Deputy Minister of Construction Nguyen Tran Nam spoke with Tin tuc(News) newspaper about financial policies for rental housing developmentprojects.
*Why hasn't rental housing development taken off in Vietnam?
Increasingthe amount of rental housing in the market was a major part of thenational housing development strategy approved in 2009 by the PrimeMinister. A recently adopted Housing Law also encouraged the developmentof rental housing.
Enterprises, however, haven't shown muchinterest in developing this kind of projects because it requires largeupfront investments and breaking even, let alone making a profit, takes along time. The Government's financial support and long-term loanpolicies are required to jumpstart the field.
At the moment, mostenterprises only borrow short-term loans from banks for investment;this makes the implementation of rental housing projects very difficult.
Investors love to build housing intended for sale rather thanrent because the capital returns are much faster. Secondly, citizenslargely buy and own homes rather than rent. Workers and students alsoprefer to rent from private owners rather than large rental housingschemes because private owners have fewer and less strict leasingrequirement.
*What measures have been taken to increase investment in rental housing development?
Enterprisescurrently depend on loans from banks. We should have policies that helpestablish new institutions that offer alternative sources of credits.The construction ministry already proposed the idea but still hasn'tsecured the support of the banking sector, which dislikes the idea ofgaining another competitor in financial field.
However, I thinkwe must establish such a fund, it's essential. The rental housing marketis stunted and lacking development incentives. Individuals with 50million VND or 100 million VND (2,400-4,800 USD) and looking to investaren't able to invest in the real estate market, only to put it away in asavings bank.
With 50 million VND, a person might be able to buyone percent of a 5 billion VND (238,000 USD) housing project as a wayto buy into the market without needing major initial investment capital.Through that first real estate investment, an investor can grow theirinvestment portfolios and look for more financial partners to begin newdevelopment projects.
In addition, investment funds that haveprofessional management and market analysis make higher and less riskyprofits than individual investors.
Credit funds have beenestablished following the Law on Credit Institutions. There was also adecree to establish credit funds but the decree's regulations areunclear or unfeasible.
The Ministry of Construction has theresponsibility to promulgate instructions for the implementation of thelaw, and therefore that includes policies which support or encourageenterprises to build rental housing. Such a policy, for example, mightoffer loans with low interest rates, longer borrowing periods and lowertaxes to investor interested in building social housing for rent.
*Whichgroups will be initially prioritised in the ministry's rental housingdevelopment plan and what do you think about its prospects?
The ministry will first focus on developing social housing projects for workers, students and low-income people.
TheVietnam Building Glass and Ceramics Corporation (Vigalcera) hasdesigned a successful model for building rental housing. They devote 20percent of their housing fund to build rental houses of suitable qualityand prices. Their rental prices are generally below 2 million VND (100USD) monthly, within the reach of most Vietnamese incomes. The modelshould be encouraged and shared.-VNA
*Why hasn't rental housing development taken off in Vietnam?
Increasingthe amount of rental housing in the market was a major part of thenational housing development strategy approved in 2009 by the PrimeMinister. A recently adopted Housing Law also encouraged the developmentof rental housing.
Enterprises, however, haven't shown muchinterest in developing this kind of projects because it requires largeupfront investments and breaking even, let alone making a profit, takes along time. The Government's financial support and long-term loanpolicies are required to jumpstart the field.
At the moment, mostenterprises only borrow short-term loans from banks for investment;this makes the implementation of rental housing projects very difficult.
Investors love to build housing intended for sale rather thanrent because the capital returns are much faster. Secondly, citizenslargely buy and own homes rather than rent. Workers and students alsoprefer to rent from private owners rather than large rental housingschemes because private owners have fewer and less strict leasingrequirement.
*What measures have been taken to increase investment in rental housing development?
Enterprisescurrently depend on loans from banks. We should have policies that helpestablish new institutions that offer alternative sources of credits.The construction ministry already proposed the idea but still hasn'tsecured the support of the banking sector, which dislikes the idea ofgaining another competitor in financial field.
However, I thinkwe must establish such a fund, it's essential. The rental housing marketis stunted and lacking development incentives. Individuals with 50million VND or 100 million VND (2,400-4,800 USD) and looking to investaren't able to invest in the real estate market, only to put it away in asavings bank.
With 50 million VND, a person might be able to buyone percent of a 5 billion VND (238,000 USD) housing project as a wayto buy into the market without needing major initial investment capital.Through that first real estate investment, an investor can grow theirinvestment portfolios and look for more financial partners to begin newdevelopment projects.
In addition, investment funds that haveprofessional management and market analysis make higher and less riskyprofits than individual investors.
Credit funds have beenestablished following the Law on Credit Institutions. There was also adecree to establish credit funds but the decree's regulations areunclear or unfeasible.
The Ministry of Construction has theresponsibility to promulgate instructions for the implementation of thelaw, and therefore that includes policies which support or encourageenterprises to build rental housing. Such a policy, for example, mightoffer loans with low interest rates, longer borrowing periods and lowertaxes to investor interested in building social housing for rent.
*Whichgroups will be initially prioritised in the ministry's rental housingdevelopment plan and what do you think about its prospects?
The ministry will first focus on developing social housing projects for workers, students and low-income people.
TheVietnam Building Glass and Ceramics Corporation (Vigalcera) hasdesigned a successful model for building rental housing. They devote 20percent of their housing fund to build rental houses of suitable qualityand prices. Their rental prices are generally below 2 million VND (100USD) monthly, within the reach of most Vietnamese incomes. The modelshould be encouraged and shared.-VNA
