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Economy

Japan to bankroll 'Japan quality' homes in Vietnam

Most homes in Vietnam are simply constructed and lack collateral value.

HANOI -- The Japanese government and some private sector companies are teaming up to spread "Japan quality" housing in Vietnam, sources said on Saturday.

According to the sources, the project is to establish financial schemes that will allow middle-class home buyers to take out loans for more durable and expensive housing than what might otherwise be available to them.

The government of Ho Chi Minh City, in southern Vietnam, will also pitch in on the 20 billion-yen ($192 million) project.

Of that amount, half is expected to come from the government-affiliated Japan International Cooperation Agency in the form of low-interest official yen loans, a type of official development assistance.

It will be the first time for Japanese official development assistance to be used to help Southeast Asians acquire housing.

The Vietnamese government has an assistance program for low-income home buyers but not for middle-class denizens.

The 20 billion yen will be used to create long-term housing loan and credit guarantee schemes for middle-class buyers of Japanese-style housing units. The two schemes could begin in 2017.

Japan's Maeda Corp., Kyoei Steel Ltd. and Tokio Marine Holdings Inc., which have operations in the Southeast Asian country, will be involved in the project.

They expect the financial schemes to boost demand for more durable housing. Maeda will aim to win housing construction contracts. Kyoei Steel will seek to expand sales of construction materials. Tokio Marine wants to boost sales of fire insurance policies.

The Japanese-style housing promotion project will be launched in Ho Chi Minh City, which has a relatively large middle-class population that wishes to purchase high-quality homes.

JICA is expected to provide 10 billion yen in yen loans to Vietnamese financial institutions, including VietinBank, through the Vietnamese government. VietinBank is an affiliate of Mitsubishi UFJ Financial Group, a Japanese financial services giant also known as MUFG.

The Vietnamese financial institutions will use the money to extend 15- to 20-year housing loans to middle-class home buyers. The loans will carry fixed interest rates, which are unusual in Vietnam.

Most homes in Vietnam are simple, with walls made of rebar and bricks. These homes have little collateral value. Also, long-term housing loans are not widely extended in Vietnam, which lacks a credit guarantee system for individual borrowers.

Under the Japan-backed project, bank loans will be extended to buyers of single-family homes and condominiums built with the so-called precast concrete construction method. This approach is used in Japan for high-rise residential buildings.

A credit guarantee institution will be set up with a total of 10 billion yen, which is to come from the Japanese private sector and the government of Ho Chi Minh City.

Borrowers will pay fees to the institution. If a borrower runs into hard times and cannot repay his or her loan, the institution will assume the debt.

Under the project, more than 50,000 housing loans are expected to be extended each year.

If the project proves successful, it will be introduced in other Vietnamese cities with growing middle-class populations, like Hanoi, the capital, and Da Nang, in the central part of the country.

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