Hanoi is determined to tackle stalled real estate projects but insiders remain concerned about how effective such measures can be.
In the center of busy Thai Ha Street in Hanoi, the yellow paint of the crane at the site of the 131 Thai Ha building has faded in the time it’s sat idle since 2009. On an area of 6,745 sq m in what many property developers back in the heydays of the real estate sector called a “golden land”, the project was to boast a complex of offices and apartments and was being developed by the Huy Hung JSC. After selling all apartments prior to 2009, it committed to handing them over to buyers in 2010. Now the site lays abandoned, with construction ending at the 14th floor. The apartments are as far from the reach of those who bought them as they’ve ever been, as are the trillions of VND, or hundreds of thousands of dollars, they paid for them.
According to Mr. Nguyen Chi Tam, Chairman of the Trung Liet Ward People’s Committee, where the project is located, local authorities accompanied the Hanoi Department of Construction on a recent investigation of the site. “The delay resulted from the economic downturn, and the developer has not managed to arrange capital to complete the project,” Mr. Tam said.
131 Thai Ha is not the only project in a prime location that’s many years behind schedule. Also in Dong Da district is another project stalled at the 21st floor. Developed by the Hoa Binh Financial Investment Joint Venture Co., the project at 198B Tay Son - featuring a shopping mall, supermarket, and office space for lease - kicked off construction in 2009 and was to be completed in 2011. Instead, it’s laid abandoned since 2011.
The long-delayed project, however, was permitted to adjust its function by the Hanoi Department of Planning and Architecture (HDPA) on May 27. Ms. Nguyen Thi Chi, a representative from the Hoa Binh Financial Investment Joint Venture Co., told local media that the project was behind schedule due to Hoa Binh having to wait for approval to adjust its function. “We were allocated land late in the project’s early days,” she was quoted as saying. “We expect to complete it with its function changing to hotel investment, which is more suitable with our current business circumstances.” Completion is expected in the fourth quarter of next year.
Two years ago, Sky Garden Towers, developed by the Dinh Cong Co., attracted much attention due to its design and location. At 115 Dinh Cong in Hanoi’s Hoang Mai district on 7,000 sq m, the project was to comprise two 28-storey towers with 360 apartments and was expected be completed in the third quarter of last year. Today the tall grass and building materials strewn about tell the story of the project, which ceased construction at the eighth floor at the end of 2013. Staff at Dinh Cong have been unable to contact the company’s managing director, according to a report the Hanoi Department of Construction (HDC) submitted to the Hanoi People’s Committee.
These three projects are among many facing the possibility of losing their license or seeing a change in developer under an HDC proposal put to the Hanoi’s People Committee. A range of violations in other projects were also uncovered after the department conducted inspections of 573 real estate projects and new urban area projects in the city at the end of August.
Seventeen projects were found to be more than 24 months behind the schedule committed to by developers when their investment was licensed, while 30 others have been allocated land or land leases for 12 months but are yet to begin construction. Twelve projects were found to be delayed due to the developer facing difficulties or have not kicked off construction since the real estate market went through a crisis a few years ago. There were also 41 projects found to be unsuitable with the general planning of the city.
Solutions to come
The inspections are a necessary part of leading the real estate market and housing development plan in the right direction, according to Mr. Nguyen Ngoc Tuan, Deputy Chairman of the Hanoi People’s Committee.
Classifications were made after reviewing and collecting figures on commercial real estate projects and urban area projects in the capital: projects completing investment and construction progress; projects under construction and suitable with approved general planning; projects that have been approved by authorities in terms of investment policy and detailed planning but the developer has been slow in implementing procedures relating to investment preparation or has used the land for improper purposes; and projects in need of adjustment to planning to be consistent with general planning and zoning planning.
For projects approved by competent authorities regarding investment policy but whose developer has been found to be slow in implementing land procedures, the HDC, in collaboration with the Hanoi Department of Natural Resources and Environment (HDNRE) and the Hanoi Department of Planning and Investment (HDPI), is assigned to review and identify specific causes and propose specific treatment. The HDC is also to study and develop software on monitoring and managing new urban areas, commercial housing projects, and social housing projects in the city, which is to be put into operation prior to June 2016.
For projects needing to adjust their planning according to approved general and zoning planning, HDPA is assigned to guide developers in complying with regulations.
Regarding projects that have been approved by competent authorities in terms of investment policy and detailed planning but the developer has been slow in implementing procedures relating to investment preparation, the HDPI is assigned to review and propose remedial measures. Hanoi will resolutely withdraw the licenses of projects where developers have deliberately delayed implementing investment preparations, Mr. Tuan added.
According to the 2013 Land Law, effective from July 1, 2014, projects found to be more than 24 months behind the schedule committed to by developers when their investment was licensed will have such licenses revoked by local authorities, who will not have to compensate developers and investors for associated losses.
Although Hanoi’s determination in handling violations is clear, conducting such tasks is not easy in reality, according to Mr. Bui Viet Anh, Head of the Binh An International Law Office. Obstacles can exist in projects where developers have completed their financial obligations with local authorities and paid large amounts to conduct site clearance. In such cases local authorities can designate other developers and investors to continue the projects, with compensation to be determined by negotiations between the new developers and previous developers.
The policy on withdrawing the licenses of delayed projects is a measure aimed at promoting the development of real estate market, according to Mr. Pham Si Liem, Deputy Chairman of the Federation of Civil Engineering Associations (VFCEA). “If local authorities have not identified new developers to take over projects they should reconsider whether to revoke the licenses,” Mr. Liem said.
It also takes time to calculate and review the amount of money developers have poured into projects. “Local authorities should publicize the names of stalled projects and conduct a public auction with the participation of local authorities and industry insiders to determine the best developers to replace the former developers and continue the project,” Mr. Liem added.
For projects in which developers have collected hundreds of thousands or even tens of millions of dollars from homebuyers, project acquisition is an extremely complicated matter.
In order to avoid license revocation or project withdrawal, insiders say that many developers now may ask local authorities to extend the deadline for project completion or adjust project planning and function.
♦ 3,978 housing and urban areas projects are underway nationwide with total investment of VND4.47 trillion ($200.2 million).
Source: Ministry of Construction
- real estate projects