Building cheap social housing with full utilities, a “blockbuster” scale equivalent to 70% of the total capacity to supply the current market
Social housing: Great social demand but “indifferent” investors
The statistics of the Ministry of Construction reflected by VTC News in an article in May 2022 have partly shown the shortage of social housing in Vietnam.
Specifically: In the first quarter of 2022, the whole country only issued new licenses for 3 social housing project with a scale of nearly 1,200 units in Lang Son, Phu Tho and Quang Ninh, but there are 39 commercial housing project with scale of nearly 18,700 newly licensed apartments.
Also according to the report of the Ministry of Construction, in the first quarter of 2022, the whole country has 4 social housing projects have been completed, 98 projects are underway, and the construction departments have issued written notices of eligibility for future housing sales for 9 projects.
These numbers show a lot more “drip” and “modest” compared to commercial housing projects.
According to a representative of the Ministry of Construction, by the end of 2021, the whole country has completed 266 projects with more than 142,000 won NOXH apartment, total area of more than 7.1 million square meters of floor.
In fact, private businesses in the real estate industry are rarely interested in this segment. An article in the Lao newspaper recently analyzed the causes of this situation.
Accordingly, Mr. Le Huu Nghia – General Director of Le Thanh Trading Construction Company Limited – said that normally, from the beginning of the project application procedure to the end, it takes about 5 years to complete. and go through a 5-step process. However, the maximum standard profit of a social housing project is only about 10%, which is even lower than the interest rate on savings.
The selling price of a social house is determined by the project investor on the basis of calculating all costs to recover the housing construction investment capital, loan interest (if any) and the normed profit of the entire project. does not exceed 10% of the total investment cost; the State’s incentives specified in Article 58 of the Law on Housing are not included in the selling price of social housing.
Excerpt from Decree No. 100/2015/ND-CP dated October 20, 2015 etc. Development and management of social housing
Mr. Le Huu Nghia shared: “Investors when developing social housing, what they are most concerned about is the legal policy and State’s incentives to reduce taxes and reduce costs for businesses when implementing the project. At the same time, we are also interested in the demand for workers and the process and procedures for buying social housing of this target group, whether there are any difficulties or not. when developing social housing”.
According to investors, one of the reasons why businesses hesitate the most is that the procedure is still troublesome. Social housing projects often encounter procedures in determining selling prices, making it difficult for businesses to finalize or issue pink books to buyers late. Regarding tax, for businesses that make social houses for rent, they are usually entitled to a 70% reduction in value added tax, but the Tax Law does not have this clause. Enterprises investing in social housing with many troubles and difficulties will gradually lose motivation to do the next projects.
When the leading man in the industry expressed his determination to enter the unattractive segment
At the 2022 shareholder meeting, Mr. Pham Thieu Hoa, Chairman of Vinhomes, said that one of the new strategic orientations of Vinhomes in the near future is to focus on developing social housing projects to serve low-income people. low in provinces across the country.
“With Vinhomes’s experience in implementing commercial housing projects, these social housing projects not only help realize the dream of owning a home for employees, but also provide them with a modern living environment.” modern, civilized, and at the same time contribute to promoting social and economic security in the localities,” said Vinhomes President.
Perspective of a project of Vinhomes near Hanoi.
Within the next 5 years, Vinhomes aims to complete 500,000 social housing houses across the country. The expected selling price of social housing is only from 300 million VND to 950 million VND/unit, with a selling price and selling plan in accordance with the State’s regulations for social housing products.The brand name of the officially selected social housing product line is ”HAPPY HOME”.
The information that Vinhomes is participating in the social housing segment has made public opinion in the past few days restless. Those who rejoice, those who are supportive, and those who are cautious are skeptical.
Experts call Vingroup’s social housing development plan a “blockbuster” because it has a great influence on the current real estate market – Mr. Le Hoang Chau, Chairman of Ho Chi Minh City Real Estate Association (Real Estate) identify
Indeed, with a plan to build 500,000 social housing units in 5 years, on average, this enterprise will supply 100,000 units to the market each year. Compared to the total market supply of 142,000 units in 2021, this is an expected “blockbuster” for low-income people.
Support from the State
The implementation of the business strategy of each enterprise depends a lot on the will of the Board of Directors, but objective conditions are also an important factor when calculating the feasibility.
In this case, the State’s policies and regulations to support investors in social housing are very important.
According to Decree No. 100/2015/ND-CP dated October 20, 2015 etc. Development and management of social housing and Decree No. 49/2021/ND-CP amending and supplementing a number of articles of Decree 100/ 2015, when doing social housing, what will Vinhomes get?
The first, investors are exempted from land use levy and land rent.
Second, The investor is allowed to use 20% of the total residential land area invested in infrastructure construction within the scope of the social housing construction investment project to build commercial housing.
Investors of social housing investment projects that do not use public investment capital or foreign state capital for public investment are exempted from land use levy and land rent according to the provisions of Point a, Clause 1, Article 58 of this Decree. Housing Law, specifically as follows:
a) To be exempted from land use levy and land rent for the land area allocated or leased by the State, including the land fund for construction of commercial and business works approved by a competent authority in scope of social housing construction projects. Provincial-level People’s Committees shall consider and decide to refund or deduct the financial obligations of project investors to pay to the State, including costs. compensation and ground clearance (if any) in case the investor has paid land use levy when being allocated land by the State or has received the transfer of land use right from another organization, household or individual. that the land area is used for construction of social housing or the project investor has paid land use levy for the land fund 20%
b) To spend 20% of the total residential land area invested in the construction of technical infrastructure systems within the scope of investment projects on construction of social housing (including projects using 20% land fund) for investment in social housing. Investment in construction of commercial housing in order to offset investment costs, contribute to reducing the selling price, rental price, and hire-purchase of social housing and reducing the cost of management and operation services of social housing after the investment. ;”
Excerpt: Decree No. 100/2015/ND-CP dated October 20, 2015 etc. Development and management of social housing
Tuesday, Investors are entitled to incentives on CIT and VAT according to the tax laws from time to time.
Wednesdayinvestors are entitled to get preferential loans from the Bank for Social Policies and other credit institutions.
Thus, to compensate for the low selling price, the cost of capital, financial costs, and tax costs of the investor are all supported by the State and pulled down to the fullest extent.
Normally, in the selling price of an apartment that the buyer has to pay, the following costs will be included: Land costs (land use rights/land rental/site clearance,…), Construction and completion costs. (labor, construction materials, outsourcing costs), selling and administrative expenses, financial expenses (project capital costs), taxes.
In a recent statement at the General Meeting of Shareholders, Mr. Pham Nhat Vuong said that the cost of land use of Vinhomes only accounts for about 30%, the remaining 70% are other costs.
In the case of social housing construction, in addition to the costs supported by the State to maximize the cost, selling costs will also be relatively large compared to commercial housing projects. Combining the low-cost factor with the brand and reputation of Vinhomes, along with the recent lack of social housing supply, the sale of cheap social housing units with reasonable utilities will probably attract a large number of buyers.
When reducing costs for intermediaries (such as real estate trading floors, brokers) in distribution, it will help reduce selling costs and contribute to lower product prices.
If calculated wisely, combined with the advantages Vinhomes possesses in terms of financial capacity, prestige and experience in drastic implementation of projects, Vinhomes’ plan of 500,000 social houses in 5 years is completely grounded. .
Mr. Pham Thieu Hoa – Chairman of Vinhomes. Photo: VHM.
“Because there is no land payment and an unlimited number of small apartments are built, the selling price will definitely be within the range we have given and perfectly match the affordability of low-income people.“, Mr. Hoa confirmed.
Regarding the implementation progress, the Chairman of Vinhomes said that the enterprise has applied for a number of social housing projects in Hanoi and Ho Chi Minh City. In addition, Vinhomes is also promoting the construction of social housing land in existing projects.
“We plan to start construction in August so that the first buildings will be put into use from June next year. Because the projects are located in the periphery, we will deploy VinFast electric bus routes connecting social housing areas with important intersections to ensure the travel needs of people.“, Mr. Hoa revealed.
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