Nov 12, 2012

Vietnam - Real estate developers may be asked to stop projects to reduce supply

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VietNamNet Bridge – The Ministry of Construction has proposed the government to take necessary measures to restrict the supply in order to help warm up the real estate market.

Believing that the oversupply is the main reason that has frozen the real estate market, the ministry believes that the current situation would be improved only if the government can block the supply.

The ministry has reportedly suggested that the government would order real estate developers to suspend their projects.

However, the idea by the construction ministry has faced the strong opposition from real estate developers, who believe that the solution is unfeasible while it would bring severe damages to the investors.

Nguyen Quoc Hiep, President of GP Invest, it is the real estate developers, who have the right to continue or delay the implementation of their projects after considering their financial capability and business development strategies.

He went on to say that it would be unreasonable to force some investors to stop their projects by giving administrative orders, even though they are completely capable to continue the implementation. This may cause immeasurable bad consequences, Hiep has warned.

The construction ministry has also suggested that real estate developers should turn their commercial projects into the projects on developing houses for low income earners.

Explaining this, an official of the ministry said that the developers of the projects would be able to enjoy some preferences, while developers would have no worry about the salability of the products, because there always exists a very high demand for low-cost houses.

On the issue, Hiep has commented that though this is a good choice, the State should not compel real estate developers to follow that way. The State just can give advices or recommendations, while it should not lay down this as a policy for enforcement.

He has noted that it would be very difficult for enterprises to make changes in the purposes of projects (developing commercial houses instead of low-cost houses for low income earners), or suspending the projects, because this would make their initially set business plans upset.

Nguyen Tuong Nhu, General Director of Sy Ngan Joint Stock Company, the developer of a series of resort real estate projects under the implementation, said the site clearance alone would cost the investors hundreds of billions of dong. Therefore, if the investors are forced to stop the projects, they would suffer heavily.

Citing the provisions stipulated in the Real Estate Business Law, Nhu said that the State can only revoke the licenses granted before to investors if the investors do not implement the projects as promised or violate the current laws. Meanwhile, if they strictly follow necessary procedures as required, the State would have no reason to force them to stop the projects.

Meanwhile, Tran Van Can, President of Handico 5, said enterprises would decide themselves whether to continue with projects. If they find the projects unprofitable, or if they meet big difficulties, they would stop the projects themselves, and no need for the construction ministry to intervene in their business.

Can also said that housing development projects have been following the market rules. Therefore, the State’s intervention at this moment is unnecessary.

Doan Van Phuong, General Director of FLC Group, has noted that a lot of enterprises have halted their project implementation because they understand their current situation, not because of the orders by the State.

Compiled by C. V

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