Mortgaged project list to boost transparency

A list of 77 mortgaged projects released in Ho Chi Minh City has sparked debate amongst property developers -photo Le Toan

According to the department, the goal of releasing this list was to provide clarification for homebuyers and make the real estate market more transparent.

According to Pham Ngoc Lien, director of the department’s Land Registration Office, developers often sell their apartments before construction completes because they need capital to fund their projects. However, the flats are only available for purchase once the conditions are approved by the Department of Construction.

It was recommended that buyers undertake careful research before placing their trust and money in housing projects, Lien noted.

“If the property is registered as mortgaged, homeowners have the right to require investors to supply them with a written document confirming the deletion of the mortgage attached to their purchased flat,” he said.

Following this release, residents, consultants, and developers have expressed their different feedback to VIR.

According to David Lim, partner from ZICOlaw Vietnam, the list is attached to Official Letter 7067/TNMT-VPDK issued by the department on July 14, 2016. As clarified by the letter, up until June 8, 2016, there are 77 residential development projects with use rights and assets attached that have been mortgaged to the banks.

“It is a common practice of the developers since they would need financing to develop the projects, especially large scale projects,” Lim said.

According to Lim, under the laws, if the residential houses to be formed in the future have been mortgaged, the developers may still sell such houses to eligible buyers, provided either that the mortgage is released prior to the sale, or the banks and the buyers mutually agree on such sale. Notably, for the sale of residential properties, developers must obtain bank guarantees in order to transfer the properties to the buyers. This factor should provide some comfort to buyers.

“With this information made public, buyers can discuss the status of such mortgages and the related loans with the developers to feel reassured that the loans are being properly serviced and that there are limited risks relating to such loans,” Lim said. “This will help buyers make informed decisions on the properties they wish to buy and create more transparency in the real estate sector. It will in turn strengthen the real estate market and will benefit all real estate players including the government, developers, and the buyers.”

Meanwhile, Duyen Nguyen, associate director of Valuation and Advisory Services from JLL Vietnam, said that the release of this list had created a negative reaction from the majority of home buyers as they perceived that their mortgaged projects meant their developers were of poor quality. “However in the long term, we think that the transparency will help to enhance the prestige of the developers and protect the rights of the buyers.”

Duyen noted that there were nine projects on the list in which the buyers had mortgaged their units to the bankers, but not the developers. Among those are Phu My Hung, Saigon Land, Saigon Pearl, and SSG Tower.

According to the Housing Law 2014, developers are allowed to mortgage their projects but still have the right to sell and lease those units, but with the condition that all the mortgages must be released before signing contracts with buyers.

“After being released from banks, units will receive confirmation from local housing management levels on their eligibility to be sold,” Duyen said. “Besides, changes related to mortgaged assets must be approved and strictly supervised by bankers. Therefore buyers’ rights are still ensured by the projects invested by developers who strictly obey regulations, ensure the progress of the project, and are tightly supervised by bankers.”