Association proposes property project transfers when developers unable to fulfill financial duties

The Ho Chi Minh City Real Estate Association (HoREA) has proposed allowing property developers to transfer their projects when they are unable to fulfill financial obligations.

Giving feedback to the draft revised Law on Real Estate Business, HoREA chairman Le Hoang Chau said the law needs to include a regulation that allows investors to transfer a project or part of a project without fulfilling land-related financial obligations, including land use taxes, land rent and related taxes, fees and charges, the transferee is responsible for covering the costs.

He clarified that when the project has a land use right certificate, it means the investor has fulfilled its financial obligations to the state.

If a project only has a decision on land allocation or land lease issued by a competent state agency, there are two cases: the investor has fulfilled its financial obligations but has not been granted a land use right certificate, or the investor has not fulfilled its financial obligations, so it has not obtained the certificate, he added.

The Investment Law 2020 features a regulation on 'adjustment of investment projects', allowing investors to adjust goals, merge projects or split one into multiple projects, resulting in additional financial obligations to the state, he noted.

According to Chau, the transfer of a project or part of a project is a normal business operation under the production and business autonomy of enterprises as stipulated in Article 7 of the 2014 and 2020 versions of the Law on Enterprises.

However, in fact, abusing the regulation that allows one project to be transferred multiple times, some businesses have made illegal profits, he elaborated.

Moreover, to avoid taxes, some businesses have concealed project transfers under the forms of transferring shares and changing shareholders, causing losses to the state budget and reducing transparency in the real estate market, he added.

According to the HoREA, the Land Law stipulates that project investors are only granted land use right certificates after they have fulfilled their financial obligations to the state.

Project transferees are usually economic organizations with strong finances. Therefore, it is completely possible to add the regulation that the transferee is responsible for meeting financial obligations, thus avoiding state budget revenue losses.

The Law on Real Estate Business, adopted by the National Assembly on November 24, 2014, was considered modern and progressive at the time, but certain shortcomings have been revealed.

Particularly, several provisions of the current law overlap with other relevant laws such as the laws on land regarding the transfer of land use rights, the laws on housing regarding purchases, hiring or hire-purchase of residential houses, and the laws on investment regarding the transfer of real estate projects.

The Ministry of Construction recently released a draft amended Law on Real Estate Business for public comment and feedback, which will, once issued, replace the current law. It expects that the draft new law will be able to tackle those shortcomings.