Hundreds of HCMC property projects stagnate over policy complexity

Hundreds of real estate projects in Ho Chi Minh City have been stalled for many years due to policy bottlenecks.

Over the past five years, about 95% of commercial housing projects in the city have not been recognized as they are not using 100% residential land. "Therefore, the investors cannot implement the projects," said Le Hoang Chau, Chairman of HCMC Real Estate Association.

More than 126 commercial housing projects in the city were suspended by the 100%-residential-land requirement between 2015 and 2018. This has had a "tremendous impact" on the real estate market, businesses, and national economy. It also reduced state budget revenues and availability of housing products, driving up house prices, according to the association.

Him Lam Real Estate JSC has had no new projects since the 1,000-apartment Him Lam Phu An project in 2016, despite owning many land banks. Its two projects in District 7 and District 1 have not been licensed due to procedural obstacles. The company has had to sell land funds to sustain its operation.

"Having no new projects over the past five years, Him Lam has to downsize its business; sales employees quit their jobs. This has greatly burdened our finances and development," said Le Thi Bich Ngoc, Deputy General Director of Him Lam Land.

Similarly, despite holding numerous land banks in HCMC, real estate giant Dat Xanh Group (DXG) has been unable to develop new projects since 2017.

Vietnam's top property developer Novaland in 2020 sought the Ministry of Construction’s help in resuming work on a 30-hecrate residential complex in Binh Khanh ward, Thu Duc city. Novaland had invested VND6,000 billion ($261 million), but the project remains suspended.

In 2015, Phuc Khang Corp intended to develop the Diamond Lotus Lakeview project in Tan Phu district. With a total area of 11,458 square meters, it includes three 21-storey towers, providing 1,000 apartments. Though its products were open for sale in 2017, the project has yet to be implemented.

Phuc Khang also planned the Rome Diamond Lotus project in Thu Duc city in 2019. “The project’s basement was completed, but it has not been granted a construction license due to the conversion of land purpose from production to residential,” said Luu Thi Thanh Mau, CEO of Phuc Khang Corp.

Ngo Quang Phuc, CEO of Phu Dong Group, told The Investor that real estate firms are only concerned with two factors, namely slow legal procedures and scarce land funds.

If the two issues were solved, there would be a diversified supply of projects to the market, fulfilling actual housing needs and narrowing the supply-demand gap, he claimed. "Otherwise, real estate developers would be exhausted as they have no more land or have to take a detour."

Project stagnation has increased businesses’ investment costs, management costs, and capital backlogs, as well as affected their revenue and brand reputation.