Solution for affordable housing

Financial solution

Ngo Quang Phuc, CEO of Phu Dong Group, said that young people with stable job and career advancement is the main target of apartment. But their limited initial saving is a bottleneck of ngtheir house purchasing. Therefore, if they are identified as target customers, real estate companies must provide them an appropriate financial solution.
For example, customers of Phu Dong Premier apartment (adjacent to Pham Van Dong Boulevard, HCMC), which average price is VND 1.35 billion for 2 bedroom apartment, can pay in 24 month installments at 0% interest rate supported by the investors. They only need to pay 20% of the total value in order to get the apartment. 

Nam Long Investment Group (NLG), known as market leader in the affordable housing segment, also support buyers by providing financial solutions. Before, Nam Long often cooperated with commercial bank partners to provide buyers loans. But now Nam Long utilizes the financial resources of its foreign investors to do so. 
Mr. Nguyen Minh Quang, Head of Business Development and Marketing at Nam Long, said that the cooperation with Japanese investors has significantly reduced the pressure for customers in paying. 
According to the regulations, foreign investors are only allowed to withdraw up to 50% of the contract value. Therefore, buyers of Nam Long’s apartments have 12 to 18 months to complete the loan application or use other financial resources to pay for the remaining balance after having paid 50% to the sellers. Mr. Quang said that by doing this, the number of buyers borrowing money from the bank to purchase Nam Long’s apartments has reduced significantly.
In order not to rely heavily on capital from the banks, many real estate companies have chosen to cooperate with foreign investors in the form of borrowing ( with lower interest rate than the local banks) and co-investing in construction.
This will stabilize the cost of apartments, especially affordable apartments, which are affected by land prices and capital costs. In addition, once the company is financially viable, it can offer flexible payment packages to its customer to increase product competitiveness since increasing interest rate on mortgage loan has somewhat impact on the psychology of buyers.

Land preparation

At the recent seminar "Is real estate price real or virtual? Real estate development solution for real demand" held in Ho Chi Minh City, Mr. Su Ngoc Khuong - Director of Investment at Savills Vietnam shares that in a city like Ho Chi Minh City where migrant and young workers take up a major part of the population, the housing demand always exceeds supply, but the challenge is creating affordable housing products. 

According to Mr. Khuong, in the next 3 to 5 years, it is not easy to sell apartments at VND 1 or 2 billion despite the available land fund in major cities. "If we can solve the cost of land, shorten the time-to-market and provide the financial solution for the borrower, we will have good products," he emphasized. 
Land costs account for about 40% of total construction costs while land prices do not tend to drop. Besides, businesses takes an average of 4 to 5 years to launch a product to the market while bank’s interest rates (for both real estate developers and home buyers) fluctuate, making price controlling for apartment an uneasy job.
Regarding price controlling for apartment, Nguyen Minh Quang said, one of the important factors to create affordable apartments is to own clean land fund with convenient infrastructural connection and to minimize cost. Representatives of Nam Long revealed that, in the period from 2017 to 2018, the company had to set up a research and development team to study the planning, economic development speed in some areas in order to seek for land fund.
Land purchase must be carefully planned 3 years in advance and the feasibility of the project must be questioned. The company must control the cost. The land must have a minimum total area of 6ha for the development of at least 2,000 apartments, to reduce management and construction costs. 
Talking about how to create affordable apartments in the state management, representatives of HCMC Department of Construction said that the Department will propose to the City People's Committee to prepare clean land fund in suburban districts to conduct bidding and developers selecting for affordable housing development after 2020. 

By: Doanhnhansaigon.vn