Real estate dented by surging delays
Today’s real estate and construction scene is heavy with projects running behind schedule and works of poor quality causing exasperating problems for homebuyers and authorities alike.
After being contacted by several frustrated homebuyers at Manhattan Tower (formerly Thanh An Tower) in Hanoi, VIR contacted both the investor and relevant parties to clarify the reasons behind the delay in construction. Truong Hoang Vu, CEO of Landmark Holding, the developer of the project, confirmed that the project is delayed indefinitely because of disagreements among the parties. Landmark Holding (LMH) had signed a contract with project owner Ba Dinh Construction Consultancy-Investment JSC (Ba Dinh JSC) and the main contractor Vinaconex.
“At the end of 2018, LMH was asked to transfer the money directly to Ba Dinh JSC so that they can directly pay Vinaconex,” Vu said. “However, Ba Dinh JSC did not comply with the agreement and did not pay the main contractor, so the project has stopped.”
Vu said that both LMH and homebuyers are victims in this case. LMH tried to initiate discussions with Ba Dinh JSC but was given the cold shoulder. “We did not manage to secure a deal to buy the entire project from Ba Dinh JSC,” he added.
CenLand, the distributor of the project between April and August last year, also submitted several proposals during the period to Ba Dinh JSC, but were firmly rebuffed.
Two weeks ago, dozens of homebuyers sent complaints to VIR stating that the construction of Manhattan Tower had stalled since last December after building 21 storeys, leaving nine unfinished. Meanwhile, they were promised that the finished project would be handed over in July.
“The deadline has passed and the project was stopped indefinitely. I have to pay rent for my son and my sister and pay off the bank loan I took up to buy the apartments,” said Nguyen Thi Hien, who bought two apartments at Manhattan Tower.
In a dispute between developers, owners, and contractors, the biggest losers stand to be the homebuyers who went into inordinate expenses to pay investors, potentially taking up bank loans in the process – to be then left without a house and a handful of debt.
Talking with VIR, secretary general of the Vietnam National Real Estate Association (VNREA) Do Viet Chien said that this is usually caused by irresponsible developers or project owners, while homebuyers usually do not read carefully or understand the purchase contracts. “Unless they ask for additional provisions in case problems occur, they will be victims,” he said.
A slew of projects have been caught up in scandals regarding delays, slowing progress, poor quality, or diverging from the original design, and abusing the maintenance fund of residents. For instance, a raft of violations have occurred across most of Kinh Do TCI Group’s projects, including Discovery Complex, Kinh Do Building, and The Capital Garden, all in Hanoi.
In addition, the developer’s Discovery Complex II has stalled for a decade due to a host of violations. The height of the project exceeded the approved design by 16 metres, equivalent to five storeys, in addition to other violations regarding the construction area, basement, and encroaching on pavements. Hundreds of homebuyers who poured tens of millions of dollars into the project have been waiting in vain to receive their houses.
In another case, Eco Green Tower in Hoang Mai district, which was promised to be handed over to homebuyers last February, also ground to an indefinite halt. A year and a half has passed since the deadline and no apartments have been handed over.
Buyers attempted to contact developer Song Da 1.01 JSC to ask for a refund, and turned to TPBank to perform its responsibilities as the guarantor, but their pleas fell on deaf ears.
Much like Ba Dinh JSC, Song Da 1.01 is a notorious real estate developer, making its name with Tokyo Tower in Hadong district, which was widely criticised for design issues and mishaps of selling the same apartment to several homebuyers.
Meanwhile Hemisco, also in Hadong district, lacked a fire system, and CT1 Van Khe was hit by protests for violations in mobilising capital and unilaterally raising prices.
According to CBRE, the reason for the long delay at many projects is that the investors do not have sufficient financial capacity and legal issues (such as putting apartments on sale before the developer has all documents, prompting local authorities to suspend construction). Another leading reason is slow land clearance.
When it comes to low quality projects, issues usually lead back to the actual investment exceeding initial expectations, leading to investors cutting corners.
Furthermore, pressing deadlines make contractors neglect quality monitoring. Another reason, far less benevolent, is investors using cheaper materials so as to increase profits.
“Besides that, unfinished projects impact the prestige of the surrounding projects and locals’ lives. Even if construction has been delayed for a long time, it will hamper the city or the district’s urban planning,” Chien from the VNREA emphasised.
In order to avoid such incidents, customers must carefully study the investor, the planning of the project, and read the purchase contract before making the leap.
“Customers should hire a lawyer who can follow up on the purchase contract and, in case the construction runs into problems, represent them,” he added.
Strict legal framework
Last March, Hanoi Planning and Investment Department withdrew and terminated 16 out of 39 delayed real estate projects in the city. According to a report from Hanoi Department of Natural Resources and Environment, 161 projects have shown signs of violations, accounting for 23.1 per cent of the total number of projects that were allocated land between 2012 and 2017. Of these, 40 projects have delayed development by more than 12 months, and 47 projects are running more than 24 months behind the deadline.
As a show of action, the violations at Discovery Complex II are being handled. The 19th floor of the project has already been cut, while other actions are being considered.
However, at a recent meeting, the chairman of Hanoi People’s Committee confirmed that all projects of Kinh Do TCI Group are going to be inspected once again.
In another case, Hanoi-based Empire Group, developer of the famous Cocobay in Danang, is facing litigation from a homebuyer. The customer sued the developer for not handing over the apartment after receiving full payment. The case was heard by the Dong Da district court last week.
Chien from the VNREA confirmed that Vietnam has strict punishments to deal with delayed projects and irresponsible developers, including the Law on Housing, the Law on Real Estate Business, among others. Especially, Decree No.11/2013/ND-CP on the management of investment in urban development stipulates that each urban area is required to set up a management board to supervise project development and to handle violations.
“The legal provisions need to be carried out in real life,” added Chien. “These management boards should be established and operated in line with the law to mitigate violations and ensure that real estate projects do not fall behind schedule. They would also go far in improving the urban landscape.”