Hanoi wants more profit for social housing developers

By Ngoc Diem, Minh Son   November 17, 2023 | 06:59 am PT
Hanoi wants more profit for social housing developers
A social housing neighborhood in HCMC's Binh Tan District, August 2022. Photo by VnExpress/Quynh Tran
The Hanoi Department of Construction has proposed increasing the profit rate for social housing construction to 15-20% from the existing 10% of the total investment cost.

The department made the proposal on Monday at an online conference about deploying Prime Minister Pham Minh Chinh’s instructions on removing challenges facing the real estate market.

The construction department argued that higher profits would encourage more firms to engage in social housing development amid high demand for affordable housing.

As part of a national plan to build one million social housing units for low-income earners and industrial park workers in the 2021-30 period, Prime Minister Pham Minh Chinh ordered Hanoi to develop 56,200 units.

The department also recommended retaining an existing regulation that allows social housing developers to use 20% of their projects’ total land area to build commercial housing.

The existing regulation acts as an important incentive mechanism to attract social housing developers, and it acts as a foundation to lower the selling prices of housing units, the department said.

The government determines profit rates on social housing projects by calculating input costs and then setting a ceiling selling cost based on what the profit percentage would be (now its 10% but the new proposal wants to raise it to 15-20%) to ensure the homes do not become to expensive for the poor and needy families they are intended for.

The department proposed to have preferential treatment in terms of loans, interest rates, and legal procedures for social housing developers that try to access the credit backage of VND120 trillion (US$5 billion).

The package was launched on April 1 by the Government to give both buyers and developers access to credit at interest rates 1.5-2 percentage points lower than the market average.

Previously, in a written proposal to revise and supplement the draft revised Housing Law sent to the Government, the Ministry of Construction admitted the profit rate of 10% for social housing construction is low.

However, the ministry believed if the profit rate increases, housing prices will go up and buyers will have to bear this cost.

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