VAGENT– Solutions to help the real estate market recover focus on completing a clear, transparent legal framework, developing infrastructure and improving access to credit for investors.
The Covid-19 pandemic is disrupting the global economy, including Vietnam. However, in this difficult context, Cushman & Wakefield Vietnam said that Vietnam has a good opportunity to turn the real estate sector into a growth engine of the economy by solving problems. Main concern for the market.
Accordingly, real estate needs to be developed to promote national growth and aid recovery in the event of an economic downturn. This growth depends on FDI inflows in the industrial, retail, office and infrastructure sectors.
Cushman & Wakefield Vietnam proposed that the Government remove 5 bottlenecks that are preventing the growth of the market, in order to provide important opportunities for investors to overcome the Covid-19 crisis.
1. Transparency in land transfer prices
In order to solve the real estate market’s difficulties, Cushman & Wakefield said that first of all the Government should give priority to ending the instability around the consideration of current land transfer prices.
This process has hindered development, affected trade markets and created supply constraints. The review of project prices paid by real estate developers needs to be accelerated and provide a clear legal framework to address.
The supply bottlenecks during times of increased demand will lead to an increase in land prices, purchase prices and rents. Therefore, the issuance of a clear policy and strict legal framework for real estate developers will help solve supply problems without overwhelming the market or destabilizing the market.
Building a clear and current mechanism for appraising historical and former land values – without relying on auctions or public speculation – would be a prudent move by the state.
2. Increase trust through public-private partnership
According to Cushman & Wakefield, the state needs to continue developing a PPP (public-private partnership) model for land owned by the military and the state. This model will increase the investor’s access to suitable land for development purposes and can be used by land owners to develop additional facilities based on the level of investment.
These land locations will help increase FDI, and will attract investors and users in manufacturing, industry and logistics.
Another proposal made by domestic and foreign investors is to develop practical and transparent application and approval processes. This process will require the appointment of three independent appraisers to value the property of developers and real estate investors. The appraisal will be mandatory for all parties and included in the process of conversion and valuation of land use rights certificates.
A transparent process will bring real estate developers and investors confidence to access projects in a timely manner, and supply problems will be removed. In addition, public access to these resources will also promote greater transparency.
3. Clearer legal framework, process and price
Another bottleneck in the market is about the process of extending land use rights certificates. Accordingly, the duration and conditions for issuing a 50-year land use right certificate are suitable for investors to gain benefits from the land or assets, and they can get results within this lease term.
Other markets in the region have successfully taken advantage of the land lease term. However, what investors are dissatisfied with is the increasing instability due to the lack of clear guidelines or legal framework for potential issues.
In this case, the expiration of the project’s land use right certificate or the property, and the process of extending the land use right certificate makes the investors and real estate developers wonder. .
A new land law would probably remove this bottleneck. However, as long as the bill changes continuously, the legal framework will remain cumbersome and affect most real estate areas, leading to project delays and increased development costs. By providing clear guidelines, processes and prices, the state can open the door to receive capital into Vietnam.
4. Invest in infrastructure
The third bottleneck of the real estate market according to Cushman & Wakefield is the lack of infrastructure. Meanwhile, the completion of internal and external ring roads, connecting ports and industrial parks with freight trains, and the development of fast intersections will support efficient use. and successful investment.
Good examples are successful PPP projects in Quang Ninh, where Sun Group has built high quality airports, marinas and highways. The same model can be applied to public transport nodes by investing in efficient integrated transport solutions, including promoting rail system development and improving access to the inner city. This model will address infrastructure constraints that are hindering development and investment in many types of real estate.
An initiative led by the state has resulted in a plan to focus on infrastructure investment in coastal economic areas and border gates as well as development of industrial parks and hi-tech parks. and agricultural area.
Capital development and allocation planning has been identified by the public and private sectors as necessary for the sustainable development of real estate markets. Providing stakeholders with a clear understanding of the impact of an investment project ensures that their investment project has been implemented in an effective manner. Similarly, real estate developers look for investors who can flexibly change to meet their capital needs.
5. Improve access to credit
Access to credit has been identified by the World Bank as the most important factor for economic growth. Cushman & Wakefield said that Vietnamese policymakers need to address financial constraints if they want the country to continue “rapid and inclusive growth”.
Access to credit for real estate developers and property owners is a key element to expanding the investor base in Vietnam. At present, the main risk for lenders who want to work with Vietnamese borrowers is very simple: in the event of an inability to liquidate, the collateral is quite difficult without arbitration. court.
To minimize risks, lenders use negative controls such as board positions, debt options, debt account control, and veto rights. decisions made by management or, in some cases, controlling company registration. This creates an obstacle for most sources of capital that want to flow into Vietnam because they are forced to limit risks, leading to an increase in the capital costs they deploy.
Therefore, solving the debt recovery problem will help increase liquidity. Developers and owners can access other sources of funding at a low cost and eliminate risks for state and local banks.
Cushman & Wakefield said that the Covid-19 pandemic could be heading to an unprecedented systemic decline of world economies for more than 100 years. If handled improperly, a pandemic could have had an impact like the crisis in the 1920s.
In this context, Cushman & Wakefield believes Vietnam can quickly remove bottlenecks of the real estate market. Thereby increasing investor confidence and helping to promote rapid economic growth.