According to the Vice Chairman of the Vietnam Real Estate Association, speculative wave-riding and virtual surfing will no longer be possible when the Land Law, Real Estate Business Law, and Housing Law take effect.
Market Only for Those with Sufficient Capability
Speaking at the seminar “Real Estate Investment Focus in the New Context,” Vice Chairman of the Vietnam Real Estate Association Nguyen Van Dinh assessed that the real estate market has grown very rapidly over the past 20 years. However, after a period of strong growth from 2018-2019 until now, the market has shown signs of slowing down.
One of the reasons is due to legal issues. According to statistics, the country currently has over 1,200 projects with a total value of over $30 billion waiting for review, evaluation, and inspection. In response to this situation, the Government and National Assembly have amended laws related to the market such as the Land Law, Real Estate Business Law, Housing Law, and Credit Institutions Law.
Vice Chairman of Vietnam Real Estate Association Nguyen Van Dinh
According to Mr. Dinh, in these legal amendments, the lawmakers’ perspective aims to unify institutional regulations related to land use, preventing overlapping and conflicting situations between laws. This helps make investment activities and land resource usage clear and transparent, focusing on how to enhance practical capacity.
The Vice Chairman of the Vietnam Real Estate Association also assessed that the market’s recent difficulties serve as a game filter. The market will only remain for businesses with sufficient capacity. Small businesses will be forced to form joint ventures and partnerships to have enough strength to develop and survive in the market.
“When the laws take effect, real estate businesses will no longer be able to ‘catch thieves empty-handed’. The current game is clearer and more substantial as project development will become much more difficult.
The market will only have capable players, including investors and customers… they must be ‘real players’, doing real work. Wave-riding and virtual surfing will not be possible when the new legal regulations take effect,” Mr. Dinh stated.
For example, the 2024 Land Law, which will officially take effect from August 1, 2024, has a series of regulations to create a better playing field from land use planning to land price determination…
“Instead of a land price framework, in the 2024 Land Law, land prices will be determined based on annually updated land price tables, with authority delegated to local governments. Land price information will be strict and clear, making the game more fair and equitable,” Mr. Dinh said.
Additionally, there are regulations on investment, social housing, and housing sales to foreigners… these are new regulations that will make the game better and more attractive in the coming time.
The Market Will Develop Professionally and in Depth
Sharing the same view with Vice Chairman Nguyen Van Dinh, lawyer Nguyen Van Dinh, a real estate legal expert, emphasized that the system of laws: Land Law 2024, Housing Law 2023, Real Estate Business Law 2023 taking effect from August 1 will positively impact real estate business in the coming time. It will create many positive effects for entities in society, from businesses to consumers, even foreign investors or Vietnamese individuals abroad.
The new regulations will basically create flow for real estate projects, projects will have opportunities to deploy, especially new projects.
For example, according to Mr. Dinh, the 2024 Land Law clearly stipulates that land acquisition for commercial housing projects through auction and bidding mechanisms only applies to large-scale projects with synchronized technical and social infrastructure (having sufficient electricity, roads, schools, stations…).
In the coming period, housing projects will basically be implemented through state land acquisition followed by auction and bidding. This means that large-scale projects when auctioned and bid will require large investor capacity, including financial, technical, and experiential capabilities.
Lawyer Nguyen Van Dinh predicts that the new laws about to take effect will also lead to changes in market structure and business scale. Small-scale businesses will need strategies such as capital increase or mergers to form new businesses with sufficient capacity to access auctions, bidding, and project implementation.
“Product segments will become more professional. The real estate market will develop professionally and in depth,” Mr. Dinh forecasts.
Two Major Challenges for Real Estate Businesses
Speaking at the workshop, Mr. Le Hong Khang, Director of Analysis and Credit Rating at FiinRatings, said that the business situation of real estate enterprises is basically still low compared to the average of the past 5 years. The situation has improved, but not significantly.
Except for a few large-scale enterprises with clean land funds and clear legal status that can record positive business results this year, most medium-sized real estate enterprises are in a waiting position.
“We believe that the market outlook in the next 1-2 years will still recover slowly. The positive points from legal factors or policies will need time to permeate,” Mr. Khang assessed.
According to Mr. Khang, most real estate businesses currently face and need to solve two major problems. First is the ability to access capital, which is much more difficult than before. Previously, real estate businesses could raise capital from investment cooperation contracts, homebuyers, bonds, bank loans… These channels now all face many difficulties, including bank lending channels.
The second issue is capital increase. After the recent business valuation process, after the process of focusing on land fund collection, when legal procedures are stuck, financial plans change significantly, some projects even increase capital by 20-30% compared to initially.
This can cause investors’ capacity to no longer be guaranteed to develop the remaining part of the project, forcing them to come up with solutions such as transfer or investment cooperation.
“The market’s recovery progress still faces many difficulties. Besides legal openness, internal business factors are needed to handle financial issues,” the FiinRatings representative said.