Confab examines new housing policies

by Xuan Huong

A new apartment building in Phu My Hung Area in HCM City. New housing policies on residential real-estate transactions were introduced to housing companies at a conference yesterday. — VNA/VNS Photo Van Khanh

HCM CITY — More than 200 representatives from property companies learned about new housing policies during a meeting held yesterday in HCM City with the Viet Nam Real Estate Association and the Ministry of Construction.

The ministry explained that Decree 90, which took effect four years ago, was replaced with Decree 71.

The new decree contains detailed regulations covering different sectors in the local property market, and guides the implementation of the Law on Housing, according to Nguyen Trong Ninh, deputy director of the Housing and Real Estate Market Management Department.

In addition, Circular No 16 issued by the Ministry of Construction provides detailed guidelines for the implementation of Decree 71 regarding residential real estate transactions. The circular came into effect October 16.

Decree 71 contains regulations on the selection of developers, the appraisal and approval process of housing, commercial housing, individual housing, social housing projects and housing projects for public employees.

It also describes ways that project developers can raise capital for their projects.

Unlike the previous decree that contained vague language, the new decree allows developers to raise capital from banks, credit institutions, investment funds, corporate bonds, secondary investors and other organisations or individuals.

Under Decree 71, housing developers will be permitted to sell in advance a maximum of 20 per cent of the total number of apartments in a property project before finishing the foundation of the building.

The remaining sales must be traded via property exchange floors when the projects' foundations are completed.

The decree also outlines regulations and preferential policies for investors who develop social housing projects.

The aim is to encourage them to develop more housing projects and meet the housing demand of low-income earners.

In addition, Decree 71 has detailed guidance concerning housing transactions of Vietnamese residing abroad and of foreigners leasing houses in Viet Nam.

Regulations in previous decrees on housing policies that conflict with the new decree are no longer valid, according to Ninh.

Housing proposals submitted before August 8, the effective date of Decree 71, to provincial governments will be considered in several ways, he explained.

If the project has fewer than 2,500 apartments and is being built with State funds, the provincial People's Committee will make a decision based on Decree 90.

If it is being built with non-State funds, the local authority can issue an investment approval document to developers without asking them to submit a statement again.

If the project proposal has more than 2,500 apartments but does not mention investment sources, the provincial authority must send a statement to the Government for approval before it is turned over to the provincial government for final approval. — VNS

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Draft decree seen cheering retailers

HCMC – The Ministry of Industry and Trade is putting forth a draft Government decree for public consultation, which is expected to create a legal foundation facilitating the setting up of distribution or retail business in Vietnam, an official said.

Pham Dinh Thuong, an expert in the Legislation Department under the ministry, told a workshop held here early this week that “the draft decree is expected to make management over distribution service more transparent and to encourage modern retail and local retailers.”

The forthcoming decree to replace the current regulations is aimed at setting up a legal framework for developing modern retail systems, meaning modern retail will be preferred to traditional markets, he told the workshop held by EU-Vietnam Multilateral Trade Assistance Project III. 

“It’s now just a draft decree and still in the process of collecting public feedback. However, it is expected to limit unfair competition,” said Thuong.

Many changes will be introduced in the new decree compared to the currently prevalent Decree 23 on distribution service management. Legal terms will be clarified to avoid confusion for investors, local and foreign alike, he said.

For example, the term ‘retail’ will be defined as the activity of selling goods directly to end-users being individuals and households.

In the current Decree 23, retail refers to an activity of selling goods directly to end-users, without clarifying whether end-users are individuals and households. Therefore, it causes confusion that a business buying materials for its production or construction might be considered an end-user.  

The controversial term economic needs test (ENT) will also be highlighted in the new decree to make criteria clearer for those foreign-invested enterprises who want to establish retail outlets in the country, according to Thuong.

The legal expert said specific criteria would be introduced when calculating ENT, including the population in a given area, the traffic situation therein, and the retail revenue among others. These criteria will constitute the formula for ENT.

However, beside the ENT criteria, authorities when considering an application for a second retail business by a foreign-invested enterprise will also prioritize those modern shopping facilities, Thuong said, explaining that the ENT formula would be applied flexibly. He added ENT would be the last resort taken by authorities to protect local retailers.

He, however, stressed that the new decree once issued would primarily seek to open the Vietnamese market wider to international participation.

Despite Thuong’s reassurance on the more liberal provisions in the draft decree, some participants in the workshop doubted the transparency and clarity in Vietnam’s management over retail business.

Robert Rogowsky from the U.S.-based George Mason University told the Daily that ENT poses a signal that investing in Vietnam would be uncertain and complicated. If used, it must be clear and transparent because vague, qualitative decision criteria lead to subjective and discretionary decisions.

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Guidelines for realty market to come out soon

HCMC - The Ministry of Construction will issue a long-awaited guidance circular for a government decree governing the real estate market in the coming days.

The circular will provide much-needed guidelines for the implementation of Decree 71/2010/ND-CP which came into force on August 8.

“We are in the last stages of collecting comments from the relevant state agencies and realty firms before the circular comes out,” said Nguyen Manh Ha, head of the housing management department of the ministry.

Speaking at a seminar held in HCMC last week by the HCMC Association Real Estate to propose some revisions to the draft circular, Ha said the new decree was more liberal than the old one.

Real estate developers, according to the decree, can issue corporate bonds and raise capital from secondary investors in addition to funding from traditional sources such as banks and business partnerships.

Funds raised from these two channels before the foundation of a project is complete may account for up to 20% of the total number of property products. However, those products cannot be transferred until the foundation has been finished.

Banning developers from transferring the contracts on capital contribution results from the fact that many developers mobilize funds from customers but then delay their projects for three to five years, leading to their disputes with buyers.

The restriction on this kind of transfer will help prevent speculators from buying properties and changing hands shortly after that since this practice has been blamed for spikes in property prices.

Realty firms complained at the seminar that the new rule allows them to raise money from customers but restricts the transfer of properties bought through a capital contribution contract.

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