Recently, many real estate developers have carried out the procedures to transform their commercial housing projects into social housing ones to enjoy various policy incentives. However, only 30% of the assisting package of 30,000 billion VND is for loan. Whether enterprises will get stuck with social housing projects? Mr. Trinh Van Quyet - Chairman of FLC Group shared his point of view:

“The problem here is not to worry about redundant supply of social houses, but, after converting the function of the projects, whether or not real estate developers can get access to the package of 30,000 billion VND of the State?”

Do you think that enterprises will “get stuck” if they cannot get access to this assisting package?

Currently, according to the Ministry of Construction’s statistics, only for officials of central ministries and Party, the demand for social housing is nearly 100,000. Meanwhile, 60 social housing projects nationwide (including new projects and commercial housing-transformed projects) can only supply some ten thousand apartments.

It is clear that the demand for social housing is very big. The State should continue encouraging real estate enterprises to invest in this segment.

However, in accordance with Article 2.1 of Circular No. 11, the maximum time to grant 30,000 billion VND is 36 months from the date of 01 June 2013.  Thus, under such complicated and time-consuming procedures and orders, if real estate enterprises, after converting the function of the projects, cannot access the subsidy for the reason that the time for application as mentioned above is over, these enterprises would be in “dilemma” situation or get “stuck” with social housing. The consequence of this is that social housing projects will become just “paper” projects.

Besides the concern of enterprises’ difficulties in getting access to the assisting package, the regulation that the preferential loan time for housing buyers is only 10 years and commercial interest rate shall be applicable if they want to continue the loan is another concern. They believe that such preferential loan time is too short, not long enough to stimulate the market in which most people in need of such housing loans are poor. What do you think about these ideas?

I totally disagree with the view that this preferential loan policy is a "trap" with borrowers.

Let’s do a calculation. One person buying a social house or ordinary commercial house will need to borrow about 600 to 800 million, for example, a total loan term is 20 years, with interest rate of 6 percent/year in 10 first years, then the house buyers shall have to pay approximately 2.7 million to 3.5 million per month (including 150,000 - 200,000 (interest) + 2.5 – 3.3 million (loan repayment)); in the next ten years, the house buyers must pay about 2.8 million to 4 million a month if interest rate increases even up to 15-20% per year. Thus, it can be seen that this cost is quite suitable with the financial budget of the preferential loan subjects.

However, the issue we need to discuss here is how to make the mechanism for loan and disbursement efficient. In my opinion, the State Bank should put more conditions for banks that want to participate in the distribution of this assisting package that these banks must commit to let preferential loan borrowers to pay such loan by installment in period of 15-25 years since the signing date of loan agreements.

To be owner of a successful company in the real estate market, in your opinion, should enterprises choose to invest in building social houses or commercial houses in less-than-15 million and less-than-70m2 segment?

The choice decision depends on many factors. For example:

An enterprise with strong financial capability will be in a very active position to choose. They can simultaneously carry out both of the above projects. Choosing social housing projects may be the best solution for enterprises with difficulties in finance in this period of time. The current preferential policies for social housing projects are very attractive: both benefit from source of loans and benefit from tax obligations to the State, while the demand market is almost ready.

Enterprises will choose to carry out ordinary commercial housing project instead of choosing social housing project if their target is profit maximization.

In addition, the location of the projects also plays an important role in the enterprises’ selection of investment choice. The common commercial houses will be chosen if the projects are located in the central areas, and the social houses will be more interested if their locations are far from the center of the city.
In short, in my opinion, price of apartments is the core issues that the customers are concerned, no matter what investment choice (social or commercial houses) is taken. Thus, it is important that enterprises can make their own calculation to offer a price suitable with the "pockets" of buyers, because their actual demand in both forms of housing is still very substantial.

In the coming time, even in 2-3 years, social houses or ordinary commercial houses will possibly be paid special attention. This segment is not only currently driven by the State, but also of many people’s interest.

I hope that there will be competition in this segment because the final preferential enjoying person shall be normal citizens. I really expect that real estate enterprises shall carry out the projects with price of around 12 million to 13 million per m2 and I do hope that banks shall actively offer programs that encourage the buyers to pay installments in the period of 20-25 years. Only by doing that, Vietnam can set up the durable real estate market in the future.

However, I also think that: it is time for the real estate Vietnamese enterprises to research and map out their own long term development strategy instead of following "movement" effect like in the past time.

Does FLC Group take part in the segment that the price is suitable with the "pockets" of buyers?

FLC Group is always active to participate in all segments of the real estate market. In addition, one of our operational principles is towards the community and social development.

Currently, FLC Group is also waiting for permits of competent authorities for converting the function of a project into social housing project and in the procedure for obtaining approval for carrying out another social housing project. The implementation of the social housing projects not only contributes to build a sustainable market for FLC Group, but also contributes to ensure social security as well as increasing value-added benefit to the society.

Thank you!

 (The Vietnam Law Newspaper).