Solutions to troubled real estate projects

There are now over 700 projects being built in HCM city, over 116 of which have run into legal difficulties. 

>> Larger real estate projects carry larger debts

According to the Real Estate Association of Ho Chi Minh City, there are now over 700 projects being built in HCM city, over 116 of which have run into legal difficulties. Some investors have struggled for up to five or seven years to finish these processes, like paying land use fees.

Search for assistance

Over the past two years, the People's Committee of Ho Chi Minh City has held several meetings with businesses and departments to discuss problematic projects. It has pledged to issue support policies for businesses with a capital of over 100 billion VND and is committed to creating a stable political environment to safeguard the legitimate interests of private investors. Despite these promises, many projects continue to face obstacles and losses.

Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, highlighted some obstacles in the investment and construction procedures for commercial and social housing projects that have caused pain and difficulty for businesses.

One of the projects currently facing difficulty is Shizen Home, invested by Gotec Vietnam Co., Ltd. (Gotec Land). Gotec Land has sent a petition to the Prime Minister, ministries, and the People's Committee of Ho Chi Minh City, requesting a solution to the procedure for issuing a notice of eligibility to sell future houses in accordance with the law for the Shizen Home project (District 7).

Gotec Land has accused the Ho Chi Minh City Department of Construction of making it difficult or not approving the procedure for issuing a notice of eligibility to sell houses formed in the future. Previously, the company had complained to the Ho Chi Minh City Department of Construction for causing them to lose more than 1,000 billion VND due to the refusal to grant a qualified license to raise capital for the project because of a "legal review."

Similarly, Novaland in 2020 had 10 projects with procedural issues that required assistance. At the recent meeting on February 20, Novaland continued to have two projects awaiting a solution to remove obstacles from the City People's Committee.

>> Real estate businesses are under pressure to repay bonds before maturity

Waiting for a solution

The real estate market is currently experiencing a crisis due to skyrocketing land prices and interest rates. Moreover, the extensive procedures are adding to the burden on businesses whose capital is tied up and unable to be recuperated.

A representative from Gotec Land stated, "If these difficulties are not addressed soon, we may face a situation where we can no longer cover costs and keep our operations running."

In order to overcome these obstacles, Mr. Bui Thanh Nhon, Chairman of the Board of Directors of Nova Real Estate Corporation (Novaland), proposed to the Prime Minister to direct the removal of legal bottlenecks for businesses across the country. This problem has persisted for many years.

Speaking to the Business Forum Magazine, Dr. Su Ngoc Khuong, Senior Director of Investment Consulting Division, Savills Vietnam, stated that legal issues are the biggest reason why foreign investors are losing interest in Vietnam's real estate market. He emphasized the need for quick and practical solutions to attract resources, especially FDI inflows across all real estate segments.

The expert explained that if the issue of conflicting laws cannot be resolved under the current law, it will take a long time to submit new laws for approval to the National Assembly. This leads to additional financial costs for projects, loss of opportunity costs, indirect waste of capital, and blocking of opportunities to release capital from partners and customers due to insufficient funds for sale and transfer terms.

Speeding up legal procedures for projects not only removes obstacles to clearing projects, but it is also a less expensive and effective solution that acts as a special medicine to cure the disease of capital shortage and lack of capital in the sluggish local market, affirmed Mr. Khuong.