Investing in social housing is risky, the profit is equivalent to depositing in the bank

Investing in social housing is risky, the profit is equivalent to depositing in the bank

Currently, the demand for housing, especially housing for low-income people and housing for workers, is very high. The Ministry of Construction also set a target of having 1 million apartments in this segment by 2030. However, in reality, the supply is very scarce.

In a recent report, Savills Vietnam stated that social housing is an affordable housing product with the characteristics of being supported for development by the State. However, like Vietnam, many places in the world are showing the urgency of resources from the private sector, thereby helping to solve the shortage of affordable housing supply.

Investing in social housing has the same risk and profit as depositing in a bank, image 1 — Vietnamese businesses are facing difficulties when faced with the problem of investing in social housing. (Photo: DD)

“It is impossible to rely solely on the national budget to develop social housing projects. According to our analysis, in many markets, the State must encourage the private sector to participate more in this issue,” Savills experts analyzed.

Regarding this issue, Mr. Troy Griffiths, Deputy Managing Director of Savills Vietnam, said that in Vietnam, it is very difficult to find a suitable investment model that ensures harmonious benefits for all parties when developing social housing projects.

"There are many factors that need to be carefully considered, such as the conditions for purchasing social housing, the distribution method, and the regulations for transferring social housing. This will be very difficult to implement unless a separate organization is established to solve these problems," said Mr. Troy Griffiths.

Another problem is that the current policies to support businesses investing in social housing are not attractive enough, making it difficult for most investors in the market to generate profits from this product line. Faced with the problem of profit, the private sector is still focusing on higher segments without paying attention to this important market.

When comparing the 10%/year profit when investing in social housing with the risks in the project development process, businesses can easily earn 9.5%/year from depositing money in the bank, the expert assessed that this is not necessarily an attractive investment channel for businesses.

What is the solution for Vietnam?

The expert said that the supply of social housing in Vietnam has remained almost unchanged in recent years. Although many initiatives have been proposed to create policy changes in social housing development, they are still not enough to attract investors to participate in this market.

According to Mr. Troy, the media's communication about the number of social housing projects such as 800,000 or 1.4 million units is not entirely accurate. Because if analyzed carefully, social housing projects are not required to be handed over at the same time, nor are they all required to be developed by the State. In this project, businesses can also participate to develop affordable housing projects, suitable for the income of the majority of people. Particularly for social housing products, there needs to be close cooperation between the public and private sectors.

“In some developed markets such as India and China, private enterprises can provide a large amount of affordable housing supply, for example, worker housing projects near industrial parks. This model can also be applied to Vietnam given the strong development of the manufacturing industry today as well as many international investors are interested in this particular segment,” said Deputy Managing Director of Savills Vietnam.

However, there are no comprehensive regulations on the conditions for building social housing projects for international investors. The conditions for foreign investors to participate in this market are a long-term roadmap with projects of up to tens of thousands of apartments. While current projects in Vietnam are still being implemented in a fragmented manner.

“If Vietnam has a clear and consistent strategy directed and guaranteed by the Government , I believe it will attract the attention of international investors because only large-scale projects can attract the private sector in terms of profit,” the expert recommended.

With many drafts and proposals on redefining profits and incentives for businesses when developing social housing as well as ensuring a clear development roadmap for projects, Mr. Troy Griffiths said that this is a very positive long-term effort of the Vietnamese Government.

Source