VietNamNet Bridge – Though Vietnam has 60 operational commercial banks and a lot of them have to undergo the restructuring to settle their big problems, the Ministry of Construction still cherishes the plan of setting up a housing bank by 2017.

Deputy Minister of Construction Nguyen Tran Nam stated at a workshop held recently that his ministry is building up a legal framework to pave the way for the establishment of housing-related financial institutions, slated for 2017.

The financial institutions include the housing savings bank, housing development fund and real estate trust fund.

According to Nam, the new financial institutions would help attract the idle money in the public to put into housing development projects. They would also encourage people to save money to buy houses instead of relying on the state’s support.

People would spontaneously deposit money at the bank monthly to get fixed interest rates, and when they have the sums of money big enough, they would be able to borrow money to buy houses at the stable interest rates.

To date, the housing development has been relying on the state budget and commercial loans. In the financial crisis, credit institutions tightened their lending, thus leaving real estate developers in the thirst for capital.

The housing savings bank, if set up, would help settle the problem.

Former Deputy Minister of Construction Pham Sy Liem, on one hand, thinks this is really a good model to follow, on the other hand, expressed his worry that this may be unfeasible in Vietnam.

Liem said that in the context of unstable conditions of the national economy, where the interest rates go up and down regularly, it would be very difficult to maintain stable interest rates at low levels for tens of years to support house buyers.

Meanwhile, as the inflation rate in Vietnam is usually high and the local currency depreciates in the long term, it would be risky for depositors to leave their money at banks at fixed interest rates.

A man who wants to buy a house at VND600 million, would have to have VND300-400 million to be able to borrow money to buy it. It would take him 10-15 years to save that sum of money. However, it is highly possible that after 10-15 years, when he has enough VND300-400 million, the house price would be much higher.

“The housing savings bank model would be helpful to medium or high income earners only, because low income earners cannot deposit several millions of dong at the bank every month,” Liem said.

Sharing the same view with Liem, Tran Kim Chung from the Central Institute of Economic Management (CIEM) has pointed out the three things Vietnam needs to have – a good legal framework, a stable national economy and the satisfactory incomes of people. Of these, the second and third remain the biggest obstacles.

In 2002-2008, the real estate price increased sharply by two folds, which made it impossible to buy houses with the saved money and the deposit interest.

By June 30, 2013, Vietnam had had six state owned banks, 35 Vietnamese owned joint stock banks, four joint venture banks, 5 wholly owned banks, 100 foreign bank branches and representative offices.

Tien Phong