Cheap housing remains out of reach for poor
(02-03-2009)
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Many old buildings in HCM City have been replaced by new high rises. Housing projects for low-income earners are expected to reduce the current demand for housing. — VNA/VNS Photo Ngoc Ha |
HA NOI — The Ministry of Construction has proposed a project to build houses for low-income earners, a move expected to reduce the current high demand for homes. There are, however, many obstacles to this plan.
According to the Chairman of the Viet Nam Construction Association, Pham Si Liem, it would be very costly and difficult, as there were very few investors who cared to build low-income, social housing.
"Investors need to turn a profit. One square metre of commercial space can be sold from VND10 to 20 million (US$600-$1,200), while it’s between VND6 and 7 million ($350-$410) for social housing. Who would want to build these homes?" said Liem.
"In Indonesia, the state regulates that 10 per cent of any urban project must be dedicated to luxury homes and 30 per cent to good homes, with the remainder used for cheap housing," said Liem.
"We cannot develop social housing projects because there are no attractive mechanisms or policies. There’s no money and no land! How can we have social housing?" he said.
Deputy Director of the ministry’s House and Real Estate Management Department Vu Thi Hoa admitted that the houses would be cheaper than some, but they would still be far out of reach for most low-income earners.
The ministry was waiting for the Government’s decision on the project, said Hoa.
Out of reach
Twenty-nine year-old Nguyen Thu Nga can only dream of owning an apartment in Ha Noi.
Nga and her husband are currently renting a small apartment in a five-storey building in Thanh Xuan District. They earn a total of VND5 million ($294) per month, barely enough to get by with their small child in the city.
"I’ve heard a lot about the Government’s project to build cheap houses for low-income earners; however, it’s still out of my budget," said Nga.
Nga and her family have no monthly savings to purchase a 50sq.m apartment in the capital, which would run about VND300 million ($17,600).
A construction ministry survey has shown that there were nearly 700,000 State employees without stable residences.
Director of the Ha Noi-based Dong Tam Real Estate Intermediary Centre Nguyen Van Tam said that the low-income earners’ demand for housing had always been high; however, investors needed to keep in mind payment abilities.
Tam said that low-income earners were vulnerable tenants, as they often faced unemployment, salary reductions and cuts in allowances.
"If we had these cheap houses now, low-income earners would neither have enough money to buy them nor the legal conditions to borrow from banks," said Tam.
Loans for houses?
Banks should be a place where low-income earners can go to borrow money to buy homes, but the current interest rate of more than 12 per cent per year is too high for most people.
According to the General Director of Sacombank, Tran Xuan Huy, there is still potential for real estate loans this year, and the bank will be actively carrying out loan programmes.
Huy said that the wives and husbands of the borrowers would need to have stable incomes as well, and family incomes should be at least VND8 million per month. The maximum loan duration would be 25 years, with interest being agreed upon between both sides. Loans could also be up to 70 per cent of the apartment’s value.
One programme, entitled New House, has been initiated by Techcombank, and aims to help people build, buy and repair houses. The maximum loan is up to 60 per cent of the total worth, and applicants must show proof of their assets in order to ensure payments.
Nguyen Thu Hoai, a capital resident, had planned to buy an apartment of the Corporation of Land and Urban Investment and Development, but the bank’s interest rate has made her hesitant.
Hoai has saved up VND200 million, but she still needs VND300 million more to buy a small apartment. "If I borrowed that money from the bank, I would have to pay interest of at least VND3 million per month," she said.
Hoai is one of many State employees who wish to buy homes right now, while prices are low, but high interest rates are keeping their dreams at bay.
According to the former Deputy Minister of Natural Resources and Environment, Dang Hung Vo, the price of construction materials has reduced while costs for homes and commercial land have remained stable.
He said it would be a suitable time for the State to develop the social housing project, as it would reduce the pressure of demand on houses in general, helping to reduce overall prices on the market. — VNS