Setbacks for housing projects in Ho Chi Minh City

(17/04/2022) - Several housing projects in Ho Chi Minh City are ready for sale to prospective buyers for many years. However, without the issuance of an appropriate legal certificate, investors have been unable to complete the sales.

The main reason is the non-issuance of a certificate of completion because most of these housing projects are constructed on public land that has not been allocated via state agency auctions. Since the state law requires that land must first be auctioned for any development projects, many investors of housing projects are unable to clear sales to buyers as their projects were developed on land not allocated via state auctions.

Projects in limbo

The housing and commercial complex on 119 Pho Quang Street in Ward 9 of Phu Nhuan District was completed many years ago, and most of the apartments there have now been rented out by the owners. The highly visible complex is located on a busy road leading to the Tan Son Nhat Airport. However, very few people know that this housing complex is still awaiting clearance for land use fees, hence homebuyers are being misled. This project was invested by the Nova Sagel Co., Ltd., and on 13 May 2016, the People's Committee of Ho Chi Minh City issued a decision to change the project's land use purpose.

Soon after this decision, the Department of Natural Resources and Environment implemented a procedure for value of land use fees, but so far, this has not been done. On 27 December 2017, the People's Committee of Ho Chi Minh City allowed Nova Sagel to pay VND 232.5 bn for temporary land use fee of the project. Recently, Nova Sagel asked the People's Committee of Ho Chi Minh City and other competent state agencies to support the early completion of the remaining legal procedures of the project, including procedures for approving land use plans, granting certificate of land use rights, ownership of houses and other land-attached assets.

In similar circumstances, the Nova Nam A Co., Ltd. also asked authorities to support the early completion of the remaining legal procedures of the housing and commercial complex project at 130-132 Hong Ha Street in Ward 9 of Phu Nhuan District. On 8 August 2016, the People's Committee of Ho Chi Minh City issued a decision to change the project's land use purpose. Soon after that, the Department of Natural Resources and Environment implemented the procedure for land use pricing, but it has not been completed to date. On 27 December 2017, the People's Committee of Ho Chi Minh City allowed the company to pay VND 128 bn for temporary land use fee of the project and the company has already made this payment.

According to a lawyer, for a project that is allocated land by the State without going through an auction, the investor must pay the land use at the price issued by the Provincial or City Land Price Appraisal Council after approval. According to preliminary statistics, in Ho Chi Minh City right now there are 64 commercial and social housing projects being implemented under this form. As per the lawyer, he believes that perhaps the project has to be auctioned to allocate land, but the authorities have appraised the price for allocation, so now it has to be reviewed, and in this case it is necessary to understand who is responsible, and where is the gap. From the beginning of 2021 up until now, the Standing Committee of the People's Committee of Ho Chi Minh City has met weekly with the Investment Team as well as with leaders of departments, branches, districts, and Thu Duc City to consider and resolve difficulties for each housing and commercial project.

Obstacles in projects

Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), said that currently a number of real estate and commercial housing projects are subject to either legal review, or have to be inspected, or even investigated. Therefore, implementation must be stopped, and the investment and construction procedures must be stopped as well, as per the red book issuance procedures for investors and homebuyers for such projects.

At the same time, all laws must be adhered to as well. In some situations, some officials and civil servants are afraid of taking the responsibility, and afraid of taking risks in performing their official duties, so they transfer documents around, and not state their opinion when submitting profiles of real estate projects. According to Mr. Chau, in the report to the People's Committee of Ho Chi Minh City, HoREA pointed out the difficulties and obstacles of each project, accompanied by recommendations of 57 business investors of 64 commercial housing and social housing projects, to find ways to resolve all the issues.

Clause 1 in Article 118 of the 2013 Land Law stipulates that the State allocate the land for collection of land levy and lease land via an auction for land use rights in the following cases. First, construction of housing for sale or rental or lease-purchase; second, invest in construction of infrastructure for transfer or lease; third, use the land fund to create capital for investment in infrastructure construction; fourth, for commercial and service land use; fifth, land for non-agricultural production establishments; sixth, lease land belonging to the agricultural land fund for agricultural production, forestry, aquaculture, and salt production; seventh, land allocation or lease of land recovered by the State due to rearrangement of working offices, non-business establishments, production and business establishments whose properties attached to the land are owned by the State; eighth, allocating residential land in urban and rural areas to households and individuals; ninth, land allocation or land lease for cases of reduction of land use levy and land rent.

Authorities now need to clarify the responsibilities of all the parties so as to ensure the legitimate interests of home buyers as well as of investors, to promote the healthy development of the housing market, and create transparency for further investments. This is necessary because in case the land put up for auction has no participants, or if only one person registers to participate, or if the auction is unsuccessful, then the State can allocate or lease the land without an auction for land use rights.

BINH MINH

INVESTMENT & FINANCE