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To improve the operating quality of property companies in Vietnam and build and develop a healthy and stable property market, the Ministry of Construction has recently proposed increasing the legal capital of real estate businesses. Accordingly, the legal capital is proposed an increase from the current VND6 billion to VND50 billion.
According to an official from the Ministry of Construction, this proposal aims to restrict easy permission for construction investment as well as easy construction halt on capital shortage. Incomplete or abandoned projects will leave bad implications on the property market.

Sorting out businesses
Deputy Construction Minister Nguyen Tran Nam said that, according to the current law, an organisation or an individual only needs at least VND6 billion to set up a real estate company. With this capital level, a lot of real estate companies have been founded. But, a lot of companies have nothing left but their big names and the legal capital of VND6 billion.

This low legal capital has posed enormous risks and difficulties to the real estate market. To a certain extent, the people have to bear these risks which become clearer when the market is lacklustre as now. A series of projects are incomplete because of capital shortfall. In many projects, people contribute their investment capital but investors fail to keep up with the committed progress, thus eroding the public confidence in the property market. Therefore, the Ministry of Construction will have measures to sort out property companies and bring the property market to the trajectory of stability and sustainability.

The Ministry of Construction said that if the rise in legal capital is not approved soon enough, it will be much more difficult to manage operations of property companies. Many projects will be abandoned because of capital shortage. However, the capital hike is still controversial.

Is VND10 billion too high?
Nguyen Ngoc Thanh, Vice President of Vietnam Real Estate Association, said that the rise in legal capital aims to select potential businesses to implement projects but this hike will prevent us from accomplishing other goals. Legal capital is different from conditional capital of a project. If this capital is pushed up too high, it will weaken operations of companies while most of Vietnamese companies are small and medium-sized. As such, we will not be able to attract capital from these companies for the property market while our objective is socialising investment and construction activities to diversify housing products.

The Law on Investment also defines basic legal barriers to project involvement. Accordingly, a company must ensure 15-20 percent of the total project investment capital. Given that, the lifting up of legal capital to VND50 billion is not very effective, even detrimental to SMEs in accessing investment projects. In reality, we not only make big projects but we also carry out small projects which are suitable for SMEs. Mr Thanh said if a company registers to open a property exchange, it will not need such a big amount of legal capital as VND50 billion.

Many real estate companies said that VND50 billion is a very small amount of money to businesses that deploy projects worth of trillions of Vietnamese dong but it is a huge challenge for companies that only involve in property brokerage and sale.

To dodge the new capital regulation imposed by the Ministry of Construction, some companies may join together or even ask capital guarantee from other companies.

To boost the efficiency of businesses to the economy by classifying them (first-grade, second-grade and third-grade companies), the hike in legal capital must ensure all grades of companies will involve in projects. For third-grade companies with a legal capital of VND10 billion, the Ministry of Construction only needs to hike its legal capital by VND10 billion and these companies can still join in projects.

He suggested that the hike of VND10 billion in legal capital is the best option, citing the current economic and business conditions and contexts. Besides, this is a way to support businesses when the market still faces a lot of difficulties as now.





Real estate was the second most attractive FDI sector after luring US$1.13 billion in the first seven months, according to the Foreign Investment Agency under the Ministry of Planning and Investment.

Industrial processing and manufacturing sector is still the magnet for foreign investment with 448 projects with the gross capital with US$6.66 billion. Of the figure, newly registered capital accounted for 69.9% of the total registered capital poured into Viet Nam.

Meanwhile, the construction sector attracted 69 projects worth US$1.13 billion, followed by the healthcare sector with nearly US$380 million.

According to economic experts, the domestic real estate market has charmed foreign investors, showing positive signs in the coming time.

In the reviewed period, Viet Nam lured nearly US$10 billion in foreign investment, said the Ministry of Planning and Investment./.

Source : VGP


A large number of economists said that the real estate market of Vietnam is attractive after bottoming out and showing signs of recovery, the Government news portal reported.



Dang Duc Thanh, Dean of the Vietnam Economists Club said that real estate prices in Vietnam fell by a half against 2007 and costs of numerous departments bottomed out.

In the period from third quarter of 2014 to early 2015, the domestic real estate market will be improved if the Government continues to support enterprises to handle high inventory levels and non-performing loans and raise liquidity for the real estate market.

According to Neil MacGregor, Managing Director of Savills Vietnam – a real estate developer, the domestic real estate market is in an attractive period.

Neil MacGregor said that Vietnam is standing at the bottom point of a real estate cycle when other Asian markets remain at the other side and are likely to be on the decline in the next few years. Hence, Vietnam serves as an important destination for investors in Southeast Asia.

He also revealed that customers of Savills Vietnam from Japan, Singapore, and the Republic of Korea are intending to join long-term and large-scale projects on housing development in Vietnam.

Phan Thanh Mai, Secretary General of the Vietnam Real Estate Association said eight commercial banks are working on a pilot programme to connect investors, bidders, material providers and banks to remove difficulties and handle high inventory levels in the real estate market. The move has defrosted the real estate market.

Source : VNA/MOC

Friday, 22 November 2013 11:40

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