With tourism hit, condotel buyers find themselves in hot water

Thuy of Ho Chi Minh City bought a condotel in the central coastal town of Cam Ranh in the central Khanh Hoa Province for VND1.6 billion (US$70,000) in 2018.

She borrowed VND1 billion last year to complete the payment but is now in dire straits due to the high interest rate and sluggish demand.

She chose a unit in a prime location and with a beautiful design, and only had to pay 30 percent upfront. She could pay the rest at the time of handover, with the developer getting her a bank loan.

Thuy said she decided to invest since the tourism outlook for Cam Ranh was bright in 2018, but the project was delayed due to legal issues.

She got the unit in 2021, but has been unable to rent it out amid the pandemic.

Her VND1.6 billion condotel is now rented by the developer for VND3 million a month, far lower than her VND12 million monthly interest.

She decided to put it up for sale last year, but over eight months have passed without any buyers.

"I have billions in debt, but the condotel secondary market has been sluggish for a long time, and so I am worried that my own possessions might bury me."

A bird's eye view of condotels in the central coastal city of Nha Trang. Photo by VnExpress/Vuong Manh Cuong

In the central city of Danang too, condotel buyers are in trouble since the developer of a property in Ngu Hanh Son District announced that they would no longer be paid the annual 12 percent return.

The two sides then negotiated a 7 percent annual return.

But Nguyen, a buyer, said many are disappointed that they have yet to receive even that rate for 2021-22.

Citing financial difficulties, the developer then offered to pay 3 percent, but buyers demurred and the situation is deadlocked.

Nguyen said: "I bought a unit for over VND2 billion with a VND1 billion loan. Revenues from renting in the last few years were zero, and I cannot sell it either while I still have to pay interest for it."

Nguyen Loc Hanh, general director of real estate firm Ngoc Chau A, said Covid has pushed many condotel buyers into financial hardship in the last two years by wiping out tourism.

Legal issues related to ownership and construction worsened the situation, he said.

Condotels are built on land legally designated for commercial and services purposes, and so getting land-use rights and ownership certificates remains difficult.

"Condotel investors should be cautious about high profit commitments since it will take a long time for the tourism industry to recover."