Building Houses for Low-income Earners: Positive Response from Businesses

Building Houses for Low-income Earners: Positive Response from Businesses

More than one year after the Government launched a programme which was in favour of building houses for low-income earners. With good incentive, investors of affordable are very interested in this segment.

Vietnam now has 32 housing projects exclusive for low-income earners, either underway or in blueprint. Ho Chi Minh City has six projects with more than 5,810 apartments in total; Hanoi has six projects with about 3,500 apartments, and Da Nang has seven projects with more than 4,310 apartments.

Potential market

According to the Ministry of Construction, Vietnam has about 700,000 low-paid civil servants and a large number of poor urban residents in need of housing. Thus, affordable housing is not only a social issue but also a potential market for construction companies.

In the past time, the apartment market in the capital city of Hanoi was stirred by many affordable housing projects like Ngo Thi Nham Flat invested and built by Vinaconex. From 2010 to 2015, the city will build some 15,000 apartments for low-income earners. However, at present, companies submitted applications to authorities for the construction of this type of housing and registered supply has mounted to 25,000 apartments. This abundant supply will help solve burning housing demand of residents in the capital city.

In Ho Chi Minh City, the affordable housing market is also very busy. Dat Lanh Company is very famous for its typical apartments of 20 - 40 square metres which are offered for sale at VND300-400 million each.

Mr Nguyen Van Tuan, Chairman of the Board of Directors of Vinaconex, a leader in affordable housing development, said: Affordable housing development programme is of great significance and important contribution to the social security and the uplift of urban life. Thus, when companies are involved in building houses for low-income earners, they actually want to share with the community.

In July and August 2010, many large Vietnamese construction companies kicked off many low-priced housing projects in Hanoi. Vinaconex took the lead with more than 1,500 apartments in Kien Hung resettlement area (Ha Dong district) at the end of last August. The price was estimated at VND600 million or so for apartment of 70 square metres. State-owned Vietnam Glass and Ceramics for Construction Corporation (Viglacera) started a housing project with 1,000 housing units in late July in Dang Xa commune (Gia Lam district) and carried out a 124-apartment project in Dai Mo commune (Tu Liem district) - one of the best location in the west of Hanoi. To date, only Hanoi and Thanh Hoa province have sold houses to low-income earners in accordance with the Circular 36 of the Ministry of Construction.

Localising projects

According to Tuan, from the aspect of investment, the profit is the eventual target; thus, affordable housing or social housing programmes for low-income earners need practical policy supports from the Government.

The Ministry of Construction pledged that investors of social housing projects were guaranteed of 10 percent profit. Thus, the ministry advised the Government to issued Decrees 65, 66 and 67 in mid-2009 to specify mechanisms and preferential and incentive policies to encourage companies to invest in social housing.

According to these incentive policies, investors of social housing will be exempted from land use fees and land rents; allowed to increase construction density to 1.5 folds from the construction planning standard; exempted from value-added tax (VAT) for social housing leasing and purchasing contracts, and free corporate income tax in four straight years dating from the year having income. They will enjoy a half reduction of corporate income tax in nine subsequent years and will be levied the corporate income tax of 10 percent after that.

One of primary reasons for the successfulness of social housing projects is, according to Mr Tuan, the cooperation of investors with other Vietnamese companies. Notably, Vinaconex and Viglacera signed a cooperation agreement on developing social housing to tap their advantages, experience and professional capacity in developing social housing projects. This cooperative agreement also served as the basis for the two sides to coordinate to introduce valuable products to social housing projects.

Reported by Le Hien | VCCI News