New law slims chances for shady developers
New law slims chances for shady developers
The revised law on Real Estate Business, currently being drafted, aims to create stricter regulations to reign in unscrupulous developers and strengthen the rights of property buyers.
Under the current regulations, developers can sell future residential properties once they have completed the basement of the building being constructed.
This regulation has led to many developers, constructing the basement level of a project, collecting money from homebuyers, then using the capital for other purposes, such as for setting up other projects. The inevitable consequence is that many of the projects are never completed.
In some extreme cases, developers have sold future residential units before they have even secured a construction licence.
In order to tighten construction management, the draft revised Law on Real Estate Business regulates that in order to sell incomplete units, developers must have both a construction licence and approved project dossiers.
In addition, the revised law also stipulates that developers can only mobilise money from hombuyers when their project has been guaranteed by financial institutions, which will bear all responsibilities in the event that the project is not completed. The additional regulations are intended to create stronger buyers’ rights, which are currently weakly protected.
According to Pham Si Liem, vice chairman of the Vietnam Construction Association, the real estate market presently contains many unscrupulous developers who collect capital without being able to complete the contract. Buyers presently bear the risk in these cases.
“Therefore banks and financial institutions must work closely together to be the agencies linking buyers and developers, to protect both a buyers’ money and a developer’s reputation,” said Liem.
Under the new law, buyers will not pay developers directly, instead they will pay via a financial institution. These institutions will ensure that the buyers’ money is disbursed according to the project’s schedule.
“The new regulations will increase the responsibility of both buyers and developers, to ensure that the project will be finished on time according to the contract,” Liem said.
Meanwhile, lawyer Le Minh Toan said that Circular 11/2013/TT-BXD issued this October, which regulates the steps to report a project’s progress, will also limit the developers ability to delay their projects.
Under the new circular, projects that have been licensed but not implemented after 12 months or fall 24 months behind schedule will be cancelled. The circular also regulates that developers have to report on the progress of their project to the relevant authorities every quarter.
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