At the beginning of this year, we have seen a series of continuous moves to remove difficulties and revive the real estate market of State management agencies as well as enterprises in the field of construction and business.
Official Letter 703 of the Ministry of Natural Resources and Environment, Circular 22 of the Ministry of Finance, Decree 91 of the Government, the dialogue of the HCMC People’s Committee with 36 real estate businesses … etc. The emerging and entangled issue is the “Legal Conditions and Legal Regulations” in real estate projects that have been and are being implemented. So here we go to find out and answer the following questions:
- What is a legal document including a real estate project?
- What are the conditions for a real estate project to be able to sign a sales contract with a customer?
- What administrative procedures does the investor need to follow when doing the project?
- All conditions and procedures are available. So why is the legality of most projects still not guaranteed? What is the subjective and objective cause?
To answer in detail, all 4 questions above will be very long, I just would like to share with you with short, concise notes:
For a real estate project to be implemented, a legal dossier comprises: – – Detailed planning of 1/500 (for projects larger than 5ha) or detailed planning of 1/500 plans (for projects of less than 5ha). These master plans must be approved by the competent authority.
– If the project has a total investment capital of more than VND 15 billion, it must be approved by the competent agency in writing.
What are the conditions for a real estate project to be able to sign a sales contract with a customer:
- The project has been approved by the competent authority for investment
- The detailed planning 1/500 has been approved
- Investor has invested in transport infrastructure
- The investor has paid all land use tax
- Written approval of Department of Construction
- Department of Construction considers whether the land plot to be traded is in a mortgage status at a lawful credit institution.
The administrative procedures that investors need to follow when doing projects usually follow 5 steps:
Step 1: Prepare the procedure of “Decision on investment policy” in accordance with the Law on Investment
Step 2: Making detailed plans of 1/500 scale according to the provisions of the Urban Planning Law
Step 3: Establish procedures for land lease, change of land use purpose in accordance with the Land Law
Step 4: Prepare procedures to define financial obligations, pay land use fees according to the regulations
Step 5: Prepare procedures for granting land use right certificates, investor recognition, investment approval and construction permit.
All conditions and procedures are available. So why is the legality of most projects still not guaranteed? What is the subjective and objective cause?
Here in my personal opinion, there are 2 reasons for this situation:
Legally, businesses must absolutely comply, but in the legal process of state management agencies still exist some reasonable points that make it difficult and prolonged for investors as step 4. : “Establishing procedures for determining financial obligations, paying land use fees as prescribed” to do this must be coordinated between 2 Departments of Natural Resources and Environment and Department of Finance, if implemented quickly, it will take 1 year. To do, slow deployment takes 2 to 3 years. So after 3 years, Developer can only take step 5, after finishing step 5, the Developer is allowed to construct the project, on average it takes about 3 years to be eligible to mobilize capital to sell houses formed in future. So it takes at least 5 years for the Developer to be able to mobilize and access capital from other individual investors. With an average loan interest of 10% / year if the project lasts for 5 years or more, the ability to capitalize is 50% and so the product cost will be very high, if individual investors invest capital the sooner it is likely to reduce the cost of real estate products
The proposed solution from real estate businesses is steps 1-2-3, which are still implemented as above, particularly steps 4-5 are proposed to change as follows:
Step 4: Making procedures to recognize Developer, approve investment, issue construction permits and deploy construction investment, assign the Department of Construction to organize the implementation as prescribed.
Step 5: Prepare procedures to define financial obligations, pay land use fees according to the regulations, issue land use right certificates, and assign Department of Natural Resources and Environment and Department of Finance to organize the implementation as prescribed.
With this proposal, real estate businesses will benefit from 2 points:
Reduce project delay time (due to 2-3 years of price appraisal)
Early access and mobilize capital from individual investors.
In short, with positive actions, listen and solve problems from the State management agencies, combined with the timely promulgation of legal documents, policies, official dispatches from ministries. Specialization will contribute to the healthy and sustainable development of the real estate market, bringing overall benefits to the economy.
Source: Le Xuan Tung