23-11-2021The supply of condotel apartments has started to increase again, showing a large market demand, but investors are still looking forward to solving the legal problems of this type.
Investing in a condotel in Da Nang 3 years ago, but until now, Ms. Nguyen Thanh Nhan (Hanoi) has not yet been had certificate of land use right book granted with the reason that the employer was "waiting for further instructions from the management agency". This makes it difficult to mortgage the apartment, she can only be lent by the bank affiliated with the employer, but fails to borrow from another bank. "I have to regretfully accept a much higher interest rate than non-affiliated banks," Ms. Nhan said.
Mr. Phan Thanh Tuan - a real estate expert in Phu Quoc also said that the biggest concern that made him hesitate to invest in this type of investment was the legal inadequacies. "If the condotel’s legality is clearly regulated, I believe that investors will receive it strongly, the market segment will be more active in the coming time," Mr. Tuan said.
Since 2020, resort real estate has suffered from many negative impacts from outbreaks of the pandemic, but in the first half of this year - before the 4th outbreak, the condotel segment from Da Nang back to Phu Quoc received positive signals by new projects with a fairly large number. According to the real estate market report of DKRA Vietnam, in the first quarter, there were 752 new products launched for sale, of which 467 products were sold successfully. In the second quarter, the market received 944 apartments for sale, up 26% compared to the previous quarter and 3.6 times higher than the same period last year. The consumption rate reached 64%, equivalent to 606 apartments, up 30% compared to the first quarter of 2021 and 4.4 times higher than the same period.
According to experts, there has been still demand for owning condotels in the market. Making this segment become warmed up again as it was in the 2015-2019 period depends on many factors. In which, Vietnam must quickly control the pandemic to recover the tourism industry, and the management agency should solve legal barriers and problems, and strengthen investor confidence.
According to HoREA's report, the country currently has about 83,000 condotel apartments, most of which are in high-rise buildings belonging to resort tourist bases, use the land fund as commercial and service land with a use term of maximum 50 years, and in special cases maximum 70 years. Condotel projects are concentrated mainly in localities having tourism strength with total investment capital of about VND 100,000 billion.
Actual image of Quy Nhon Melody tourist apartment is in the finishing stage. Photo: Hung Thinh Land
According to Mr. Tran Quoc Dung, Deputy General Director of Hung Thinh Corporation, condotel apartments meet the design and safety standards, exploit similarly to hotels, which means they have standards much higher than those of apartments. However, if the apartment has its own complete legal framework, governed by housing law, the condotel type is governed by many different regulations from: Law on Tourism, Law on Business Real estate business, Land Law.... "Official Letter No. 703 of the Vietnam General Department of Land Administration, Ministry of Natural Resources and Environment, issued on February 14, 2020 which are the basis for localities to more easily grant ownership certificates for qualified condotel apartments, but so far this issue has not been applied and implemented in a synchronous and thorough manner by localities", Mr. Dung emphasized.
According to Nguyen Van Dinh, Vietnam Association of Realtors (VARS), the absence of specific regulations on allowing condotel buyers to have ownership certificates granted causes many obstacles, not only tightened by banks on capital sources but also transferring more difficult and complicated when investors want to liquidte. "While, for investors, capital flow always needs to be flexibly mobilized, buying at one time and selling at another time, which hindered their desire to invest," Mr. Dinh said.
Agreeing with this viewpoint, a representative of Hung Thinh said that most commercial banks are cautious in granting credit to employers as well as to customers who want to invest in condotel. Therefore, real estate enterprises want banks not to imitate servilely in requiring pink and red books. When there are legal regulations, the bank can fully appraise the effectiveness of projects, customers and commitments from investors. At the same time, the bank can include in the contract the asset settlement plans in case the borrower commits a breach... "Banks should be flexible enough to ensure enough factors to be able to support the customers in having more investment capital", Mr. Dung suggested.
According to Mr. Su Ngoc Khuong, Senior Director of Savills Vietnam, if Housing Law 2014 allows foreign organizations and individuals to buy 30% of the number of apartments in an apartment building, there have not still been this regulation for the condotel segment.
While in Vietnam, condotel investors announce their commitment to ensure a minimum profit for owners of about 8-10% in the first 10 years, much higher than the common level of the world. The demand for buying real estate by foreigners in Vietnam is increasing, especially investors in the region such as Thailand, Malaysia, Singapore, Indonesia...
Vietnam still lacks tourism infrastructure for the goal of being in top 3 in ASEAN in terms of tourism competitiveness, receiving 35-50 million international visitors by 2030. Currently, there are only about 100,000 resort rooms from 3- 3. 5 stars or more (including condotel apartments), about 300,000 resort rooms are missing. "Therefore, we should expand, grant certificates of use rights to foreign investors, and attract this capital to improve the infrastructure for the tourism industry. Not only that, owning real estate in Vietnam also increases consumer spending, foreign exchange cash flow pouring into other economic sectors," Mr. Khuong said.
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