by VI ANH - TRUONG DANG 16/05/2023, 02:38

Are real estate deals on trading floors necessary?

Businesses feel that the Draft Law on Real Estate Business (amended) should take into account the addition of an intermediate step when regulating real estate transactions that take place through a trading floor.

Ten chapters and 92 articles make up the (amended) Draft Law on Real Estate Business. The Government has sent the proposed law to the National Assembly for review, and it is anticipated that it would be adopted at the session in October 2023. According to experts, this draft law covers more specific real estate business challenges than the 2014 Law, but it still has to be given more thought.

*Many concerns have been raised that this regulation will lead to an increase in intermediary layers, raise transaction costs, and be factored into the selling price for homebuyers*

The sale or lease-purchase of residential properties or future building projects by investors, as well as the transfer, lease, or sublease of land with technical infrastructure, are both real estate transactions that, according to the Draft Law (amended), must take place on a trading platform. Clarification of openness and open disclosure of transaction information in the market will result from this.

According to Mr. Nguyen Quoc Hiep, the Chairman of the Vietnam Association of Construction Contractors, Article 57 of the Draft Law on Real Estate Business (amended) requires real estate transactions to be carried out through a trading floor, while Article 60 states that a real estate trading floor only needs to meet the requirements of "technical infrastructure and financial capacity."

Because there are presently numerous real estate investment organizations that coordinate between trading floors and investors, Mr. Hiep thinks that this legislation is somewhat tight. However, the volume sold through internal trading floors is never more than the volume sold through the sales department. The personnel are more committed to the project as a result, and commission rates for external trading floors are always double those for employees of selling investors.

As we progressively work to streamline intermediary processes and cut expenses, Mr. Hiep recommends that this intermediate phase should be taken into consideration. Real estate deals should be open and transparent, whether through trading floors run by investors or through trading floors.

On the other hand, the need that real estate transactions be certified by a notary public casts doubt on the legal ability of real estate trading floors.

Associate Professor Dr. Nguyen Quang Tuyen, Head of the Department of Economic Law at Hanoi Law University, assesses: "Are we currently training our staff working on the trading floors with the necessary skills and professional knowledge to meet the requirements of society, including the directors of these floors?" How much training has the director of our trading floor undergone in a systematic manner?"

*The mandatory regulation of real estate transactions through exchanges increases intermediary costs for the exchange, drives up housing prices, and ultimately burdens the homebuyers*

According to Mr. Nguyen Van Dinh, an independent real estate expert, notaries have the obligation to assess the legal aspects of the assets being transacted, including evaluating the legal status of the project and the conditions for including the real estate in the transaction, when executing notarized contracts for real estate purchase and transfer. The notarization will be rejected if the prerequisites are not satisfied.

This function of notaries overlaps with that of the trading floor (as specified in Article 61 of the Draft Law on Real Estate Business (Amended)). The notarization charge for contracts in this article will not exceed 0.1% of the contract amount. The buyer and seller must pay an intermediate charge on the trading floor that is greater than 2% or even up to 8% of the contract value, which is 20-80 times higher than the rule.

Furthermore, this rule compel people to do transactions through an intermediate corporation, limit ing their business autonomy and choice of business organization processes and contract signing with consumers.

According to the foregoing data, experts feel that mandating real estate transactions through a trading floor is unnecessary. However, according to Mr. Nguyen Manh Khoi, Deputy Director of the Ministry of Construction's Department of Housing and Real Estate Market Management, the requirement in the Draft Law to conduct real estate transactions through a trading floor is necessary and in line with Central Executive Committee Resolution 18-NQ/TW in 2022 and Resolution of the 13th National Party Congress. It highlights the need of placing people's genuine interests first in policy creation.

According to Mr. Nguyen Manh Khoi, while the trading floor was not well-developed in the past, the transaction process was unclear, and personnel professional competence was weak and insufficient, there are now sufficient conditions to implement real estate transactions through a trading floor. Furthermore, Mr. Nguyen Manh Khoi argues that there have been several deficiencies in openness in recent real estate deals. As a result, real estate transactions must be conducted through a trading floor, analogous to commodities trading through a commodity exchange.