Mr. Le Hoang Chau: 4 issues of the real estate market are facing

In dispatch to the Government and the Central Economic Committee, Ho Chi Minh City Real Estate Association (HoREA) has pointed out 4 problems of the current real estate market should be removed.

Mr. Le Hoang Chau, Chairman of HoREA said that the official dispatch of the Association has been sent to the Government and the Central Economic Committee, the Association has made recommendations to remove barriers, difficulties and obstacles to be removed to develop healthy and sustainable real estate market.

Source: Internet

According to Mr. Chau, in recent years, the field always has a high rate of newly established enterprises. To date, there are more than 10,000 real estate enterprises operating, however, most of them are small and medium-sized enterprises operating mainly in real estate brokerage and services. Currently only 65 real estate enterprises are listed on the stock exchange. Recently, the Government as well as ministries have fiercely participated in listening to solving some difficulties for real estate enterprises. Real estate developed in many provinces and cities but the market still has 4 issues that need to be solved:

Firstly, the business environment has seen positive changes but has not been really transparent and fair. The previous market still has a phenomenon of interest groups, especially projects of the form of build-transfer (BT) contracts, which are reciprocally paid by urban land fund, leading to the fact that the competent authorities have to review, inspect and audit fiercely in the recent time.

Secondly, real estate companies are at risk of facing many risks, even bankruptcy due to the lack of stability and unpredictable policies; Or due to the phenomenon of "retroactivity" for some cases recently. Especially problems related to input costs are difficult to anticipate before deciding to invest in the project, including land use fees payable. According to Mr. Chau, in the past 2 years, Ho Chi Minh City has more than 150 projects reviewed and inspected. But recently it has just cleared for 124 projects, accounting for 78% of the projects reviewed, being able to return to normal.

Thirdly, the scale of the real estate market is declining both supply and transaction. From March 2017 until now, the HCM City real estate market has been continuously declining: In 2018, the market size decreased by 34% compared to 2017; In the first quarter of 2019, the number of projects approved by the Department of Construction decreased by 67%; According to Savills, the number of apartments decreased by 57% compared to Q1/2018; State budget revenue from land use fees decreased by about 70%.

Fourthly, real estate needs medium and long-term investment capital, however, depending on the current market depends on 2 main flows of bank credit and capital mobilized from customers. This poses many risks for both businesses and banks. Meanwhile, the State Bank is implementing a roadmap to gradually reduce credit to the real estate market, but there is no alternative capital source when the stock market has not really become a capital channel for the real estate market. Real estate investment funds and trust investment funds have not developed as expected... Therefore, this market is not really healthy and sustainable.

According to HoREA chairman, these factors are directly affecting the sustainable development of the real estate market. The reason is that the market still has above bottlenecks that have not been removed. In addition, the legal system is not really synchronous, it is also against cross-conflict, contradiction... For example, the Land Law stipulates that enterprises with "land" funds are allowed to implement the project, but the Housing Law stipulates that it must be "residential land" to be recognized as the investor of the housing project. At the same time, administrative procedures are still cumbersome, overlapping and with the same legal system, but there are localities where real estate enterprises are entangled with procedures, but many other localities are not entangled... 

Mr. Chau proposed while waiting for revision of related Laws such as Land Law, Housing Law, Planning Law, Investment Law... The Government should soon issue a Decree on using land fund to pay investors. BT, to solve current difficulties and problems, and open the way to mobilize private resources to participate in developing the infrastructure system by public private partnerships. In addition, the Association also proposed to popularize the method of land auction, bidding for projects using land to select investors. The relevant ministries also need to actively review, simplify, publicize and transparent administrative procedures, administrative processes...

According to Nhat Minh - Tri Thuc Tre