Are investors waiting for the regulations to change?

Công Luận•25/05/2023

"Running at breakneck speed" to complete the project of building at least 1 million social housing units.

Recently, the Government approved a plan to build at least 1 million social housing units for low-income earners and industrial zone workers during the period 2021-2030.

The project is divided into two phases. Phase 1, from 2021 to 2025, aims to complete approximately 428,000 units. Meanwhile, Phase 2, from 2025 to 2030, targets the completion of approximately 634,200 social housing units.

Investors are waiting for the mechanism to change (Figure 1).

However, a report from the Ministry of Construction shows that from 2021 to mid-May 2023, the whole country completed 41 social housing projects in urban areas, with an estimated more than 19,500 apartments handed over. It is expected that from now until 2025, the end of Phase 1 of the Project, approximately 294 projects will be completed, with nearly 288,500 apartments handed over.

If these projects are completed on schedule, in Phase 1 of the Scheme, the total supply of social housing will be approximately 308,000 units, equivalent to 30.8%. This figure does not meet the government's allocated expenditure for Phase 1.

Thus, in phase 2, from 2015 to 2030, localities will have to work frantically to complete the remaining 69.2% of the apartments, equivalent to 692,000 units. This does not include cases of projects being delayed or deliberately not implemented according to regulations, making the implementation of the tasks in the Plan increasingly difficult.

Many obstacles exist in the construction of social housing in urban areas.

According to the Ministry of Construction, there are many difficulties and challenges in implementing this project, such as limited capital; lack of allocated land; and mechanisms and policies to encourage the development of social housing that are not truly attractive,...

However, there are certain difficulties with Government Decree 49, issued in 2021, regarding the requirement that developers of commercial housing and urban areas must allocate 20% of their land for social housing construction.

Specifically, Decree 49 stipulates that commercial housing projects in special urban areas with land plots of 2 hectares or more must allocate 20% of the land for social housing construction. For smaller urban areas, only urban development projects with land plots exceeding 5 hectares are required to comply.

According to the Hanoi People's Committee, the city currently has many commercial housing projects with areas exceeding 2 hectares in suburban areas, in remote regions such as Ba Vi, Ung Hoa, My Duc, etc. Therefore, developing social housing on more than 20% of the land in these projects is inappropriate.

In addition, commercial housing projects larger than 2 hectares but with a small area of land for housing construction are still required to allocate 20% of the total land area where technical infrastructure has been developed for the construction of social housing.

Therefore, allocating land for social housing in these projects is inappropriate and fragmented; however, according to regulations, the decision not to allocate land for social housing in these projects must be reported to the Prime Minister.

Meanwhile, according to the People's Committee of Dong Nai province, there are cases where investors have completed commercial housing projects (Level I projects), and now wish to continue investing in social housing on the 20% land allocation of that commercial housing project (Level II projects). However, the investor is not allowed to separate the 20% land allocation into an independent social housing project; instead, they must adjust the investment plan and extend the project timeline.

However, in many cases, consideration for extending the project timeline for Level I projects is not feasible because some Level I projects have exceeded their investment period by more than 24 months.

Slow progress in constructing social housing on over 20% of urban land.

Currently, many developers are deliberately delaying the construction of social housing on more than 20% of urban land, aiming to wait for changes in regulations and circumvent the rules. This is especially true in major cities like Hanoi or Ho Chi Minh City, where land prices are very high, and few developers comply with this regulation.

Previously, at the end of 2022, the Ministry of Construction proposed abolishing the mandatory requirement for developers of commercial housing and urban areas to allocate 20% of their land for social housing construction. Instead, the Ministry of Construction requested the addition of a regulation stating that the allocation of land for social housing development is the responsibility of the provincial People's Committees.

Speaking with a reporter from the Newspaper & Public Opinion, Mr. Nguyen Trung Tuan, a real estate expert, said: Because of this proposal, there is a phenomenon where developers intentionally "stall" to wait for policy changes.

“In special urban areas, 20% of a 2-hectare plot of land is extremely valuable. Therefore, for some developers, building social housing on this land is wasteful. This is because social housing projects are subject to profit limits. Meanwhile, when the mechanism changes and this regulation is removed, they can build other commercial housing projects with higher profit margins,” Mr. Tuan said.

Similarly, the Ho Chi Minh City People's Committee stated: Within the city, there are many urban development and commercial housing projects with large land areas exceeding 2 hectares, and some even exceeding 10 hectares. These projects have allocated 20% of their land for social housing construction, but the project developers have been slow to implement land compensation and clearance or have not yet invested in the construction of technical infrastructure, thus preventing the commencement of social housing construction.

In response to this situation, the Ho Chi Minh City People's Committee will review and strictly enforce the regulation requiring 20% of the land fund with completed infrastructure in commercial housing projects and urban areas to be allocated for the development of social housing, in accordance with the housing law.

The Ho Chi Minh City People's Committee will strengthen inspection, supervision, and handling of legal violations in the development of social housing and worker housing in the city, including the allocation of land for social housing in commercial housing projects and urban areas.

At the same time, urge investors of commercial housing projects and urban areas to implement the construction of social housing on the 20% land allocation of these projects according to the approved schedule.

"In the event that the investor fails to implement the project, the Ho Chi Minh City People's Committee will consider revoking the 20% land allocation to select and assign it to other investors," the city leader emphasized.

Mr. Nguyen Thanh Nghi, the Minister of Construction, recently urged large real estate businesses and corporations, in addition to developing urban and housing projects, to pay more attention to investing in social housing for low-income individuals and industrial zone workers in localities, in order to ensure social welfare and achieve the goals of the Project.

Furthermore, the Ministry of Construction requests that businesses seriously fulfill their responsibility to invest in social housing on the 20% land allocation within commercial housing projects and urban areas where the businesses are the investors.

In the coming period, the Ministry of Construction and local authorities will strengthen inspection, supervision, and handling of legal violations in the development of social housing and workers' housing in their respective areas.

Specifically, the regulations requiring 20% of the land fund with completed infrastructure in commercial housing projects and urban areas to be allocated for the development of social housing, in accordance with housing laws, will be reviewed and strictly enforced.

"The Minister of Construction emphasized that commercial housing project investors are required to invest in and construct social housing on this land according to the approved schedule."

Dinh Tran

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