Recognition of project investors through land use rights transfer agreements to implement the project
Recently, the Ho Chi Minh City Real Estate Association (HoREA) has sent a document with comments on the draft Decree on renovation and reconstruction of apartment buildings (draft Decree) to the Prime Minister and the Ministry of Construction.
It is necessary to add a provision "recognizing the project investor through an agreement to transfer land use rights to implement the project" for this case, then the investor will be approved for investment policy according to the provisions of the law on housing.
According to HoREA Chairman, Mr. Le Hoang Chau, Article 15 of the draft Decree only stipulates "selection of project investors through agreements on receiving transfer of land use rights to implement the project" but does not stipulate the recognition of project investors through agreements on receiving transfer of land use rights to implement the project for investors "who have purchased or received transfer of all apartments and other areas in the apartment building associated with land use rights to build the apartment building" so it should be added to Article 15 of the draft Decree.
Mr. Chau cited the case of Company P agreeing to buy back all 52 apartments in the old 4-storey apartment building at 239 Cach Mang Thang Tam, District 3, Ho Chi Minh City. Afterwards, Company P demolished the apartment building to carry out a real estate investment and construction project, high-end commercial housing at this location.
According to Mr. Chau, it is necessary to add a provision "recognizing the project investor through an agreement to transfer land use rights to implement the project" for this case, then the investor will be approved for investment policy according to the provisions of the law on housing.
Therefore, HoREA proposes to add Clause 6 (new) to Article 15 of the Draft Decree stipulating: "In case an investor has purchased or received the transfer of all apartments and other areas in an apartment building associated with the right to use land to build an apartment building to implement a real estate and housing business investment project in accordance with land use planning, construction planning, urban planning, housing development programs and plans of the locality, the investment policy for the project to renovate and rebuild the apartment building shall be approved in accordance with the provisions of the law on housing".
In addition, HoREA also proposed to amend and supplement Clause 2, Article 6 of the draft Decree stipulating the time for collecting opinions from owners, users of apartment buildings and relevant agencies and organizations on the content of the plan to renovate and rebuild apartment buildings should be 50 working days, which is more reasonable because the regulation of 30 days including Sundays and holidays is not enough time for competent State agencies to collect opinions.
In addition, regarding working time, HoREA proposed to amend and supplement Clause 3, Article 16 of the draft Decree because the regulation "The deadline for receiving application for registration as an investor as prescribed in Clause 1 of this Article is 30 days" is unreasonable, but should be 35 working days to have enough time to study the application and decide to participate in the project of renovating and rebuilding apartment buildings.
Proposal for home buyers of old apartment renovation projects to borrow from 125,000 billion VND package
Notably, regarding the credit issue, HoREA proposed to add Article 27b to the draft Decree regulating preferential credit policies according to the provisions of the law on credit.
According to Mr. Chau's assessment, the 125,000 billion VND credit package is quite suitable for investors and home buyers in apartment renovation and reconstruction projects who are borrowing at very high interest rates, around 10%/year.
According to Mr. Chau, currently, the State Bank has not issued a Circular detailing and guiding the implementation of preferential credit policies for investors and home buyers in projects to renovate and rebuild apartment buildings according to the above regulations, but has only implemented a program to lend for social housing, workers' housing, and renovate and rebuild old apartments according to Resolution 33/NQ-CP according to Official Dispatch No. 2380/NHNN-TD dated April 1, 2023, commonly known as the VND 125,000 billion credit package.
In this credit package, investors and home buyers in apartment renovation and reconstruction projects can borrow at an interest rate 1.5-2% lower than the normal commercial loan interest rate, and this interest rate is adjusted every 6 months; investors in apartment renovation and reconstruction projects can borrow preferentially for a period of 3 years, while home buyers in apartment renovation and reconstruction projects can borrow preferentially for a period of 5 years, after which they must borrow at an agreed, "floating" interest rate.
According to Mr. Chau's assessment, the 125,000 billion VND credit package is quite suitable for investors and home buyers in apartment renovation and reconstruction projects who are borrowing at very high interest rates, around 10%/year.
But currently, due to “legal problems”, there are no projects to renovate or rebuild (new) apartments or many projects cannot be implemented, leading to no housing products in the projects to renovate or rebuild (new) apartments, so up to now, no investors and home buyers in the projects to renovate or rebuild apartments have been able to borrow from the 125,000 billion VND credit package.
Therefore, if the National Assembly Standing Committee and the National Assembly can arrange medium-term state budget capital to implement preferential credit policies for investors and home buyers in apartment building renovation and reconstruction projects as prescribed in Point d, Clause 1, Article 63 of the 2023 Housing Law, the State Bank will have budget capital to support refinancing and interest rate compensation for credit institutions implementing this preferential credit policy.
“The State Bank is requested to stipulate that investors and home buyers in apartment building renovation and reconstruction projects can borrow a credit package of VND125,000 billion for a maximum period of 5 years with a fixed interest rate, 1.5-2% lower than the normal commercial loan interest rate,” Mr. Chau proposed.
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