It’s Time to Adjust Housing Law and Real Estate Law

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According to statistics by the Ministry of Construction of Vietnam, from 1999 to present, the housing area of the country has developed more than twice from 709 million sq. kilometres in 1999 to about 1.6 billion sq. kilometres in 2012. Currently, there are over 4,000 housing projects and about 90,100 hectares of new urban projects under construction. The development of the real estate market forced the policy makers to take into account the amendment of the Housing Law and Real Estate Law, as more regulations are no longer consistent with the actual situation.

Economic development and rapid population growth makes annual housing area in the country increase rapidly. The rapid development of real estate market during a long period of time has exposed the inadequacies of management issues. Along with the development of the commercial housing segment and ground segment, social housing projects as well as housing projects supporting the poor and social policy objects living in rural areas are also given much attention. Besides, the number of the Vietnamese residing in foreign countries as well as foreign individuals and foreign organisations operating in Vietnam are also behind the high demand for houses, causing difficulties for the management and issuance of policy on development of the property market.

In recent years, investment from foreign organisations in the field of real estate also increased. According to statistics by the Ministry of Construction, by the end of 2011 there were 303 foreign invested real estate projects. Along with the development of the property market, real estate transaction floor system, notary office system, real estate training organisations have also been flourishing. By the end of March 2013, there were over 1,000 real estate transaction floors licensed. This has shown the transparency of the market.

According to Mr Trinh Dinh Dung, Minister of Construction, the development of the real estate market reveals the Housing Law and Real Estate Law shortcomings, lack of practice, thus it is in need of amendment and supplementing.

Regarding this issue, Mr Nguyen Manh Ha, Director of the Housing and Real Estate Market Management Department, the amendment and supplement of the Housing Law and Real Estate Law is necessary. According to Mr Ha, it is important to focus on the reform of administrative procedures to ensure transparency, avoid duplication, and meet integration requirement. Housing policy for the Vietnamese living abroad and foreign organisations and individuals living and working in Vietnam will be separated into a chapter in the Housing Law.

The National Assembly has assigned the Government to conduct research to build the draft Housing Law and Real Estate Law to submit to the National Assembly to address the existence and shortcomings in the current legislation. It is expected that in 2014, the National Assembly will consider and pass these two laws which will enter into force in 2015.

Mr Pham Sy Liem, Vice President of the Vietnam Federation of Construction, said that the amendment of the Housing Law and Real Estate Law should focus on social and low cost housing. It is also essential to focus on providing a variety of houses, particularly low-priced houses to meet the needs of all people. Mr Liem said that there is no clear legal provision in the present contribution method in construction investment, which is one of the causes for complaints and claims in recent times.

According to Mr Nguyen Van Minh, Deputy Chairman of the Vietnam Real Estate Association, legal regulations of capital of businesses in real estate sector do not have much meaning as previously there was regulation stipulating that the project investor have equity of at least 20 percent of the total project investment capital. Therefore regulations on legal capital conditions for real estate business should be abolished.

On the issue of housing transfer and purchase contracts, a representative from Viglacera Co., Ltd. said that the granting of customer’s certificate of house ownership takes very long. For example in some projects, it even takes three years to get house ownership certificate after house handover. This makes it difficult for people to buy and sell houses.

There are also opinions that foreigners should not be restricted from buying houses, but only in the number of houses they buy. The regulation stipulating that foreigners in Vietnam can own a house up to 50 years, after that, they have to sell or donate it to the Vietnamese also caused many difficulties in determining related rights as well as significantly reduced the asset’s value and led to many disputes and other consequences.

A representative of an enterprise operating in the real estate sector shared that currently, the costs related to the creation of land-use rights such as compensation cost, clearance cost, relocation cost, etc. have no VAT. Accordingly, in principle, the output, which is houses for sale, will also have no VAT for land use rights. However, in fact, currently real estate products are being imposed VAT. Therefore, to separate costs related to the creation of land use right will be very difficult, but this has been accepted by tax authorities for they can collect tax. Consumers are the ones to have to pay this tax.

Non-real estate businesses are also facing several difficulties in the purchase and sale of real estate. They can hardly determine whether the amount to be paid is according to the corporate income tax or real estate transfer tax (percentage is calculated on the basis of the total transfer value or profits).

The shortcomings in the operation of the real estate market are the basis for assessing the effectiveness and practicality of the current Real Estate Law. On that basis, there will be changes in the law to fit the needs of market development. This is attracting the attention of experts and citizens.

Dinh Thanh

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