Japanese ODA loans to fund house purchases won’t be ‘a free lunch’

  • by VNBUSINESS
  • July 06, 2016

Japan has, for the first time, decided to provide ODA (official development assistance) to help Vietnamese buy houses.

vietnamnet bridge, english news, Vietnam news, news Vietnam, vietnamnet news, consumption tax, TPP, US President Obama, Vietnam net news, Vietnam latest news, vn news, Vietnam breaking news, Japan ODA, real estate market, MOC

Nikkei has reported that the Japanese government would join forces with Japanese private businesses to run a financial project which aims to help Vietnamese middle-class buy expensive houses. The project is capitalized at 20 billion yen, or $192 million. It is expected that JICA (Japan International Cooperation Agency) would provide half of the capital under the mode of official loans at preferential interest rates. The other half would be provided by a credit guarantee organization. Under the plan, JICA would provide 10 billion yen to Vietnamese financial institutions, including VietinBank which would use the money to fund Vietnamese house purchases for 15-20 years. A credit guarantee organization would be established with capital of 10 billion by private businesses and HCMC authorities. If the project succeeds in HCMC, it would be implemented in Hanoi and Da Nang as well.
Japan has, for the first time, decided to provide ODA (official development assistance) to help Vietnamese buy houses.
Nguyen Tri Hieu, a renowned banking expert, believes that this is a good project as it helps Vietnamese buy houses at preferential interest rates with long term loans. Hieu also commented that Japan has taken smart steps to make the project feasible. Instead of providing loans directly to Vietnamese, it would lend money through Vietnamese banks and the credit guarantee organization. This way would help avoid legal problems. In principle, when people borrow money to buy houses, they would mortgage the houses themselves for the loans. If Japanese institutions lent money directly to Vietnamese, they would have to accept the houses as collateral. Meanwhile, under current laws, this is still impossible in Vietnam. In other words, Vietnamese laws are not open enough to mortgage assets to foreign legal entities not in Vietnam. The credit guarantee organization is believed to be just like the US Federal Housing Administration (FHA loans). Commenting about the Japanese plan to provide ODA to fund Vietnamese house purchases, analysts said the capital is ‘really important’ and ‘useful’, but warned that ‘there is no such a thing as a free lunch’. Former Deputy Minister of Construction emphasized that this is ODA, which means that Japan would provide preferential interest, while it won’t give capital for free, which means that Vietnam would also have to pay for what it gets, and that ODA would not only bring benefits to ODA recipients, but also to ODA grantors.  Hieu pointed out that only those who buy apartments meeting Japanese quality would be able to access the project. “You can understand that Japanese are building houses to sell to Vietnamese and they are lending money to Vietnamese to buy their houses,” Hieu said.
 

Dat Viet

Source: VietNamNet

Related Articles