Vietnam’s real estate market has witnessed the emergence of numerous types of “hybrid” products over the last few years, which combine the dual purposes of business and living. 

Apart from the robust investment wave in condotels and officetels in recent years, some local developers have also been introducing a new property format combining tourism with housing, called “hometel”. 

Such developers include the BIM Group, the Thanh Yen Group, the Sunshine Group, and Tan Hoang Minh. 

Most hometel projects available in the market are located in major cities and provinces possessing advantages in tourism and hospitality, including Hanoi, Ho Chi Minh City, Quang Ninh, and Nha Trang. 

The number of hometel projects, however, remains limited compared to the scale of the condotel model in the local real estate market. 

Hometel vs. condotel

“Hometel”, of course, derives from “home” and “hotel” and means a home owner can live in the property and also use it as a hotel. 

The most important difference between hometel and condotel, which has been promoted by some developers, is that hometel owners can receive permanent land use right certificates while condotels have ownership of 50-70 years at a maximum. 

It seems that the creativity of the hometel model by local developers is to emphasize the advantage of the model, which overcomes condotel’s shortcomings in terms of ownership. 

Vietnam’s real estate market has been developing quite stably over the last two years and has seen active participation by foreign investors, so differentiation is necessary to ensure the success of each developer when launching new products. 

“Hometels are considered an innovative version of condotels,” said Mr. Stephen Wyatt, General Director of JLL Vietnam. 

“They are new products from developers that aim to match investors’ demands when high-end customers begin being interested in not only apartment products but also the services associated with their apartments.” 

The first hometel project in Vietnam, Green Bay Premium, was developed by the BIM Group, one of the country’s leading real estate developers and focused on the northern market. 

The project, located in Ha Long city in northern Quang Ninh province, saw construction begin in early 2016 and handover to purchasers is expected in the last quarter of this year. 

Green Bay Premium is a four-star hometel building belonging to the Green Bay Village project, in the Halong Marina Urban Area, with apartment prices starting at $66,000. 

Hometel buyers have been guaranteed a profit of around 12 per cent per year, meaning investors can earn a profit from leasing the premises like a hotel from $44 to $130 per night, especially in the peak season. 

Additionally, a hometel’s occupancy rate needs only be 25 per cent a year and the owners would earn up to $8,000. 

“Hometels were created after condotels, so will definitely face a few more difficulties, but they hold potential as an investment line, bringing clear opportunities in profitable investment, leasing, and hospitality,” Mr. Doan Quoc Huy, Vice Chairman of the BIM Group, told VET.

Hospitality real estate segment

Source: CBRE Vietnam, 2016

Following the trend, the Sunshine Group brought the hometel model to its high-end Sunshine Riverside project near the shores of West Lake in Hanoi. 

The initial price offered by the developer was around $1,500 per sq m, with a rental commitment of 18 per cent for two years. 

The project is to be completed in the fourth quarter of 2018 and is expected to trigger a strong investment wave in the north’s high-end real estate market because of the unique factors of the hometel model. 

The Thanh Yen Group, which has been concentrating on the country’s southern market, has appeared to be more active in promoting its hometel products to customers at its GoldCoast project in the south-central coastal city of Nha Trang in Khanh Hoa province.

The GoldCoast project, one of the largest tourism and entertainment complexes in Nha Trang, was introduced to local investors early this year at a reasonable price compared to condotel projects in the city, of around $1,300 per sq m after discounts. 

The developer has also engaged purchasers with a guaranteed profit of 50 per cent for the first five years. 

Reasonable prices along with its large scale have been two major factors in its quick sales. “More than 700 hometels were sold of the project’s 920 units within just a few months of launch,” Ms. To Thi Uyen Thanh, Deputy CEO of the Thanh Yen Group, told VET. 

The project has full legal documents, including land use right certificates, which will be issued in the apartment form. 

Legislative limits 

Unlike condotels, which are often built within an entertainment and resort project and are under the general management of developers in terms of both business results and profits, hometel owners are given full control and responsibility for their business and do not share profits with developers. 

The risk in this self-management increases, of course, if hometel buyers do not have experience in hotel operations. 

Legal issues are the biggest risk for the hometel model, as the Law on Housing does not currently permit the granting of permanent ownership of residential housing combined with business purposes, similar to the issue condotels have encountered. 

There have been some cases where hospitality and resort projects are granted permanent land status, so hometel ownership is totally legal. 

The ownership issue is a matter that hometel buyers must consider very carefully, and they must not be distracted by the advertisements of developers. 

The hometel model faces many other risks, such as limited borrowing capacity, unpredictable interest rates, lower expected earnings, and interrupted cash flow for loan repayments to banks. 

“Circular 06 officially came into effect in 2017, so capital inflows into real estate began to be squeezed, especially in the high-end segment,” said Mr. Nguyen Van Duc, Deputy Director of Dat Lanh Land. 

“This will have a direct impact on the scale, condition, and interest rates of bank loans provided to the high-end property market, including hometels.” 

According to Mr. Duc, bank credit plays an important role in the development of Vietnam’s high-end real estate market, which contains a great deal of opportunities but also many implicit challenges and risks. 

Therefore, “a sound understanding and accurate analysis of opportunities and challenges in bank credit for the hometel market are important and practical for all parties involved in the market,” he added. 

Mr. Tran Ngoc Quang, General Secretary of the Vietnam Real Estate Association (VNREA) agreed, saying that “there are now fewer projects with the factors needed to develop the five-star standard hometel model in Vietnam. Services and convenience are a condition in affirming the real value of a successful investment project.”  

Potential for development 

Although the legal risks remain unclear, according to JLL Vietnam, the segment could grow stronger as Vietnam’s real estate market in recent years has gradually improved, with project information becoming more transparent and buyers easily requiring developers to provide legal documents on long-term or infinite ownership so they can evaluate the potential of their investments. 

But the challenges in the hometel model must be taken into account. 

It can’t be denied that hospitality real estate has become a major trend in Vietnam, led by a series of coastal villa and condotel projects being launched over the last few years. 

According to a report from Danh Khoi A Chau (DKRA), a Vietnamese real estate agent and distributor, there were about 15,000 condotels introduced last year. 

The number is expected to accelerate this year, when developers further evaluate the potential of the local hospitality real estate segment, and aims to take full advantage of the government’s loosened policies, such as Vietnamese being allowed to enter casinos and foreigners being able to own housing. 

This also clearly creates greater competitive pressure for new products like hometels while the supply of hospitality properties, in the short term, is growing rapidly, even surpassing demand. In order to compete, according to Mr. Nguyen Quoc Viet, Business Director at the Seareal Company, besides projects being in beautiful locations, buyers need to pay attention to the developers’ brand and their links with customers to ensure a steady rate of occupancy. 

From another perspective, according to Mr. Mauro Gasparotti, Director at Savills Hotel, Asia Pacific, hometels have not been a business model but a kind of “second home” product, which includes condotel and holiday homes. 

Based on developers’ descriptions about hometel products, in his opinion, it can be perceived as being similar to a holiday home. 

As at the first quarter of 2017, there were approximately 36 second home properties with more than 7,000 units in Vietnam, from affordable to luxury. 

“It is anticipated that six coastal destinations will witness a huge wave of second home supply of more than 17,000 units in the next three years,” he said. “It will take some time for all of the inventory to be absorbed by the market.”

VN Economic Times