being affected by market interest rate fluctuations while ensuring the harmony of interests of the parties.
At present, some real estate companies have implemented a program of supporting home buyers such as Hong Ha Joint Stock Company which assists home buyers at Tu Hiep social housing (Hanoi) projects with a 4.8% interest rate loans within 15-year loan from VBSP. Meanwhile, Hoang Quan Real Estate JSC announced that the investor will provide interest rate support to borrowers to buy social housing for interest rates in excess of 6% per year on commercial loans within 15 years. This solution is well appraised but the question is whether the owner is capable of doing the same or the solution to free up the stagnant supply of real estate developers.
Another common form is reconsidered as businesses in cooperating with banks. For example, Hai Phat Joint Stock Co. cooperates with VietinBank, and they provide a loan of $39 million for the social housing project named The Vesta (Hanoi); Vicoland Group cooperates with ABBank to provide loans with a limit of 70% of the value of apartments within 20 years for projects in Hue and Da Nang. However, experts advise buyers to pay attention, as these loans usually only have incentive interest rates at the beginning, and from the second or third years onwards the interest rates are applied at market rates.
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