City making effort to revive real estate business
City making effort to revive real estate business
The real estate business in Ho Chi Minh City has continually been taking a fall and even though the ultimate blame goes to the sudden outbreak of the Covid-19 pandemic, many other problems and policies need upgrading to revive the industry once again.
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ate blame goes to the sudden outbreak of the Covid-19 pandemic, many other problems and policies need upgrading to revive the industry once again.
Heavy cost cutting
According to a report by the Department of Construction in Ho Chi Minh City, from the beginning of the year up until now, only fourteen projects were able to mobilize capital, which indicates that the City was down by ten projects since the same period last year, a loss by 41.6%. The total number of apartments launched in the market were 4,569 units, less by 37.5% over the same period last year, in which the mid-end segment priced at VND 20 mn to VND 40 mn per square meter were 1,243 apartments, less by 67.6% over the same period last year. In the affordable apartment segment which are priced below VND 20 mn per square meter, there are 163 units, which is down by 86.9% over the same period last year.
As noted by Saigon Investment, most real estate businesses have had to narrow down on scale, lay off staff, find premises of lower rental value and even operate from their homes. Mr. Doan Chi Thanh, Chairman of HASG Real Estate Company, said that his company has just moved their headquarters from a fairly large premise in a central district to a smaller alley road in Tan Binh District to cut down on overhead costs. Along with shrinking corporate office space, businesses are also only retaining their key business components. One director of a brokerage company shared that he had only just broken out on his own when the pandemic struck, and now all brokers and associates in other departments have either quit or are working from home.
Mr. Than Quy Phai, General Director of the 557 Joint Stock Company, said that the company had laid off almost ten employees, who are all engineers in technical departments. The reason was that the projects being implemented by their company where facing setbacks in proceeding forward. Ms. Le Thi Huynh Mai, Director of the Department of Planning and Investment in Ho Chi Minh City, said that in the eight months of 2020, the whole city had about 26,500 new licensed businesses, with a total registered capital of almost VND 562,000 bn, down 6.7% in number of businesses but up 23% in registered capital. However, nearly 21,300 businesses suspended operations, of which 3,566 businesses filed for complete dissolution at the Department of Planning and Investment, which was 12.31% of all businesses or 10,382 businesses that had totally stopped working. Among the thousands of businesses that were either dissolved or suspended, there were many businesses in the field of real estate investment and trading.
Policy barriers
Mr. Tran Le Kien, Deputy Director of the Department of Construction, spoke with Saigon Investment and explained that it was partly due to the Covid-19 pandemic, but mainly it was due to problems in real estate investment and because several related businesses which were linked to their operations had closed down.
Several petitions from departments and businesses sent to the City and to the Central Ministry have not received any response. In April, the Department of Construction sent a proposal to the People's Committee of Ho Chi Minh City to complete the implementation of commercial housing projects in accordance with the Law on Investment and the Housing Law. In this Document, the Department of Construction agreed to the process of implementing commercial housing projects in five steps, but so far this process has not been approved. Also in April, the People's Committee of Ho Chi Minh City sent a petition to the Prime Minister to look into the housing projects involved in public land issues, in order to remove problems on projects that are halted, so as to help real estate businesses complete existing projects and increase housing supply.
Accordingly, for the public land fund with a total area of less than 1,000 square meters, the City has proposed to the Prime Minister to assign an investor to change the purpose of land use and comply with the planning. For the land fund with a total area of public land of more than 1,000 square meters, the City has proposed that the Prime Minister allow the City to swap with the investor for an equivalent land fund and for the investor to hand over this to the State for management and use. Also in this document, the People's Committee of Ho Chi Minh City has proposed to the Prime Minister to remove problems on the regulation that 100% of legal residential land be recognized as an investment, because at present, Ho Chi Minh City has about 63 projects in this form that need to be removed. However, so far, the City has not received an answer.
At a meeting on the current socio-economic situation in Ho Chi Minh City in the last eight months of 2020, Mr. Nguyen Thanh Phong, Chairman of the People's Committee of Ho Chi Minh City, instructed the Director of the Department of Natural Resources and Environment to quickly review businesses and complete land procedures, thereby generating revenue for the City immediately. The total state budget revenue in Ho Chi Minh City in last eight months is estimated at VND 220,800 bn, only 54% of the target. The average income per working day in eight months was VND 1,346 bn, equal to 82% of average collection per working day that the Ho Chi Minh City collected in 2020.
Chairman Nguyen Thanh Phong has suggested that tax authorities coordinate with relevant departments and agencies to focus on exploiting land revenue, especially those projects that have been allocated land but cannot follow procedures and hence cannot fulfill their financial obligations.
In cases where the lease contract has expired but has not been renewed, the People's Committees of districts and the City Housing Business Management Company have to complete auctioning procedures soon for factory premises approved by the People's Committee of Ho Chi Minh City to start the auction to recover back the money for the City. It is now becoming increasingly clear that if we do open up the real estate market and pour in more investment, the daily revenue of Hi Chi Minh City will be greatly affected.
