Property sector’s new gamebreaker

A pot of gold at the end of the rainbow will await developers who play by the rules

Vu Xuan Thien, vice director of the Ministry of Construction’s (MoC) Housing and Real Estate Market Management Department, said: “The new Decree 71/2010/ND-CP, effective on August 8, will help to make the property market more transparent, pushing supply from large-scale property projects rapidly into operation, offering the reasonable residential prices for residents. The decree will also pose a challenge for short-term investors and weed out small real estate companies without enough financial capacity.”

Thien said the new decree allowed residential developers to sell in advance a maximum 20 per cent of a project’s total number of apartments to raise cash to address any capital mobilisation issues.

MoC vice minister Nguyen Tran Nam agreed that the decree would raise residential apartment supplies in Vietnam, especially Hanoi.

“Hanoi currently has 1,000 property projects with about 200 projects waiting to be licenced based on the city’s master plan towards 2030 and a vision to 2050,” said Nam.

“Once the master plan is approved by government, it will combine with Decree 71 to help these above projects, creating a huge residential supply for the market. That will help stabilise the Vietnamese property market as supply will gradually reach demand,” added Nam.

Besides, the decree is expected to bring transparency to the market as it forces developers to inform local construction departments, where their projects will be located, 15 days before signing capital raising contacts.

The information must include capital contribution forms, the amount of capital the developers plan to raise, names and addresses of individuals or organisations that will sign capital contribution contracts.

Developers are also required to report their process of mobilising investment every six months to local authorities.

“The clauses that force developers report their project’s detail information, how many units they have and sell and who the buyers are, will partially help to make the market to be more transparent,” said Nguyen Thien Huong, a lawyer from Vilaf international law firm.

Furthermore, the decree will also weed out investors and developers which have insufficient financial muscles. Developers can only sell the remaining units by signing sale contracts with buyers after having project designs approved, finishing the foundations of a project and completing sell-purchase procedures through real estate trading floors.

The decree also regulates that housing developers must use the money raised in advanced from individuals and organisations only for specific projects stated in the contract.

Doan Chi Thanh, director of CDO Saigon real estate company, further explained that, according to the decree, second developers or capital contributors were not allowed to sell products immediately after signing contracts and paying money to the first developers. They could sell only after the project meets all of the above requirements [having design of the project approved, finishing construction of the foundation of the project and completing sell-purchase procedures through real estate trading floors.

“That means capital investors poured into a project would be blocked for a long time. Those have no financial capacity cannot join into the market,” said Thanh.