“Credit Packaging for the Under-35s: A Pipe Dream?”

Reduced Interest Rates and Extended Promotional Period for Loans

Yesterday, the State Bank announced a preferential loan package for individuals under 35 years old to purchase social housing with an interest rate of only 6.1%/year, applicable for the first 5 years, with the following 10 years offered at a rate 1% lower than the general level. The list of 9 participating banks includes: Agribank, BIDV, Vietcombank, VietinBank, HDBank, VPBank, Techcombank, TPBank, and MB.

Compared to the previous credit package of VND 120,000 billion for social housing, the new package has been increased to VND 145,000 billion with a lower interest rate of 0.5%/year. While the promotional period for the first 5 years remains the same, the new package offers additional benefits for the following 10 years.

Mr. Ngoc Duong, from Thanh Xuan, Hanoi, shared: “Previously, I purchased a social housing project in Nam Tu Liem district, Hanoi, but when I inquired about the VND 120,000 billion package, the interest rate was over 8%/year, which was beyond my family’s financial capacity. Now, I see that the new package offers a lower interest rate, but my family has already received and moved into the house, so we no longer meet the loan requirements.”

Meanwhile, Ms. Minh Hang from Hoang Mai, Hanoi, shared a different perspective: “I’ve seen one preferential loan package after another for social housing, with very slight differences in interest rates. What young families like mine truly desire is new housing projects to purchase, but Hanoi is progressing very slowly in this regard. If the issue of supply is not addressed, then even with additional preferential credit packages, the fundamental problem remains unresolved.”

In a conversation with Tien Phong PV, Mr. Nguyen Quang Huy, a finance and banking expert from Nguyen Trai University, stated that in the context of the real estate market undergoing restructuring and recovery after a prolonged stagnant period, the State Bank’s decision to implement a preferential credit package for individuals under 35 years old to purchase social housing is an important policy shift.

By identifying young people under 35 years old as the beneficiaries of this privilege, there is a clear demographic orientation – indicating that policy thinking has moved beyond the framework of “short-term hardship support” towards building a long-term future.

“With an interest rate of only 6.1%/year for the first 5 years and continued support for the next 10 years, this is one of the longest-term preferential credit packages to date. This clearly demonstrates the determination to implement the goals of Resolution 33 and the National Housing Development Strategy by 2030 – considering social housing not only as a welfare issue but also as an important component in the structure of a sustainable real estate market,” said Mr. Huy.

Will the New Credit Package Remain on Paper Only?

Looking back at the implementation of the VND 120,000 billion credit package for social housing launched in 2023, Mr. Huy pointed out that this package has faced numerous obstacles.

According to a recent report by the Ministry of Construction, since its launch, the State Bank has reduced the interest rate for the VND 120,000 billion package four times. Specifically, from July to December 2023, the interest rate for borrowers and investors was 8.2% and 8.7%, respectively.

In the first half of 2024, the interest rate for this package was reduced to 7.5-8%/year, followed by a further 1% reduction in the second half. From the beginning of 2025, the State Bank announced a rate of 6.6% for investors and 6.1% for borrowers.

Thus, since its implementation, the interest rate for the VND 120,000 billion credit package has been reduced by over 2%. Currently, this rate is lower than the lending rate for social housing borrowers under Decree 100 (about 6.6%/year). However, the disbursement progress of this credit package has been slow.

The Ministry of Construction reported that there are 97 social housing projects in 38 out of 64 provinces and cities that have been announced to be eligible for borrowing. The disbursed amount from this credit package is estimated at approximately VND 3,400 billion, equivalent to a disbursement rate of over 2%. Of this, about VND 2,940 billion was lent to investors in 21 projects, with the remainder going to homebuyers. In the first four months of this year, the disbursed amount reached over VND 550 billion.

Mr. Huy assessed that the three biggest bottlenecks of the old package, which also pose challenges for the new one, are: insufficient and inappropriate supply of social housing. The scarcity of land, complex legal issues, and low profits make developers less interested. The approval process for projects is slow, and there is a lack of large-scale and attractive products.

“The new package faces difficulties because young people often have unstable incomes, insufficient savings, and lack collateral. Commercial banks, without a risk-sharing mechanism in place, are forced to maintain stringent credit standards – diminishing the ‘preferential’ nature of the package. Banks are cautious, and borrowers face challenges in meeting the requirements, causing the new package to potentially ‘remain on paper,’ ” Mr. Huy explained.

Mr. Huy emphasized that credit policies, if focused solely on offering low-interest rates without accompanying implementation support mechanisms, can become inaccessible.

“Introducing multiple loan packages is a positive step, but if the root cause of the supply-side issues is not addressed, any preferential credit package will face challenges in a congested ecosystem,” asserted Mr. Huy.

Mr. Nguyen Tri Hieu, a finance and banking expert, shared his thoughts: “In my opinion, the interest rate for the new social housing loan package is still very high and unstable. The current rate, valid until June 30, 2025, is 6.1%/year, which is slightly lower than the commercial rate but remains high for the majority of low-income earners. After June 30, 2025, the rate will be adjusted and will likely remain around this level.”

According to Mr. Hieu, for the government to successfully implement the social housing program, they should provide capital to commercial banks at a very low-interest rate, ideally around 3%/year, so that the banks can lend it out at a rate of approximately 5%/year.

“At an interest rate of 5%/year, an individual borrowing VND 1 billion to purchase a house worth VND 1.2 billion would have monthly repayments of VND 7 million, which is more reasonable. Otherwise, we will continue to see the same story of people struggling to repay their loans and sharing their woes on television,” Mr. Hieu concluded.