Untying legal knots inexpensive solution to property market woes: insiders

While the government is considering earmarking credit packages of up to VND230 trillion (US$9.67 billion) at low interest rates for both developers and homebuyers, Le Huu Nghia, CEO of property development company Le Thanh, said the root of the problem lies in red tape.

For a social housing project, it took his company six years just to get the licenses, and during that period loan interests rose from 11% to 14%, he said.

Projects in Ho Chi Minh City take five to seven years for the legal procedures, and banks determine that the risk ratio increases with time and hike the loan interest rate, he pointed out.

"Streamlining administrative procedures is thus the least costly but most effective solution."

Huyng Phuoc Nghia, a senior consultant at consultancy firm GIBC, too said resolving the administrative problems would be of more practical benefit than credit packages.

Projects that stall in HCMC could see their cost increase by hundreds of billions of dong (VND100 billion = $4.20 million), and by trillions in prime locations.

Su Ngoc Khuong, senior director at property consultancy Savills Vietnam, said legal obstacles are the main reason for foreign investors to shun the Vietnamese property market.

The government needs to come up with practical and speedy solutions to draw foreign direct investment into retail, office, industrial, and residential property development, he said.

Contradictions in laws need to be resolved by the National Assembly, which is a time-consuming process that could increase developers’ costs and reduce the opportunities of receiving further investment from partners, he added.

Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association, said 70% of difficulties plaguing the property market are due to legal provisions, and the government has to find solutions for them.

Four major decrees related to corporate bond issuance, land, areas managed by the Ministry of Construction, and construction and investment in property projects need to be changed he said.

"Untying legal knots is the key to opening up new opportunities."