Demand in Vietnam for low-priced social houses and houses for long-term rent was high but incentive policies have not yet encouraged investors.

There are currently dozens of low-priced social housing projects in Hanoi and Ho Chi Minh City that have not been given preferential loans from the government.

Le Thanh Commercial Construction Co Ltd director Le Huu Nghia told the Tien Phong (Vanguard) newspaper that for years his company had invested into building more than 3,000 low-priced houses in Ho Chi Minh city’s Binh Tan district.

The company sold the houses at 12-13 million dong ($500-550) per square metre, he said.

In addition, the company had completed a social housing project with 930 apartments for rent with tenures of 50 years, said the director.

However, he said, procedures for land use and soft loans had not yet been completed, so the company had to pay interest of 11 per cent per year.

“In fact, policies for social housing development had been slowly implemented with overlapping regulations on taxes,” said Nghia.

For example, Decree 100 regulates that social houses for rent will be given 70 per cent reduction of value-added tax (VAT) and corporate income tax.

However, the tax authority had given companies 50 per cent reduction in taxes as the tax authority still applied the VAT Law in 2016 and Law on Corporate Income.

The tax authority explained that the Law on Housing in 2014 stipulates the tax reductions but does not specify the rate of 70 per cent. The laws on taxes is of higher legal value than Decree 100.

Thus, the companies involved in social housing projects must pay taxes in accordance with the tax laws.

A Bank for Investment and Development of Vietnam Insurance JSC (BIC) representative said investors found it hard to secure soft loans.

He said: “The businesses were given an exemption of land use fees but did not have ground clearance costs deducted, while commercial housing businesses offer the deduction. VAT was entitled to a five per cent reduction but the input VAT was still 10 per cent.”

The tax incentives should be the same as land use fees – immediately converted to money for businesses by exempting input VAT, he said.

Meanwhile, a representative of Bac 9 Real Estate Investment JSC, which is undertaking the Ecohome Social House Project in Hanoi, said procedures for tax incentives were hindering investors and businesses.

To obtain tax reductions and exemptions, the tax agency required lists of customers first, he said.

“It was impossible. How can businesses get the lists if they had not sold houses or apartments yet? The procedures to get tax reductions or exemptions were really complicated,” he said.

Hanoi Department of Construction vice-director Nguyen Chi Dung told the newspaper that the soft loans for social housing projects were taken from the budget revenues of projects under 10ha, which were more than 10 trillion dong.

The city will lend through Hanoi Development Investment Fund (Hadif) with preferential interest rates, he said.

“However, the lending must be based on principles of safety and efficiency of loans. Last year, the preferential loans for social housing projects were very few. Hanoi was only allocated tens of billions of dong for both investors and home buyers,” said Dung.

Meanwhile, Hadif director Chu Nguyen Thanh said the fund was allowed to lend more than 200 billion dong per project with a yearly interest rate of 6.95 per cent.

The rate was lower than commercial banks and did not change during the bank loan period, she said. The fund had also opened seminars approaching investors but few of them were interested.

Investors may prefer to work with commercial banks over the fund because the banks’ procedures are more flexible, while procedures to borrow money from the fund took four to eight years, she said.

“Investors need a fast and flexible process, they cannot wait,” said Thanh.