Orientations for Perfecting Housing Finance Policy in Hanoi Urban Area

 The Government has policies and solutions to guide and manage the healthy development of the urban land and housing market.

Therefore, in the coming time, the State needs to have mechanisms and policies to develop the real estate market in the direction of a market economy under the management of the State. The State will perfect the system of mechanisms and policies in the direction of ensuring the principles of synchronization, consistency, respect for market rules and increasing competitiveness. On this basis, a real estate market will be formed that is open, transparent and provides sufficient information to buyers and sellers. This is a prerequisite to ensure the liquidity of mortgaged assets in the market.

Developing the stock market to mobilize resources for housing finance. After nearly 7 years of operation, the stock market has actively promoted its role as a medium and long-term capital mobilization channel, meeting the investment needs of the economy, and is one of the factors promoting the transparency of business operations. However, the scale of the stock market is still small, not really a capital mobilization channel for the economy in general and for housing in particular.

Currently, the amount of idle money in the population is very large, but attracting it to the stock market, especially mortgage securities (if any), is still limited. The reason is that goods in the secondary mortgage market are often of great value, while the idle capital of the people is often small, so they are less likely to participate, although the real estate market has the potential to generate high profits. Therefore, if this amount of money can be mobilized, it will be an important source of capital in developing housing for the people.

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The underdeveloped stock market is also due to obstacles from the State's policy mechanism for issuing securities to the public, such as: high issuance conditions, complicated issuance procedures, lack of legal basis for problems arising in the process of issuing securities... Especially

There are no regulations on procedures and order for issuing mortgage securities and mortgage bonds.

The secondary market is quiet, not very active, and the market liquidity is not high, which is the underlying reason why mortgage securitization activities have not been implemented in this market. Therefore, housing finance activities have not been able to mobilize long-term capital sources for housing development and there is no mechanism to refinance housing mortgages. The State (specifically the Ministry of Finance, the State Securities Commission and the State Bank of Vietnam) needs to have specific regulations for this type of activity and special securities.

The development of the stock market is a prerequisite for the issuance of mortgage bonds in the secondary mortgage market. Mortgage bonds are a special type of security, combining the form of securities investment and real estate investment, secured by the value of the real estate it represents. At the same time, it allows investors to profit from the fluctuations in the value of this real estate, but does not necessarily hold direct ownership of part or all of that real estate during the period of owning the security.

Therefore, the State needs to have specific impacts to encourage market development. First of all, the State needs to strengthen the management mechanism, supervise the information disclosure in the market, create a transparent market to help investors make decisions based on complete, systematic and accurate information.

At the same time, continue to improve the legal corridor for the market, establish a stable and synchronous legal environment for securities trading activities. Enhance the effectiveness of legal documents in the field of securities trading and activities, including the issuance of mortgage bonds.

Establish an attractive environment for investors. The State Securities Commission should not interfere too deeply in the activities of the above members.

In the market, the motto "market members are allowed to carry out all activities that are not prohibited by law" should be implemented.

Housing credit must ensure technical elements of housing finance. These housing elements include:

Long loan term . It can be said that investing in housing is a big investment in every person's life, because low and middle income households have a very low savings rate to be able to cover the cost of buying a house in a short time. Their income is not high, so after deducting the minimum necessary living expenses, they can spend the remaining income to buy fixed assets or repair and upgrade houses. According to the survey results of the Institute of Sociology, on average, households regularly save about 8% - 10% of their income to invest in renovating their houses every year. If they want to improve their living conditions, they often do it step by step and prolong the time to repair and upgrade their houses. Low-income households can buy a house if they are allowed to pay in installments and have a long payment period, in some cases even from 20 to 30 years. According to the research results from the investigation process, it also shows that the capital demand for housing depends on the loan term factor of over 10 years, while the borrowers' desire is for this term to be over 20 years.

Loans are usually small loans. Households in need often borrow small loans, which are not very attractive to banks because the profits are too small compared to the costs that banks spend on management and credit records. Meanwhile, these subjects need low interest rates and loans are often unsecured or the value of the collateral is not high. In some cases, after borrowing capital, they refuse to repay the loan, or are unable to repay the debt.

Credit institutions also do not have much sympathy when lending to individuals and households. Usually, these organizations have difficulty in attracting

pressure for borrowers to repay loans. In case the collateral for the loan is recovered, it is not easy to sell these assets, especially for real estate. On the other hand, with small loans, financial institutions often set high interest rates to cover management costs, which is inconsistent with the requirements of housing finance. However, these small loans make households gradually expand their houses, improve living conditions and also reduce risks for the Bank although it means high administrative costs.

Low interest rates. Housing finance has different characteristics from other investment fields such as large investment capital and long loan terms. Because the loan amount for housing investment is often 20-30 times larger than the average annual income, borrowers want to be repaid over a long period of time. During the operation of the housing sector, there are difficulties arising for lenders. Lenders often have to collect short-term and medium-term payments to lend long-term. This raises the problem that in order to mobilize large deposits, long-term lenders are required to pay high interest rates. Therefore, borrowers who borrow capital to build houses will also have to pay high interest rates. Another issue that needs attention is the lending interest rate because it determines the operating costs and the interest earned from the lender. For long-term lending methods often applied to housing, the interest rate is the most important parameter that determines the success or failure of the lending activity. The three components of an interest rate are: (1) the actual rate of return on deposits, which depends on the amount of the deposit; (2) the extent to which it reflects the current or expected rate of inflation; and (3) the lender's operating costs. Since interest rates must take into account the rate of inflation, they are usually very high in places where inflation is common. High interest rates will lead to a situation where those who want to borrow cannot borrow money. However, only by raising interest rates can we attract deposits and protect

depositor's interests due to inflation or currency devaluation. The fact is that the housing finance sector is much more affected by inflation than other short-term lending sectors. This is also the contradiction in housing finance activities.

Using assets formed from loan capital as collateral. The specific content of housing finance is the method of mortgage with housing. The basic principle of this method is that housing loans are guaranteed by using housing ownership rights and/or land use rights as collateral. To effectively implement this issue, it is necessary to have a clear and strict system of documents confirming housing ownership rights and land use rights, which becomes a mandatory legal procedure for all citizens. In fact, the lack of legal ownership documents often greatly hinders people living in temporary places from being able to borrow capital to renovate their housing.

3.2.2. Orientations for perfecting housing finance policies in Hanoi urban area

In a market economy, when economic relations are regulated by the market, it is essentially a monetary economy. Distribution relations in the economy are expressed in the form of value. Through access to monetary funds and capital sources provided by financial intermediaries or internally, households and individuals use them to create housing. In that context, the general orientation of Vietnam in general and Hanoi in particular in housing finance policy in the coming time is as follows:

Building and perfecting organizations operating in the housing finance market (such as commercial banks) that operate healthily, effectively, sustainably, and have financial and management capabilities to ensure effective mobilization of capital sources for housing development, focusing on domestic capital sources, promoting internal resources, and effectively utilizing international capital resources.

Capital is a prerequisite for maintaining production development in general and for ensuring long-term and effective housing finance. Capital is also the basis for profit distribution and evaluating the effectiveness of economic activities, including material resources or assets in enterprises, cash resources or reserve assets in the population. Therefore, housing finance policy must focus on domestic capital sources, in which policies on capital creation and use must be built and implemented according to the inevitable laws of the market economy and contribute effectively to the formation of the capital market and the monetary market. State policy must thoroughly liberate all domestic capital sources, of all economic sectors of the entire population in the process of national construction in general and housing development in particular.

The main domestic capital sources include the State's economic investment capital, the self-owned capital of enterprises, cash capital and idle money of the population. To mobilize this capital source to serve the goal of developing housing finance, it is necessary to implement measures to develop the financial market. All forms of capital creation, whether primitive (directly from those with capital to those in need) or through financial intermediary systems, are facilitated to develop, especially the laws ensuring the safety of financial investment activities and credit activities outside the Bank. On that basis, create conditions for organizations to issue bonds, bills of exchange, stocks and to buy, sell and transfer on the market. The first meaningful action to promote capital market activities is the issuance of securities, allowing commercial banks, financial institutions and the entire population to buy, sell and transfer securities, creating trust in monetary business activities, gradually forming secondary markets to respond quickly to the volume of investment capital.

Domestic capital is the main source, foreign capital is important, the State needs to encourage and expand foreign economic and financial activities.

to attract foreign capital sources, take advantage of advanced technology and link the domestic capital market with the international capital market. Therefore, it is necessary to build a correct foreign economic strategy, in line with the current great changes in economics, politics, society and science. The strategic guiding ideology of foreign financial policy is national, democratic, developmental and socialist-oriented, with the main motto being multilateral economic relations, openness and mutual benefit. The State needs to have appropriate financial policies to encourage foreign investment in the form of loans, financial investment, direct investment... Special incentives for foreign investment in urban infrastructure projects, cutting-edge technology... Expand the foreign exchange market by allowing many commercial banks with sufficient capital and business conditions to trade in foreign exchange and provide international payment services to ensure by law the conditions for capital movement, profits, and quick and convenient foreign trade payments for domestic and foreign enterprises.

Develop and perfect legal regulations and practices to manage and operate the housing finance market effectively, healthily, and sustainably, minimizing and preventing financial and credit risks.

The ultimate goal of any financial policy is to conserve and use capital effectively. However, in implementing housing financial policy, the role of the State is very important in terms of the capital allocated from the State budget for the housing sector. In the early stages of the transition period, the State has a fairly large source of concentrated capital to invest in housing development projects. This capital includes capital mobilized from budget revenues, capital from equitization of state-owned enterprises, loans or aid from foreign countries and international financial organizations. The mechanism for using this capital source is still heavily based on one-way allocation and its use is extremely wasteful (during the investment or use process). These are essentially subsidies from the State.

water for housing without the real meaning of capital (returning to the owner and rotating many times). Therefore, for the State's capital source, it is necessary to convert the State's basic construction capital into medium and long-term credit. There are regulations on recovery time with reasonable interest rates and it is possible to contribute capital with other economic organizations for effective investment. On the other hand, the State should only subsidize housing for those with meritorious services, policy families and the urban poor, meaning that the State's policy in housing finance is selective.

At the same time, to create an effective, healthy, sustainable source of housing investment capital, minimize and prevent financial risks, the banking system's credit needs to continue to complete and put into operation quality money markets as well as deep capital markets. Implement a policy of capital mobilization and lending actively and strongly, ensuring both volume and efficiency in capital use, ensuring repayment capacity. Although the average income per capita is still low as it is now, the people's ability to save is generally limited, but banks, through diverse forms of savings mobilization with quite attractive interest rates, have attracted a large amount of this idle capital. For housing finance to develop, bank credit needs to be expanded to effectively meet loan needs. The credit structure needs to continue to shift in favor of housing investment, increasing medium and long-term lending. Continuously improve credit quality, reduce overdue and bad debt ratios to a healthy level according to international standards, increase turnover and improve capital efficiency. Continue to expand lending to those in need of home repair, upgrade and renovation, paying due attention to low and middle income groups.

Build and develop housing finance market tools and products such as housing savings programs, mortgage loan guarantees, mortgage insurance, and other housing finance tools with support and participation

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