Phu My Hung new urban area in Ho Chi Minh City

Risks still lie ahead

Chairman of the Ho ChiMinh City Real Estate Association (HOREA) Le Hoang Chau said although theproperty market bounced back thanks to the Government and local authorities’efforts in removing bottlenecks, it has not developed stably and risks stilllie ahead.

According to the association,many property enterprises are facing risks as investors have paid much forground clearance compensations but cannot complete legal procedures, so theyare not allowed to implement their projects.

Risks related tofinance and credit are also worrying enterprises, the HoREA said.

The State Bank isimplementing a roadmap to gradually reduce credit to the real estate marketand, as a result, enterprises are encountering difficulties in finding othersources of capital to replace part of credit capital. In addition to expandingcooperation with foreign-invested enterprises, or seeking capital on the stockexchange, real estate enterprises have decided to issue corporate bonds to acquiremore capital.

Chau said that in thefirst five months of 2019, real estate, construction and infrastructureenterprises issued corporate bonds worth up to 16.2 trillion VND (695.7 millionUSD), accounting for 27 percent of the total value of bonds issued. Even realestate enterprises have issued bonds with very high interest rates of 12-14.5percent per year, doubling the savings interest rate.

Budget collection affected

A fall in the realestate market has caused heavy impact on Ho Chi Minh City’s budget collection.According to the municipal Taxation Department, as of June 30, tax debts were13 trillion VND (559.5 million USD), 4.9 trillion VND higher than those in late2018. Of the total, 61 percent was owed by real estate enterprises.

Explaining thissituation, the department said that since mid-2018, business activities relatedto the sector have experienced a slowdown. Several key projects cannot becarried out, leading to a reduction in budget collection.

Tran Vinh Tuyen, ViceChairman of the municipal People’s Committee, predicted that the city’sdomestic budget collection can be 15 trillion VND lower than the assignedtarget, including 12 trillion VND from land-related issues and 3 trillion VNDfrom enterprises operating in the property sector.

Removing bottlenecks

To overcomedifficulties, HoREA suggested the municipal People’s Committee to assign theDepartment of Planning and Architecture to receive and handle documents ondetailed planning projects with the 1/500 scale proposed by investors.

It also proposed the committeedirect the Department of Finance to soon develop the principles of landvaluation criteria for real estate business projects, commercial housingprojects, ensure the calculation of land use fees are reasonable and avoid lossesof State budget.

The Department ofFinance and the Department of Natural Resources and Environment should completethe process and administrative procedures on calculating land use fees forcommercial housing projects in order to save time and increase State budgetcollection.

For projects underinspection, the association suggested authorities to have conclusions at anearly date to allow investors to carry out their projects as soon as possible.Many businesses agreed that legal review on real estate projects is necessary,thus helping investors rectify their investment and business activities andfully implement their financial obligations. However, a delay in this procedurecan have huge impact on investors and consumers.

Experts expect a brighterscenario for the second half of 2019 as large-scale projects will be rolled outvery soon.

In terms of segments,mid-end and affordable will continue to dominate while new launches from luxuryand high-end will account for only a small proportion. The east will continueto be a market hotspot with new projects in District 2 and District 9.Inventory will be absorbed in the next few quarters thanks to limited newlaunch supply.

Ho Chi Minh City’srealty market will welcome abundant supply from eastern areas, led by VinhomesGrandpark in District 9 with more than 10,000 units, and five new projects inDistrict 2.

The supply will comefrom other areas like the west with AIO City, Akari City and D-Homme projects,and the south with Eco Green Saigon, Sunshine City Saigon and Lovera Vista.-VNA