Red tape prevents Vietnam housing industry recovery

TN News

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With as many as 400 guiding documents on real estate laws and regulations to follow, red tape has become a huge drag on businesses’ efforts to revive the housing market.

Analysts said their repeated calls for paperwork to be reduced has not been heeded and in fact things got worse. The paperwork is among reasons that prevent housing prices from falling back to the rates that obtained before the hot streak that preceded the current slump.

Nguyen Van Duc, vice chairman of the Ho Chi Minh City Real Estate Association, said it often takes firms three to five years or even longer to complete the paperwork, while five or six years ago it used to be just around seven months

Housing prices would fall significantly if the process is cut short by 50-70 percent, he said.

Luu Thi Thanh Mau, general director of housing firm Phuc Khang Corp, said red tape has pushed many firms in the industry -- mostly small and medium-sized businesses which are more vulnerable to the economic situation -- into “passive” mode.

Vu Viet Ngoan, chairman of the National Financial Supervisory Committee, said red tape and the calculation of the “market-based” land-use tax -- which typically results in charges much higher than firms’ estimate – are among the biggest problems for the industry.

Analysts blame red tape also or the slow disbursement of the government’s US$1.42-billion cheap loan package.

As of mid-January the program, which targets both buyers and developers of social housing, has committed only VND1.4 trillion ($66.4 million) to 15 businesses after more than six months since it was begun.

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Another VND720 billion has been promised to around 1,990 home buyers.

The total amount represents less than 8 percent of the package.

Ongoing efforts   

Earlier this year Deputy Minister of Construction Nguyen Tran Nam told the media that prices in most housing segments have fallen by 10-30 percent since 2011.

The market has shifted its focus to genuine buyers with the majority of supply coming in the mid-priced and cheap segments costing VND12-17 million ($570-810) or even VND10 million per square meter rather than the average of around VND20 million before the slump.

Sales by volume last quarter doubled from the first quarter of 2013.

Tran Nhu Trung, deputy director of Savills Hanoi, said the market is gradually inching up but is still very far from the peak period when up to 90 out of every 100 housing units hitting the market were sold within a quarter.

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