Recapturing growth on strength of sound policy

January 16, 2017 | 10:09
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After a period of crisis, the Vietnamese real estate market has started down a path of stable growth. Deputy Minister of Construction Do Duc Duy talked about the contributing factors to this success and the ministry’s plans to create more conducive policies to reinforce this growth.
Do Duc Duy

In the 2015-2016 period, the market can be said to have realigned on a course of stable growth. What role did government policies play in this recovery?

When the real estate market was in crisis, the government’s timely issuance of Resolution No.02/NQ-CP dated January 7, 2013 and Resolution No.61/NQ-CP dated August 21, 2014 offered many solutions to support the market and resolve bad debts.

First, the government allowed projects to decrease the planned area of apartments to make them more affordable. In addition, they were allowed to change the type of their projects from commercial to social housing so that they could enjoy financial incentives reserved for the segment, which enabled them to decrease prices and sell to the underprivileged.

Second, the government extended the deadline for land-use fees and tax payments, and decreased corporate income tax for developers of social housing and the value-added tax on social housing.

Third, a VND30 trillion ($1.32 billion) credit package was issued for people with low income, state employees, and members of the military to borrow at preferential interest rates, to buy, rent, and buy-to-let social housing and commercial housing under 70 square metres and VND15 million ($660) per sq.m. The credit package was also made available for companies, households, and individuals to build social housing.

Fourth, the government reviewed and weeded out projects that were slow to be carried out or were not carried out at all. In case it was necessary, it modified the type of the apartments inside some projects to be more suitable to the market demand and the housing development plan of the locality.

Besides these, on November 25, 2014, the National Assembly ratified two very important laws concerning the real estate market, namely the Law on Housing (LoH) and the Law on Real Estate Business, with clauses to ensure the stable operation of the real estate market in general and the residential housing market in particular.

The most important clauses allowed foreign-investment companies to trade real estate, loosened entry conditions for foreign institutions and individuals coming to Vietnam to work to buy and own houses to live in, and raised the minimum legal capital of real estate business companies from VND6 billion ($264,000) to VND20 billion ($881,000). In addition, conditions on buying and leasing houses were tightened, limiting the amount of money that real estate sellers could collect from buyers before handing over the properties and the certificate of land use rights.

The laws also incentivised developers to build social housing, aiming to stabilise the market.

With the property sector’s recovery, lessons have been learned that should ensure continued growth Photo: Le Toan

Besides the government’s policies, what else contributed to the recovery?

After a period of crisis, all stakeholders, from the government to companies, and people, have learned to make better decisions, which led to more stable growth.

The Vietnamese government increased control in the market to protect the rights of the parties, create a conducive business environment, and make it easy for anyone and any institution to join the market. Companies improved the quality of their products to increase their competitiveness and increased their responsibility to customers.

People now think more carefully before they buy real estate – especially about the project’s legality and its progress, and the developer’s capacity and prestige.

Now that the market is stable, what will the government focus on?

The Ministry of Construction, when building laws and policies, will focus on making the market healthy, sustainable, and transparent, and on implementing the National Housing Development Strategy up to 2020, with a vision towards 2030, which the prime minister approved in 2011 to ensure the underprivileged have a place to live.

More specifically, we will continue working on the legal framework on the management and development of the urban and housing segments of the real estate market, guide localities in implementing the two laws, and other related policies. On the other hand, we will continue to make sure the National Housing Development Strategy is implemented and will work with other government agencies and localities to make sure the market stays stable.

Some people complain of remaining bottlenecks, despite the marked improvements in government policies for the real estate market. For example, there is no mechanism for foreigners to borrow from Vietnamese banks to buy houses and there are difficulties in implementing the policy to encourage social housing development. How will the ministry address these issues?

Regarding financing for foreign homebuyers, the LoH is very open in allowing foreigners to buy and own houses in Vietnam compared to the previous law and to the laws of many countries in the region. If there is a bottleneck, it is in transferring money to Vietnam to buy houses, because many countries have tight controls to prevent money laundering and tax evasion.

Regarding social housing development, the LoH and Decree No.100/2-15/ND-CP on managing and developing social housing have regulations, but currently there are difficulties financing the segment: public funds reach only so far, while the investment areas vying for priority continuously grow.

Regarding this, we have been working with the Ministry of Planning and Investment and the Ministry of Finance to get banks in a position to be able to lend for social housing. Currently, the prime minister has assigned the two ministries and the State Bank of Vietnam and Vietnam Bank for Social Policies to arrange the necessary funds.

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