Mr. Nguyen Manh Ha, President of Vietnam Association of Realtors and former Director of the Housing Management and Real Estate Market Department, said that the Land Law in 1993, 2003, 2013 stipulates that if the project does not use the land for more than one year or delays the construction for more than 24 months in accordance with the approved progress, it will be withdrawn, but in fact, the number of projects withdrawn is very little.
It is not difficult to find a ‘clinical’ project
According to Mr. Nguyen Viet Cuong, Chairman of Kosy Group, many projects have been delayed for decades and are not withdrawn because of the lack of determination in management of local authorities. The decisions on land allocation for businesses are mainly ‘temporary allocation,’ and there is no time limit for implementation. This is the legal gap for the enterprises who have allocated land to take advantage of dozens of years’ delay without being handled according to the law.
Therefore, it is not difficult to find the numerous ‘clinically dead’ projects throughout Vietnam, such as the Kenmark Viet Hoa Industrial Park on Highway 5 (Hai Duong City) by Taiwan's Kenmark Investment Development, Vietnam International University Urban Area Project in Hoc Mon District, Vietnam Finance Center (VFC) in District 10 (Ho Chi Minh City) and Nam Dan Plaza on Pham Hung Street (Hanoi).
According to the Hanoi Department of Natural Resources and Environment, the city has 211 projects with a total area of 44 million square meters of land, which are slow to develop. In particular, the projects have been detected in 2012 but not thoroughly handled yet. In addition to the above-mentioned projects there are reports that 22 districts in Hanoi discovered 172 more projects, bringing the total number of delayed projects in the city to 383.
In Ho Chi Minh City, there are 2,758 projects that have been included in the land use plan, the Department of Natural Resources and Environment identified 215 projects as delayed implementation. However, it is believed that the actual number of projects pending in the city is much larger.
“One of the reasons for this situation is the congestion in transferring real estate projects. At present, the demand for transferring projects is very high, but according to the law, the investor must complete site clearance and acquire land use rights in order to transfer, making the project transfer very difficult. In 1H 2018, only 6 of 15 project transfers were approved. Therefore, it has not allowed new investors to replace the old investors to restart the projects which have been paused. It has also put a put a damper on the market ventilation in project transfer and tax revenue for the state budget. This is another reason for more than 500 projects being revoked and ‘covered’ but not eligible for transfer,” said Mr. Le Hoang Chau, Chairman of HCMC Real Estate Association.
Proposed fines for delayed projects
According to Mr. Nguyen Manh Ha, there are many reasons causing delayed projects. Firstly, the investors can lack important necessities, such as finance or experience. Secondly, the projects’ approval procedures, planning and construction permits can be prolonged. Lastly, when the market changes, the old investment plans, before the land allocations, can bring losses, especially due to obstacles in compensation and site clearance.
Therefore, businesses suggest that in order to limit the pending projects, one must first solve the site clearance mechanism. When the project of compensation reaches a minimum of 70%, if the remaining 30% is not compensated it can be resolved in two ways. One being that the state intervenes to conduct the clearance for investors, and the other allowing the investors to bring it to court to conduct the clearance for the project.
Mr. Dang Hung Vo, former Vice Minister of Ministry of Natural Resources and Environment, proposed the handling of suspended projects through a fine equal to 30% of the payable land use fee. Recently, the Prime Minister has asked the Ministry of Natural Resources and Environment to review this proposal. However, many people wonder if this solution, once set in the Land Law context, is appropriate only for project bidding for rights to use land that has been cleared with full planning.
"In the long run, it is necessary to amend and supplement the Land Law 2013 in the direction of dealing with delayed projects by paying progressive tax such as the content of Resolution 19. The State may impose financial fines on investors, forcing investors to make their own decisions or to focus on investments, finding partners for joint ventures or transfer without intervention. If the investor could find capable investors with good financial capability, they can make new planning or follow the old plan but they must commit to a specific timeline for implementation and make a deposit to guarantee the project completion. Once this is done, the projects will no longer be suspended" said Nguyen Viet Cuong.
