Wheels in motion to resolve impediments in real estate

December 30, 2022 | 11:00
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After a period of sluggishness over the last couple of years, the real estate market has not yet rebounded as anticipated and has even shown symptoms of a standstill due to legal concerns.

The government on December 14 issued Official Letter No.1164/CD-TTg, outlining the responsibility of ministries and branches to eliminate obstacles associated with corporate real estate bonds.

The previous month, it also issued Decision No.1435/QD-TTg, which established a working group to resolve bottlenecks in the execution of local real estate projects.

BHS Group is planning such a project, with huge housing developments in Danang and Cam Ranh; these properties are to be priced between $29,000 and $42,000. Chairman of BHS Group Nguyen Tho Tuyen said, “We want to distribute the items at the optimal period, when the market bottoms out at the end of 2023.”

Wheels in motion to resolve impediments in real estate
Vietnam wants to kickstart real estate prospects as soon as possible, photo Le Toan

However, Tho is concerned that if interest rates do not change or continue an upward trend in early 2023, it would be disastrous because it would “impact the mentality of investors”.

Some groups have recently implemented a sales strategy that offers homeowners zero interest for the first two years. According to this strategy, the grace period will expire in 2023, at which point investors would be required to pay principle and interest on their own loans using variable market interest rates.

Given that the real estate market is on the verge of entering a recession, the concerns of Tho from BHS Group may be well-founded. According to a number of real estate companies, legal and mechanism issues are critical when undertaking social housing projects. In addition, the state offers incentives to lower the cost and complexity of purchasing a home.

Le Huu Nghia, general director of Le Thanh Construction Trading Co., Ltd., said, “At present, the application process for social housing is complicated by several rules.” According to Nghia, the investment and housing law processes are conflicting, making the situation tough for both companies and homeowners.

“One particular issue is faced by self-employed homebuyers. There are checks on whether or not a person owns a home, but they do not verify if an individual who wants to purchase a home pays personal income tax. This prevents firms from submitting papers to the Department of Construction for evaluation,” Nghia said.

According to the Ho Chi Minh City Real Estate Association (HoREA), legal issues account for the majority of the challenges facing real estate projects. A variety of conflicting and inconsistent legal provisions are the primary cause.

HoREA chairman Le Hoang Chau said that administrative processes are complex and inconsistent, forcing firms to spend a long time to complete them “or lose commercial prospects” as a result of rising investment costs. He cited over 100 real estate projects in Ho Chi Minh City with unresolved legal issues dating back almost a decade, such as the social housing project Le Thanh Tan Kien, phase 2, which has been unable to proceed with development because planning has not been revised.

Amendments to the 2013 Law on Land are hoped to be completed soon, along with a number of associated regulations to provide uniformity and consistency. This procedure is anticipated to be finished in 2023, thus Chau said there should be more immediate remedies, such as addressing present legal issues and aiding the recovery of the real estate market.

HoREA has advised the government to quickly develop a standard protocol for investment processes for urban and commercial housing projects. It also suggested that, for social housing projects, municipalities expeditiously adopt processes for approving policies and investors in the event that firms acquire land transfers and are not obliged to adhere fully to the plan.

Dr. Vo Tri Thanh, director of the Institute for Brand and Competitiveness Strategy, remarked that the dedication of the government and the National Assembly to create momentum with the economic stimulus and remove policy inefficiencies is a strong indicator that will help the economy and the real estate market recover and flourish.

“The main remedy is to modify the land law. However, it is also vital to evaluate the approach: whether specific or generic, it must be grounded in reality. Additionally, it must be addressed as to how to manage it; only then can the existing difficulties and arguments be resolved,” Thanh said.

He added that removing some policy obstacles would assist real estate companies to be more confident with their business plans in 2023, particularly after three years of being afflicted by the geopolitical situation, consequently causing a domino effect in numerous other economic sectors.

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By Angela Nguyen

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