Incentives for businesses to participate in the rental housing segment
According to the Ho Chi Minh City Development Research Institute, in the total demand for social housing in Ho Chi Minh City, lease-purchase demand accounts for 68.1%, purchase demand 26% and net lease demand only 5.9%.
In which, the group of salaried workers (officials, civil servants, public employees, workers, armed forces...) accounts for up to 82% of the long-term rental model; the group of students accounts for 14% of the socialized dormitory and mini-apartment model. Thus, 96% of subjects have stable incomes and are fully able to pay rent if the price is reasonably controlled.
Dr. Nguyen Duy Phuong - Director of Financial Investment of DG Capital - said that, unlike commercial houses that can recover capital quickly, rental projects have a duration of 15-20 years and are quite sensitive to interest rates. With businesses still bearing commercial loan interest rates of 10-14%/year, financial costs can greatly affect profits.
Therefore, if businesses want to strongly participate in this segment, they need long-term credit packages with low and stable interest rates, because the characteristic of rental housing is that the recovered cash flow lasts for 15-20 years. At the same time, it is necessary to offer preferential land use tax, corporate income tax or tax reductions for projects committed to long-term leasing at reasonable prices.
Need a special preferential policy mechanism
Mr. Le Hoang Chau - Chairman of the Ho Chi Minh City Real Estate Association (HoREA) - said that it mainly lies in area standards and planning psychology.
According to Mr. Le Hoang Chau, currently, the mandatory standard for social housing is to have a minimum area of 25m2. However, for a worker or single worker, the cost of renting a 25m2 apartment is still too high compared to their income. The world principle is that the cost of renting a house should not exceed 20-25% of their income. In Vietnam, we are close to the 25% threshold, this level is expensive. When a 25m2 apartment is not affordable, investors are stranded and consider it a burden. Meanwhile, many people are still living in private boarding houses with an area of only about 15-20m2.
According to this expert, it is necessary to drastically change the institution, for example, allowing businesses to develop social housing for rent in the form of rented rooms with a more flexible minimum area.
Agreeing with this view, Dr. Nguyen Duy Phuong proposed that the State should have its own strategy, including allocating land funds for housing development for rent at reasonable prices; credit and tax incentives for investment enterprises; and developing rental housing areas near metro lines, industrial parks and job centers; it is necessary to standardize long-term rental contracts so that tenants have a sense of stability like owning a house, instead of the current "temporary living" mentality.
Regarding profit, the current quota of 10% for social housing is not attractive enough.
Regarding land funds, Ho Chi Minh City after the merger has a fairly abundant housing fund and public assets, which need to be utilized to develop policy housing.
As well as establishing a common resettlement housing fund for the whole city. It is possible to adjust and convert between types such as resettlement, public housing, social housing, urban embellishment without the need for procedures for preparing, appraising, and approving functional conversion projects.
Not only building new social housing but also making good use of the above resources, diversifying housing forms, which are buying, renting-purchasing and renting for all beneficiaries.
When the State is holding land funds and licensing projects, state-owned enterprises directly doing it will be very effective. Conversely, if it continues to be handed over to the private sector, the waiting time for administrative procedures will be extremely cumbersome" - Dr. Phuong stated his opinion.
