According to Nikkei, citing several sources, the Japanese government and private businesses have launched a project with financial programs aimed at helping Vietnam's middle class purchase high-end, long-term housing. The total capital for the project is $192 million.

The Japan International Cooperation Agency (JICA) will provide half of the funding in the form of low-interest official loans, a form of official development assistance. JICA is an agency under the Japanese government.

This will be the first time Japan has used official development assistance to help people in Southeast Asia buy homes, according to Nikkei.

The Vietnamese government has implemented a program to help low-income people buy homes. However, the program does not support the middle class.

Middle-class residents in Ho Chi Minh City have been able to borrow money to buy houses under a Japanese-funded project since 2017. Photo: real.vn.

The Japanese government's project will create a long-term loan program for home purchases and credit guarantees for the middle class if they buy apartments that meet Japanese quality standards. Both programs could begin in 2017.

Many Japanese corporations operating in Southeast Asia – such as Maeda, Kyoei Steel, and Tokio Marine Holdings – will participate in the project. They hope the financing programs will stimulate sustainable demand for housing. Maeda will take on home construction contracts, Kyoei Steel will expand its building materials sales, and Tokio Marine aims to increase its fire insurance sales.

Interest rates remain unchanged.

According to the plan, JICA will provide a 10 billion yen loan to Vietnamese financial institutions, including Vietinbank.

Vietnamese financial institutions will use funds to provide home loans to customers with terms of 15 to 20 years. The interest rate on the loan will be fixed – an unusual phenomenon in Vietnam.

Most houses in Vietnam are quite simple, with walls made of brick and reinforced steel. For lending purposes, such houses are not of high value. Furthermore, long-term home loans are not common in Vietnam, a country that still lacks a robust credit guarantee system for individual borrowers.

Under a project supported by Japan, buyers of single-family homes and apartments built using precast concrete technology can receive loans from banks. The Japanese have applied precast concrete technology to build high-rise residential buildings.

A credit guarantee organization will be established with a total capital of 10 billion yen. Private businesses and the Ho Chi Minh City government will collaborate to form this organization.

Borrowers pay a fee to the credit guarantee organization. If the borrower experiences financial difficulties and is unable to repay the loan, the credit guarantee organization will pay off the debt on their behalf. Customers can access more than 50,000 home loans each year.

If the project is successful, it will be further implemented in cities with growing middle classes in Vietnam – such as Hanoi and Da Nang.

According to Zing.vn