NA passes new Real Estate Law

Sky’s the limit: the new law is expected to improve the transparency of the real estate sector

The law will tighten a legal framework full of loopholes that have caused chaos in the real estate market over the past few years, analysts said.
“It is essential to have a real estate law in order to address problems in the real estate market, such as illicit transactions, speculation, and stagnancy to make the market healthier,” said Chu Van Chung, head of the legal department at the Ministry of Construction.
“The law will make it legal and more convenient for individuals and economic organisations to conduct real estate transactions,” he said.
The law, which will take effect in January 1 next year, provides regulations on property development and transactions, brokerage services, consultant services and state management.
One controversial point in the law is whether to allow properties not yet built to be traded, said Nguyen Duc Kien, head of the NAs Budget and Economics Committee, said this practice already exists and there was no reason to change it now. He argued that most developers were not financially strong enough to put up cast for projects, while buyers had ready money, thus allowing developers to raise funds.
However, to protect buyers’ interests, the law puts forward principles that developers must follow after a sale. They may only take deposits from buyers after they have completed infrastructure construction for properties according to approved plans. Fundraising, meanwhile, must be paid by instalment.
The law requires developers to use deposits to build properties and if they miss the finish date set in contracts, they will have to pay interest for the advanced deposits for the delay period. The law also provides that buyers who do not pay as promised will pay interest for the sum delayed.
Interest rates will be set in line with those of the commercial banks and the provision must be included in each contract. The law also requires developers to trade properties via a centre, which can be set up by, or leased from, individuals and organisations. However, individual transactions do not have to be conducted via the centre.
Several NA deputies have said, however, that the provision was inflexible and could increase costs and procedures for businesses. But Kien defended the clause, saying that it was crucial to make real estate transactions more transparent. Most property transactions are currently not registered, making it a challenge for the government to manage the real estate market effectively and for developers to obtain reliable information for market analysis.
“Forcing transactions to be conducted via trading floors will benefit both sellers and buyers,” said Kien.
The law also has provisions over real estate brokerage and price appraisal. Those who want to set up brokerage and appraisal business must have at least one staff member with an approved certificate in the field. Individual brokers are also required to register in line with laws and must have brokerage certificates.
Chung said the government would issue more specific regulations on granting brokerage and appraisal certificates.
The law also forces developers to take responsibility for the quality of construction.



No. 767/June 26-July 2, 2006