Controversy over proposal to increase profits to 15%

At the online conference to implement the Prime Minister's telegram to solve difficulties for the real estate market on the morning of November 13, the Hanoi Department of Construction proposed to increase the profit margin for building social housing to 15% - 20%, instead of the old level of 10% which did not attract many businesses to participate.

A representative of the Hanoi Department of Construction said that increasing profits to 15% - 20% is also the desire of many investors in the market.

debate on proposal to increase profit to 15-20 for social housing picture 1 — The 10% profit margin when building social housing is considered unattractive, making many large investors uninterested. However, the proposal to increase the profit margin to 15% - 20% is still controversial. (Photo: DM)

In an interview with a reporter from the Journalist and Public Opinion Newspaper, a representative of a company that is preparing to build two social housing projects in Hanoi said that the maximum profit when the investor builds housing is 10% of the total investment capital. That is, if the project has an investment capital of 1,000 billion VND, the investor will only make a profit of about 100 billion VND.

This person believes that controlling profits has the benefit of controlling housing at a low level. However, in reality, in the process of building social housing, there will be some risks that may occur, such as increasing material prices, inflation, increasing labor costs, etc.

“Therefore, investors are very afraid of losing money when participating in social housing projects. Therefore, increasing profits to 15% - 20% is reasonable,” he said.

Previously, the Ministry of Construction also spoke out about the proposal to increase profits for social housing projects. According to the Ministry of Construction, some enterprises investing in social housing said that the preferential regulations in the draft revised Housing Law that the Government submitted to the National Assembly for investors in social housing projects and housing for the armed forces were not attractive and not practical.

Specifically, the incentives of exemption from land use fees, land rent for the entire land area of the project, and value added tax incentives... are not actually incentives for investors but incentives for buyers and hire-purchasers because these incentives are not determined in the selling price or hire-purchase price of social housing.

Regarding the incentive of enjoying a maximum profit of 10% for the area of social housing construction (not the profit for the entire project), businesses said that this level is low. Businesses proposed to increase this profit level to 12-15%. However, the Ministry of Construction said that if the profit level is increased, the price of social housing will increase, and buyers will have to bear this cost.

The incentive is to reserve up to 20% of the total residential land area of the project or reserve 20% of the total residential floor area for the construction of business and commercial services (not housing). The investor is allowed to account separately, not to include the investment cost of building this project in the price of social housing and is entitled to enjoy all the profits from this business and commercial services area as the draft submitted by the Government to the National Assembly has solved the problem.

According to the Ministry of Construction, the above regulation is a real incentive for investors. However, businesses believe that this mechanism is not attractive and encouraging enough because investors have to invest large amounts of capital in these commercial and service projects, but can only lease them out, and the capital recovery period is long.

These projects only have value in large urban areas, and are difficult to lease in other areas. This can lead to abandonment and stagnant capital for businesses.

Meanwhile, according to the Ministry of Construction, the regulation that investors of social housing projects are entitled to 20% of the total land area within the project to invest in the construction of commercial business facilities to offset investment costs. This will contribute to reducing the selling price, rental price, and hire-purchase price of social housing and reducing the cost of management and operation services of social housing after investment as stipulated by the Government.

The Ministry of Construction emphasized that the above incentive mechanism has been implemented stably and effectively by ministries, localities and enterprises for nearly 10 years.

Based on the above reality, the Ministry proposes to supplement regulations on incentive mechanisms for investors of social housing projects. Accordingly, investors of social housing projects not using public investment capital are entitled to a maximum profit of 10% of the total construction investment cost for the area of social housing construction.

At the same time, 20% of the total residential land area within the project has been invested in building technical infrastructure systems to invest in building business, commercial and residential services.

The investor is allowed to account separately, not include the construction investment cost of this project in the price of social housing and enjoys all profits from this service and commercial business area.

In case of investment in construction of commercial housing, the investor must pay land use fee for the area of commercial housing construction according to the provisions of the law on land.

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