The HoREA: Real estate market has many congestions

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The transfer of real estate projects are facing many difficulties. Photo: N.H

Congestion in making procedures for approval of investment policy

The HoREA reports that the first congestion in the real estate market today is that the state agencies do not deal with the policy of investment in cases where enterprises have received the land use rights transfer, including residential land, agricultural land, non-agricultural land, the land for real estate projects.

According to the HoREA’s report, in the past, based on the provisions of Article 169 and Article 191 of the Land Law, competent state agencies will issue documents approving the investment policy and designate investors in the case of enterprises have received the land use rights transfer of the project, including residential land (usually accounts for a small proportion of new residential projects, new urban areas), mainly agricultural land, non-agricultural land, specialized land use..., in accordance with land-use planning already approved by competent state agencies.

However, the process and procedure for selecting investors in the form of appointing investors who had had clean land fund of the project (including residential land and other land) has been stuck, after the Ministry of Construction issued Document No. 805/BXD-QLN dated May 5, 2016. The Ministry of Construction requested the People's Committee of Ho Chi Minh City to report to the Prime Minister for approval before carrying out the above policy.

According to the HoREA, the approval of investment policy is the first step to be taken to carry out the next steps in the project. At this point, the company has spent a great amount of capital for land clearance and carrying out the preparation of investment. This is also one of the reasons for the decline in project supply, in housing products, in supply of flats and in real estate transactions.

Many enterprises are in a difficult situation, stuck with long-term capital, bear high interest rates, easily fall into bad debt and lose investment and business opportunities, are even on the edge of bankruptcy. Since mid-2015, the Association has made a number of written proposals, but this issue has not been resolved because of the process of reviewing amendments and supplements to the Land Law, Housing Law and Real Estate Law.

Transfer of projects is difficult

Another bottleneck of the real estate market is the transfer of real estate projects. At present, the demand for transfer of projects is very large, in which many projects have been mortgaged as collateral for credit loans, including bad debts.

The transfer of project is a normal business activity according to the needs of enterprises, but according to the current law, the investor will have to implement land clearance and have a certificate of land use right before transferring the project. In reality, the transfer of projects is very difficult. In the first 10 months of 2018, only 15 of 23 projects for transfer were approved.

Therefore, it does not facilitate new investors to have the capacity to replace the old ones to restart the projects which have been stopped, as well as not creating a favorable flow in the project transfer market. This is also a cause leading to the fact that more than 500 projects have been revoked investment policy, being delayed, or being an " inventory project ", but not eligible for transfer.

According to the HoREA, in terms of business nature, transferring the entire project or part of a land-using project is a normal activity of a business under the market mechanism without any factor of profiteering.

The transfer of land-using projects for profiteering is due to loopholes and loosening of legal regulations, enabling some people to profit from the policy.

Accordingly, it is necessary to popularize the method of open bidding in the country, open international bidding to select investors in land-using projects, the socialized projects of investment in Public Private Partnership (PPP), especially the form of BT contracts paid by reciprocal land fund.

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In addition, the Government soon issued a decree regulating the use of public assets to pay investors when carrying out the project in the form of BT contract. This is a lack of legal documents to implement the Law on management and use of public property. Due to the lack of this Decree, the legal gap has been created since 1 January 2018. While this Decree has not yet been issued, the HoREA requested the Government to soon issue a resolution to instruct ministries, branches and localities to handle BT projects to be repaid by reciprocal land fund, in order to ensure the legitimate rights and interests of BT project investors who are facing many difficulties in the recent years.