Businesses struggling to complete housing projects

(SGI) - Real estate has been in a state of limbo for the last two years across the country. 
Illustrative photo.
Illustrative photo.

The current tightening of credit by banks for real estate projects has created scarcity of capital flow and this has caused housing prices to rise. Demand for housing in big cities like Hà Nội and Hồ Chí Minh City has always been insufficient in the past, and now businesses are also struggling with procedural problems that are holding up completion of several important projects.

Housing projects on hold

Several businesses are struggling to complete ongoing projects. About 64 housing projects are facing procedural problems. Recently 29 real estate businesses in Hồ Chí Minh City asked for the removal of procedures that are holding up completion of 38 commercial housing, social housing, and resettlement housing projects that are lying incomplete for many years.

Mr. Le Hoang Chau, Chairman of the Hồ Chí Minh City Real Estate Association (Horea), said that currently in Hồ Chí Minh City there are over 100 real estate projects waiting for completion. For instance, the high-rise apartment buildings in Dong Tang Long new urban area in Truong Thanh ward in Thu Duc city is awaiting Compensation and Clearance Corporation to clear procedures. Although the investment policy has been approved since 2009, until now, even after 13 years, it is still being held up because of only one procedure. Normally, the investor of this project builds one lot of resettlement houses, then hands them over to the city by exchanging land use fees and commercializing the remaining three lots. When the enterprise carried out the procedures for land allocation to complete the next procedure, there was a snag in the exchange mechanism, and the matter continues to remain unresolved.

A similar procedure in swap mechanism is holding the Phu My-2 apartment project in District 7, belonging to the Khai Huy Quan Joint Stock Company. According to the approval procedure, the investor is allowed to do commercial business and must hand over to the city the resettlement house fund corresponding to 252 apartments to exchange land use fees for this project and the Florita project in District 7. Currently, the company is carrying out the procedure of handing over 252 resettlement apartments to complete the payment but has encountered the swap mechanism snag because the current law no longer has this regulation. This has led to the Florita project being shelved and unable to be handed over to people since 2018. So far, the procedure for granting certificates to residents has not been considered or resolved.

Also facing procedural problems is the Sao Mai project in District 7 of Hung Thinh Incons Joint Stock Company. This is the initial project approved by the People's Committee of District 7 for a 17-storey apartment building, where the foundation and basement have already been built. By 2017, the project was transferred to Hung Thinh Incons due to bad debt trading and approved by the City to receive the transfer of the entire project. The red book of residential land has been transferred to Hung Thinh Incons, but then it could not be deployed because the planning of subdivision is low-rise and building the basement foundation without a construction permit is not in accordance with the plan. The Hung Thinh Incons Company has dismantled the basement and repeatedly petitioned to terminate the project to transfer residential land use rights to recover capital, but there is no mechanism to resolve it.

Previously, after receiving a report summarizing the recommendations of 57 businesses asking to consider and remove obstacles from 64 commercial housing and social housing projects, the Office of the People's Committee of Hồ Chí Minh City had Document 2391 convey the opinion of Mr. Phan Văn Mãi, Chairman of the People's Committee of Hồ Chí Minh City, directing relevant departments and branches to urgently study the contents of the recommendations. Accordingly, now departments and agencies work and guide project investors to comply with the law. In case there are difficulties or problems beyond their authority, it is reported to the People's Committee of Hồ Chí Minh City for consideration within 30 working days.

Price rise inevitable

The latest report of the Ministry of Construction on the real estate market shows that apartment prices in localities will tend to increase, with the average rate of increase at 3% towards the end of 2021. In Hà Nội house prices of apartment buildings increased by 4% to 5%, higher than in Hồ Chí Minh City where it increased by about 1% to 2%. For instance, high-end apartments in some projects with special and central locations in Hồ Chí Minh City have very high asking prices, such as in Thao Dien Green project in Thu Duc city, which costs about VND 100 million per square meter. In particular, the Empire City-Monarch project in Thu Thiem urban area in Thu Duc city has an asking price of upto VND 200 million per square meter.

The increase in house and land prices in big cities is now inevitable. Especially in recent years, when many projects have been put on hold, prices have increased more due to several regulatory factors. Understandably, hundreds of projects with tens of thousands of apartments stuck for many years will have a significant impact on the real estate market. When the project is completed, businesses can recover capital to implement new projects, but because the project is prolonged, it leads to increased costs, and high prices are affecting homebuyers the most.

Mr. Nguyen Van Dinh, Chairman of the Vietnam Real Estate Brokers Association, said that the laws related to investment and business development have been completed, but the market is growing too fast, so there are points that are no longer relevant in the present context. There is limited supply while demand is high, which is pushing up real estate prices. In addition, the tightening of credit in real estate has also contributed to the current steep rise in housing prices. Speculators look for financing through informal channels at a very high interest level. Investors who buy real estate with idle money, or businesses with good sales ability, are less affected when banks tighten credit. However, the restriction on lending to real estate can make it difficult for investors with large inventories but dull sales.