Lesson 1: The sad reality

The real estate market has never been as gloomy as it is now. New real estate projects are starting up, while old projects are almost "inactive", many real estate floors are only operating at a low level and sometimes have to close, leading to thousands of employees having to quit their jobs. Along with that, corporate debt and bond debt are increasing and are at risk of "exploding" at any time.

The "magic" attraction has cooled down

The real estate business in general and the high-end real estate market in particular are one of the key economic sectors, contributing greatly to the growth and GDP of the whole country. In addition, real estate helps millions of workers have jobs and income and is closely related to many industries: Construction materials production, tourism - resorts, banking and finance, construction... However, in the context of tightly controlled credit, along with a number of legal difficulties that have not been resolved, real estate project investors are not financially strong enough, and the legal documents are not complete, so "customers" do not pay as quickly and easily as before. This leads to slow sales, the real estate market is almost in free fall and is creating an unprecedented gloomy scene.

Recently, due to the impact of the Covid-19 pandemic, the world economy has encountered difficulties, inflation, and increased bank interest rates have deeply affected the real estate market, especially the high-end real estate segment. Many new real estate projects have not been licensed, old projects are behind schedule, making supply increasingly scarce. Meanwhile, many real estate projects have been sold out but the investors have not completed them for use as planned, leading to a series of abandoned villas, overgrown with grass, causing waste.

Many foreign investors believe that the real estate market in Vietnam has the characteristics of a large population and a high demand for real estate, which is always an attractive reason for them to pursue. Vietnam is promoting urbanization while the Government is determined to build a smokeless industry as a spearhead for development. In addition, the number of high-class customers is increasing, they see this as an investment channel with high profitability, although it is determined to have many risks.

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According to data from the Ministry of Planning and Investment, if in 2021, registered FDI capital invested in real estate only reached 2.6 billion USD, by 2022 it had increased to 4.5 billion USD and the first quarter of 2023 still had positive signs. Real estate is the second sector attracting FDI capital, after the processing and manufacturing industry.

Mr. Le Minh Hiep - a high-end real estate trader in Nam Tu Liem district said: "My two friends and I invested together. A few years ago, we made good profits and had quick liquidity, but from 2021 until now, we have almost not bought any more villas, while some of the ones we had previously "held" have not been sold yet. Although some people asked to buy, they offered too low a price". Mr. Hiep added: "Luckily, when we bought, we did not borrow money from the bank. If we had borrowed and paid interest until now, we would have had to sell urgently".

It can be seen that at this time, real estate is no longer at its peak like many years ago.

Is supply and demand virtual?

Real estate experts say that the inventory of the high-end real estate segment (especially villas) is quite large. However, new supply will become increasingly scarce because there are very few prestigious high-end real estate projects with sufficient financial potential being implemented. Meanwhile, the supply of villas and shophouses (a housing model combined with commercial business) in Hanoi and the northern provinces has decreased sharply. Currently, the supply is mainly in real estate projects implemented before 2020. From 2021 to the first quarter of 2023, only a handful of real estate projects related to the high-end segment have been implemented, while this segment is mainly for the upper class, not for low-income people. Therefore, the already gloomy market is now even more gloomy.

Mr. Dinh Van Troi - Sales Director of Dai Phong Construction Investment - Real Estate Joint Stock Company commented: The supply of villas and townhouses in Hanoi has been continuously in short supply for a long time, while the new supply in 2022 and early 2023 mainly comes from ongoing projects and is concentrated in the suburbs of Hanoi. In some ways, it will provide more products to the market but not significantly for selection.

According to a survey by reporters in Quang Ninh province, the supply of villas and shophouses is still abundant, but mainly from old real estate projects such as: BIM Group, Geleximco Group, Tuan Chau Group... and almost no new real estate projects are being implemented, new supply has hit rock bottom.

Meanwhile, the supply in the localities of Ha Nam, Bac Ninh, Phu Tho, Hai Phong, Hoa Binh, etc. is also not very promising. In these provinces and cities, there are few high-end real estate projects, limited transactions, and in recent years, very few high-end real estate projects have been implemented. While old projects are operating at a standstill, many villas and shophouses, although owned, are not put into use, leading to abandonment, causing waste and potentially causing social evils.

That is the supply, and in terms of demand, experts say that the trend of villas and shophouses associated with green space, optimal utilities, located in a complex and convenient transportation connection will be the top choice of customers. In addition, the urbanization rate, natural population growth rate and the increase of the middle and upper class are also the main driving forces to boost the demand for villa consumption in the coming time.

In fact, once the economy recovers strongly after the Covid-19 pandemic, the Government's policies to remove obstacles and difficulties for the real estate market are seriously implemented by localities, plus the "credit room" is loosened, corporate bonds are guaranteed, then corporations, companies and individuals will soon have access to the necessary capital, from there, real estate projects will be deployed and provide a variety of high-end real estate products: villa real estate, shophouse, resort, health care... to the market, the purchasing and selling power of the real estate market will be vibrant again.

Mergers and acquisitions appear

This is a natural law, the strong overwhelm the weak, the weak are acquired and merged into the strong is a normal thing in the real estate industry in recent times. However, recently there have been "sharks" from home and abroad, they use many investment funds or spend cash to buy back high-end real estate projects, projects with clean legal documents for development.

It can be seen that from the beginning of 2023 until now, Vietnamese real estate companies have been divided into 4 typical groups: Risk, balance, potential and "new players". In which, the "new players" group includes companies, investment funds... looking for opportunities to penetrate the real estate market through mergers and acquisitions.

Typical examples include FLC Group, Tan Hoang Minh... After the leader was involved in legal trouble, a series of "big guys" wanted to jump into the potential projects of these groups. Bamboo Airways has officially separated from FLC Group, leading to many real estate projects of this Group in Quang Ninh, Thanh Hoa, Thai Nguyen, Vinh Phuc, Phu Tho... at risk of having to stop implementation or be forced to transfer to other partners to continue researching and implementing the project.

In addition, many other acquisitions are in the negotiation stage. According to many economic and real estate experts, with the current sluggish real estate market, coupled with the difficult financial situation, if this situation continues, many project investors will no longer have money to turn around, and they may have to think about transferring or selling off real estate projects. That is not to mention many companies and foreign investment funds are preparing money waiting for the opportunity to acquire domestic real estate projects when businesses encounter difficulties and are forced to sell.

Mr. Le Hoang Chau - Chairman of the Ho Chi Minh City Real Estate Association (HoREA), proposed: The Government and the National Assembly Standing Committee consider allowing enterprises to transfer real estate projects by agreement according to the pilot mechanism stipulated in Resolution No. 42/2017/QH14 dated June 21, 2017 of the National Assembly. According to Mr. Chau, if implemented, it will remove difficulties in cash flow and liquidity for real estate enterprises, including enterprises issuing bonds that are about to mature. Allowing enterprises to transfer projects by agreement, according to demand, the State will both collect taxes and strengthen the effectiveness and efficiency of state management of the real estate market, increase transparency, and overcome the situation of "underground" project transfers disguised as share transfers, causing losses to the State budget.

Ms. Do Thu Hang - Senior Director, Research and Consulting Department, Savills Hanoi, said: The supply being sold directly from investors in current projects in this segment is very limited, stemming from the small number of new units being brought to the market. However, townhouses are still the main product line, followed by villas and then shophouses, which only account for a small proportion of the current total supply.

Lesson 2: Racing to "finish" slowly

There are many reasons given by real estate project investors, but most of them are due to slow site clearance, changes in legal mechanisms and tax policies, plus the weak financial capacity of many businesses... leading to slow project completion.

Slow-progressing real estate projects spread widely

Most of the 63 provinces and cities have behind-schedule real estate projects, however, the high-end real estate segment is mainly located in large provinces and cities with favorable geographical locations, potential for tourism exploitation, transportation and infrastructure development.

The locality with the most delayed real estate projects is Hanoi. According to incomplete statistics, Hanoi currently has several hundred projects that are behind schedule, equivalent to an area of ​​over 5,000 hectares that has not been exploited, causing great waste.

Some real estate projects are delayed by up to ten years, such as: Kim Chung - Di Trach Urban Area (now renamed Hinode Royal Park Urban Area - PV), in Hoai Duc District. Or Nam An Khanh Urban Area of ​​Song Da Urban and Industrial Park Development Investment Joint Stock Company (Sudico), which was once promoted as a paradise of life. However, the site clearance work has not been completed, many villas and townhouses are still abandoned, causing waste of resources. Sudico's media representative said: Due to the recent sluggish real estate market, many customers investing in villas only hold land, waiting for positive changes in the market. This leads to a situation where some villas are abandoned, causing the overall beauty of the project to be lost.

In Phu Tho, the Thanh Thuy Hot Mineral Water Resort Project, invested by Song Thao Company Limited, has a scale of more than 87 hectares, is more than 2 decades behind schedule and has many violations... The project is currently abandoned and used by people as a place to graze livestock.

Mr. Tran Van Kien - Vice Chairman of Thanh Thuy Town People's Committee frankly said: "The problem of Thanh Thuy hot spring project now lies in the capacity of the investor. The project currently has a clean site, full legal documents but cannot be implemented because the investor has weak capacity. Our locality is also very impatient because voters have many opinions but the authority to handle it belongs to Phu Tho province".

Ha Nam province has a real estate project that is no less thrilling, which is to turn public works and service land into commercial housing (shophouse) and then leave it abandoned. That is the commercial and residential complex of Thang Loi Thanh Liem Company Limited. Up to now, the project has completed the rough construction, some households have bought houses and moved in, many items in the planning have not been built, while some projects show signs of deterioration and abandonment.

In the Inspection Conclusion Notice No. 161/TB-TTCP dated January 17, 2023 of the Government Inspectorate regarding the project of the Complex Commercial Center of Thang Loi Thanh Liem Company, Ha Nam province allocated land but did not go through the form of auction of land use rights, violating Article 118 of the 2013 Land Law. More seriously, this land area is planned as public works, services, and commerce land, without residential land function, violating Article 26 of the 2009 Urban Planning Law and Article 14 of Decree 37/2010/ND-CP dated April 7, 2010 of the Government.

Remove the “tumor”

Localities with real estate projects that are behind schedule, even stagnant for many years are: Hanoi, Quang Ninh, Phu Tho, Hoa Binh... In Hanoi alone, there are currently hundreds of real estate projects that are behind schedule and have not been implemented, of which many projects have been given a red alert and a few projects have been revoked by the Hanoi People's Committee.

A typical example is the Phuong Vien Luxury Housing Project in Me Linh District, invested by Phuong Vien Trade and Tourism Services Joint Stock Company. The project was allocated land in 2008 but was slow to implement, so the Hanoi People's Committee issued Decision No. 4058/QD-UBND on land reclamation, canceling the land allocation decision for the above project. In addition, there are projects: Truong Giang Construction Company with the project of building garden villas; Anh Duong Joint Stock Company with the project of building technical infrastructure for Sunny Light villa area; Vinalines Vinh Phuc Real Estate Joint Stock Company with the project of Vinalines New Urban Area... The Hanoi People's Committee has issued a decision to reclaim land.

Regarding the Thanh Thuy Hot Mineral Water Resort Project invested by Song Thao Company Limited, Mr. Ha Minh Duc - Deputy Head of the Department of Land Management, Department of Natural Resources and Environment of Phu Tho province said: "In Document 2308/UBND-KGVX dated June 21, 2022, the People's Committee of Phu Tho province directed the Provincial Tax Department to collect the land rent that Song Thao Company owes, and at the same time, assigned the Department of Planning and Investment of the province, Thanh Thuy District People's Committee and relevant agencies to review and separate an area of ​​about 37 hectares in the total area of ​​the project for the company to implement. Mr. Duc added: Currently, the Investor has not yet carried out the procedures for approving the 1/500 Detailed Planning, so there is no basis for measuring and separating the area according to the direction of the People's Committee of Phu Tho province. On March 25, 2022, the People's Committee of Phu Tho province issued a decision to revoke the Investment Incentive Certificate of the above project.

These are some typical projects that have been resolutely revoked by the local authorities and enforced by law. However, there are still many projects that are behind schedule, have been extended many times, and have weeds growing wild, but have not been handled. For example, in Quang Ninh, there are many projects such as: Cao Xanh - Ha Khanh New Urban Area; The Bay View Tower mixed-use commercial and apartment service project (Ha Long City) ... that are behind schedule. In addition, many real estate projects have been put into use but the occupancy rate is not high, many villas and shophouses have owners but have not been put into residence, showing signs of deterioration, causing waste of resources and loss of urban beauty.

Mr. Nguyen Huu Nha - Vice Chairman of Ha Long City People's Committee said: Recently, the city has resolutely implemented the review, report and propose the province to consider, handle and revoke dozens of projects that are behind schedule and violate the law, in order to avoid the situation of "holding land" for a long time to let weeds grow, causing waste of land resources, affecting environmental sanitation and urban landscape.

For real estate projects, especially high-end real estate, local authorities need to take strong measures to inspect and thoroughly handle projects with serious violations, slow progress, lasting for many years, seriously eliminate projects with poor planning, limited financial potential, and deliberately "holding land" without implementing.

Lesson 3: Staying in a million dollar mansion

Low-income people live in million-dollar villas, they rent villas, shophouses to live in, open grocery stores, sell vegetables, beer bars... to do business to make a living, it sounds like a joke but it exists in most urban areas (KDT) that are expected to be livable, civilized and modern.

Turning villas and shophouses into… “markets”

It is not difficult to see that many villas and shophouses with wide frontages, next to residential areas or at the foot of apartment buildings in Hanoi are often used for rent to open cafes, restaurants, grocery stores, fast food stores, fresh food stores, etc. This is not prohibited by law, but it has unintentionally created a shabby appearance for urban areas that are considered civilized and modern.

Mr. Nguyen Quang Truong, living in Hoai Duc district, rented a shophouse in Tan Tay Do new urban area, Dan Phuong district, said: "My two friends and I rented the shophouse to sell fast food, coffee... Initially, we rented it to sell goods for 5 million VND/month (rented from the landlord - PV). Later, because we sold all night, we had to pay an additional 2 million VND/month to stay overnight.

A “service broker” specializing in renting shophouses here said: The tenants are mainly workers from the provinces, they rent cheaply to open breakfast shops, sell vegetables, beer bars… the rental is not binding, no need to deposit much money, when the owner takes it, it must be returned.

The fact that small traders have concentrated on renting shophouses to organize business has turned this place into a spontaneous flea market. A resident living in the HHA Apartment building, in Tan Tay Do Urban Area, said: Buying and selling is convenient, but every morning and on weekends, there are a lot of buyers and sellers, many vehicles go in and out of the urban area, potentially causing traffic safety problems. Not to mention the shops discharging wastewater, garbage... which is very messy.

Reporters went to the field in some urban areas in Hoai Duc, Gia Lam, Nam Tu Liem, Bac Tu Liem, Hoang Mai districts... and found that the situation of villas and shophouses being rented out by owners... appeared everywhere, each place had different characteristics and different rental prices. But all had one thing in common: contributing to the shabbiness of the civilized and modern urban area.

In the provinces and cities of Hai Phong, Phu Tho, Ha Nam, Hung Yen, Thanh Hoa, etc., the situation is not very optimistic. Although there are fewer tenants and prices are cheaper, it is still very messy. Meanwhile, the abandoned houses are overgrown with grass and show signs of deterioration.

Many "no"s in million dollar villa

In the role of a person renting a villa to stay temporarily, we were led by Ms. Nguyen Thi Bich to tour around Nam An Khanh Urban Area, Hoai Duc District, Hanoi City. Here, we saw a few villas and shophouses with people living there. Although the exterior of the villa was not yet completed, the doors were temporarily installed with plastic panels, some doors were made of thin corrugated iron sheets... inside, clothes were hung haphazardly, the sleeping places were temporarily made of wooden boards by workers, some places had mats spread straight on the concrete floor, the kitchen was set up temporarily and more specifically, there was no proper toilet here.

Mrs. Bich asked: "How many people do you plan to rent the villa for? If there are many people, you should rent the whole villa, the area is from 200 - 300m2, the price is only about 6 - 8 million VND/month, you can choose how many people you want to stay. If you agree, tell me so I can call the owner."

Most of the workers come from Nghe An, Thanh Hoa, Nam Dinh, Vinh Phuc, Tuyen Quang... they live in villas, shophouses, during the day they work as janitors, construction workers, mechanics... at night they gather together in a million dollar villa but "lack" everything: no electricity, no clean water, toilets do not work...

Le Khac Nam (from Thanh Hoa) is currently living temporarily in a villa in Hoang Mai district. He said: "I dropped out of school in 9th grade and followed my neighbor here to work as a construction worker. Now I am a construction worker. If it weren't for everyone's support and guidance, I don't know where I would be now."

These days, students are on summer vacation, many children are taken to Hanoi by their parents, for the first time they are staying in a million dollar villa with their parents. Ms. Le Thi Hai (from Nghe An) said: My child is on summer vacation, she said she misses her parents so I came back to take her here to play. There is no air conditioning, some days it is so hot that I can't sleep until late at night, I feel sorry for my child but there is no other way. I plan to let my child stay for 1-2 weeks and then take her back to the countryside to live with her grandparents.

Ms. Hoang Thi Sy - the main chef who cooks for more than 30 workers, said: "These days, the boarding house is much happier. There are 5 children who are welcomed by their parents. During the day, I cook and also take on the role of nanny. The good thing is that each of them comes from a different hometown, but they play together very unitedly and give in to each other."

In some urban areas in Hoa Binh, Ha Nam, Quang Ninh... here, low-income workers temporarily live in villas,

Shophouses still exist, although not many. When we approached them as reporters, they refused to answer or in some cases actively asked not to disclose information or take pictures… for fear that the landlord or investor would not continue to rent them out.

(Note: Names in this article have been changed to protect privacy.)

Lesson 4: Perfecting institutions, bringing high-end real estate to its true value

Real estate project developers and investors need to sacrifice small, short-term benefits for long-term benefits, proactively restructure businesses, focus on core projects, reduce debt, control corporate bonds well and limit over-reliance on credit institutions. As for management agencies, the State needs to soon complete a clear legal system from the central to local levels and clearly divide management power, avoiding overlap and lack of cohesion as at present.

Sacrifice small benefits

For businesses, benefits are always given top priority, sacrificing short-term benefits for overall, long-term benefits is indeed an extremely difficult choice. However, for a business specializing in high-end real estate, it is necessary to have courage, vision and certain understanding to face the need to sacrifice unprofitable projects or projects with low profitability, at the same time, restructuring the business, reducing debt, focusing on the main business, core projects... that is the wise decision.

Mr. Dinh Van Nghi - Chairman of the Board of Directors - General Director of VinaPol Joint Stock Company - a unit with many years of experience in developing real estate projects, frankly shared: Real estate enterprises should take advantage of this time to look back at themselves, must restructure the enterprise, reduce debt, reduce dependence on credit institutions, boldly cut off high-risk projects, do not invest in a scattered and fragmented manner. Avoid chasing quantity and hasty development, because once facing difficulties, it will be too late to turn back.

For "gods", in addition to having money, it is necessary to carefully study the legal aspects of the real estate project that you intend to invest in or buy for long-term residence. This is not difficult but requires investors to seriously consider, avoiding "closing the barn door after the cow is lost". In fact, there are currently many high-end real estate projects that, although they have been built and even allowed customers to move in, the legal procedures have not been completed and the infrastructure is not yet synchronized. This leads to the situation where villas and shophouses have owners but no one lives there, are left abandoned, overgrown with grass, and waste resources.

Localities should also carefully select reputable investors, strong financial potential, should not follow the movement, avoiding the development of high -end real estate, lack of planning on orientation. Water loss of tax and fees.

Need the "hand " of the State

In fact, the real estate market in general and high -end real estate in particular has been "loose" in terms of price, while the taxation and fee for this field is still low, not commensurate with the development of the market, leading to rampant speculation, blowing prices, making people need real housing difficulty access. Real estate experts said that the State needs to directly regulate the real estate market, because currently the State has sufficient legal tools to control this.

According to many experts, the high -end real estate market is blocked, leading to an unbalanced supply - demand, which leads to a series of other industries that have been reduced to growth. Therefore, it is necessary to open the real estate market, from which, cash flow from domestic and foreign into real estate increases and the merger of enterprises and real estate projects will take place in the market, to help create all the economic development and to create the economic development of all other industries.

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Resolution 18-NQ/TW of June 16, 2022 of the Central Executive Committee pointed out: "Continue to renovate, improve institutions, policies, improve the effectiveness, efficiency of land management and use, create the driving force for our country to become a high-income developed country", which is expected to have a strong impact on many aspects of Vietnam's real estate market in the coming time.

On the other hand, administrative procedures for settlement for enterprises to implement projects on land have been removed, but still entangled and prolonged.

This vicious circle kept repeating, from project to project, from one business to another, this year to another ... that's the saying "Fear of not having enough legal grounds", or "waiting for the guidance of the superiors", causing investment projects to be clogged, not implemented, leading to the ineffective social resources.

Regarding the support of investment capital, an enterprise specializing in developing real estate projects (for anonymity) said: "Currently, credit institutions do very well the postponement and debt to enterprises: The Government has directed" loosening "credit for real estate, but in my opinion, we should accompany bonds for businesses. Currently, we have access to bank loans very difficult and have a hard -to -spread psychology.

The improvement of institutions and policies on management and use of land synchronously and in accordance with the development institution of the socialist -oriented market economy will open land resources, help the State manage, exploit and use to ensure savings, sustainability and highest efficiency in land. The state management machine on land, streamlining, uniformly, eliminating intermediaries, promoting decentralization, decentralization, accompanied by mechanisms for inspection, supervision and control of power.

Delegate Dang Bich Ngoc- National Assembly Delegation of Hoa Binh Province

Need to solve the project problem, slow progress

The draft of the Land Law (amended) submitted to the 5th session on the basis of synthesizing after the widespread comments on the entire people.

The draft law needs to solve the problem of suspended projects, slow progress. For example, in many provinces and cities with many projects licensed to invest but due to many objective factors, it is slow to implement or only take a few steps, then do not deploy 5 years, even 10 years of wasting land resources and pressing for people.

I hope the draft Land Law (amended) must have strict and specific regulations to help the locality handle this problem in a radical and thorough manner.

Lawyer Nguyen Hong Bach - Director of Hong Bach and colleagues Company Limited

"Down" the investment must be cautious

Currently, in the fluctuating economic situation, real estate investment is still a safe destination for investors. Therefore, real estate projects are very much interested.

However, real estate investors need to be cautious when "down" The above documents, because when encountering a dispute, will be more convenient in the process of handling benefits. Wednesday, the content of the contract term and other costs.

Ms. Do Thu Hang - Senior Director, Research and Consulting Department, Savills Hanoi

Interested in the legal of the project

The supply is being sold directly from the investor in the current projects of the high -end segment that is very limited, it can be said to be scarce, while the newly started real estate project is only calculated on the fingers, partly due to the global financial crisis, partly due to many incomplete projects or difficult to complete legal procedures to start construction ... These are the main causes of high -end real estate supply.

However, investors need to equip information about the project most clearly, and must have specific commitments, binding many parties together.