The real estate market since2019 has witnessed a sharp decline in transactions due to less supply. The main cause of this situation is a series of projects that could not be implemented due to administrative procedures and legal problems.

The Ministry of Construction is continuing to review and finalize regulations
related to real estate investment and business activities. Photo: H. Anh 

Many projects get stuck because of procedures

Le Hoang Chau, Chairman of Ho Chi Minh City Real Estate Association, said the conflicts in the current legal regulations arethe biggest cause behind the shortage of real estate.

Le Hoang Chau said that according to the statistical report of the Department of Construction of Ho Chi Minh City, from December 2015 to the end of 2018, there were 126 housing projects with mixed land funds (including residential land, agricultural land, and non-agricultural land) blocked due to investment procedures because the investor received the transfer of land use rights in accordance with the land law and has to change land use purposes, but has been congested and unable to complete construction investment procedures, due to a number of inconsistent legal regulations, as well asconflicting laws.

Consequently, enterprises are in extremely difficult circumstances, buried in capital for many years, unable to carry out projects, suffering from losses, even in danger of bankruptcy. Therefore, it is difficult for people with real needs to create houses.

In this regard, Nguyen Thi Minh Thao, Head of the Research Department of Business Environment and Competitiveness (CIEM) also said that at present, in business investment activities of enterprises, the contradictions in regulations on investment, land and construction are the most contradictory.

Currently, some problems have been overcome. Regarding difficulties in changing the purpose of land use for projects with mixed land fund, the Law on Investment and the Law on Construction (amended) have incorporated and supplemented a number of articles of the Housing Law and the Law on Environmental Protection, which stipulates that investors have the right to lawfully use residential land and other types of land permitted by competent state agencies to change the purpose of land use to residential land. This regulation takes effect from January 1, 2021, and will remove the bottlenecks, because previously the Housing Law required that 100% of legal residential land must be designated as an investor of a commercial housing project. At the same time, clearing the deadlock of 126 commercial housing projects with mixed land fund in Ho Chi Minh City.

However, according to the assessment, the Investment Law and the Construction Law (amended) take effect from January 1, 2021, but some related laws such as the PPP Law and Law on Environmental Protection, as well as some provisions, are effective from September 1,2020, so it is not guaranteed to be synchronized and handle the congestion for investment projects using land. Accordingly, experts suggest that some provisions of the PPP Law and the Construction Law, the Investment Law (amended) should take effect from September 1, 2020, to ensure consistency and dealing with congestion on investment projects using land.

Quickly complete the review of legal procedures

Regarding the legal problems in real estate business, the current legal status for condotels is still a cause for concern. While ministries and sectors such as the Ministry of Construction and the Ministry of Natural Resources and Environment are taking steps to complete the legal provisions for this segment in order to protect the rights of stakeholders, recently, the Ministry of Public Security has issued documents. requesting the Government to direct the Ministry of Natural Resources and Environment andlocal People's Committees not to legalize tourist apartments (condotels), tourist villas and offices combining accommodation (officetel) into houses.

According to the Ministry of Public Security, in Document No. 703 dated February 14, 2020 of the Ministry of Natural Resources and Environment guiding the determination of the construction of tourist apartments, tourist villas is land for trade and services; tourism apartments, tourist villas are eligible for transfer under the Real Estate Business Law, the certificate of ownership of construction works allows the assignee to perform under the ownership certificate, constructions (red book) are not houses.

However, the Ministry of Natural Resources and Environment has not yet instructed the issuance of certificates of ownership of tourist apartments, tourist villas will be granted to investors or to each person who buys an apartment. In case of granting property ownership certificates to buyers of apartments in the project, there will be many complicated problems in security and order in the management of the building and management of apartment business and investment activities; management of project revocation upon the expiry of the project land use term.

Immediately after the Ministry of Public Security issued a written objection to the granting of ownership certificates for this type of real estate, the Ministry of Natural Resources and Environment also responded. The legal framework for this type of real estate is very clear.

By this time, the fate of these types of real estate has not been finalized, which means that besides the existing risks in the projects, there may be many potential risks waiting for entities related to this type of real estate. Obviously, the law for real estate business investment has not really reassured the entities in this market.

Also related to legal procedures in implementing the project, speakingat a seminar on the real estate market, Trinh Van Quyet, Chairman of FLC Group, said that many businesses were wary of investing in a real estate project due to the difficulty in implementing legal procedures. The FLC representative said that in the past, this enterprise implemented large projects such as FLC Sam Son, FLC QuyNhon in about 11 months, during which time the enterprise had just completed the legal procedures and construction. However, at present, if favorable, the time to complete legal procedures often takes up to three years, not to mention that each locality has a different approach, even many localities change their own decisions.

In this regard, Deputy Minister of Construction, Nguyen Van Sinhsaid there are still some inconsistencies in the related legal system such as the Investment Law, Land Law, Housing Law, Law Managing public assets in carrying out procedures for approval of investment policies, land allocation, land lease, selection of project investors.

In order to solve problems for projects, the Ministry of Construction has also urged localities to urgently complete the review of legal procedures on real estate projects that are currently being implemented but are temporarily stopped and dealt with definitively in the fourth quarter of 2020 to soon implement the project again, ensuring that ensure timely supply of goods to the market.