Vietnam - Developers and buyers snub low-cost condos

Developers are indifferent to housing projects for low-income people and factory workers due to capital shortages and slow capital recovery while buyers are not keen on low-cost homes for insufficient infrastructure.

Nguyen Xuan Chinh, head of the Hanoi Authority for Industrial Parks and Export Processing Zones, was speaking at a meeting on a housing development program and low-cost housing projects held by the government of Hanoi City last week.

Both developers and homebuyers are distressful

Housing projects for low-income people and workers are suffering low occupancy, said most business executives at the meeting. Many investors are not keen on rolling out their projects given high volumes of unsold condos and slow capital recovery.

In particular, the CT19 project worth 179 billion dong in Viet Hung urban area has 515 apartments but only 270 units has been handed over to buyers so far. The 121 billion dong CT21 project, also in Viet Hung, has got approval from the city government to sell 178 of a total of 300 units.

Meanwhile, the project in Dang Xa has only sold 650 out of a total of 950 apartments, according to a report of the Hanoi Department of Construction.

Tran Duc Son, director of Hanoi Housing Management and Development Co., noted the biggest problem lies in installment payment delays after houses have been handed over to customers.

Citing 52 apartments for families of wounded soldiers in Viet Hung as an example, homebuyers have moved in for nearly a year, but have yet to pay a single installment. The investor is struggling to recover the huge capital poured into this project.

Houses for rent to workers are facing the same fate. It is expected 1.6 million square meters of housing for workers will be developed in Hanoi from 2011 to 2015 but so far enterprises have registered to build 536,000 square meters.

The housing project in Phu Nghia Industrial Park, Chuong My, Hanoi has had one of the five planned buildings put into operation, but occupancy is low. Despite loans equivalent to 70% of the project’s cost and an annual interest rate of 3.6%, the project owner is still in trouble.

Enterprises are discouraged to develop condos for workers by a long time of capital recovery and multiple risks associated with such projects. Workers find high rentals unaffordable, said Vu Ngoc Dam, head of the Housing Department Division under the Hanoi Construction Department.

Developers ask for Government loans

Multiple housing projects for low-income people and students in Hanoi are facing difficulties and have asked for loans from the State budget, said the Hanoi Department of Construction.

For instance, Vinaconex Xuan Mai, the owner of the CT02 project worth 565 billion dong, has requested a 300-billion dong loan to implement the project on schedule and timely hand over 900 apartments to customers.

Work on the Bac An Khanh project involving Vinconex and Handico has yet to start. The two developers are seeking 300 billion dong in aid from the State. The low-cost housing project Thanh Lam-Dai Thanh 2 of Housing and Urban Development Corp. (HUD) is also in need of 100 billion dong in cheap loans from the State.

However, even those financed by the State budget are struggling with poor sales. Specifically, Viglacera wants 100 billion dong in State loans to proceed with its 560 billion dong low-cost housing project in Dang Xa, Gia Lam. Since the project was opened for sale, 400 of a total of 1,000 units have remained unsold because the project is far from the city downtown.

More incentives needed

The problem faced by low-cost housing projects is that developers spend big but get back little, said To Thi Hanh, general director of Hanoi City Development Investment Fund. Therefore, enterprises are in need of support polices, such as tax exemptions and preferential loans worth 80% of a project’s value, or even 100%, instead of the current 70%.

In addition, Government assistance is necessary to reduce prices of houses for low-income people and workers and offer developers soft loans.

Sharing this view, Vu Ngoc Dam suggested the municipal authority allocate funds to cheap housing projects and provide investors with interest rate support.

The Hanoi Construction Department proposed the city allocate budgets to develop housing and have a financial mechanism to assist enterprises.

Hanoi vice chairman Nguyen Van Khoi requested the construction department, the finance department and the authority for industrial parks and export processing zones to make detail reports on the general picture of low-cost and social housing. Related agencies are asked to review each project to detect any arising problems.

Saigon Times

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