Homebuyers will soon get protection for their money and rights as aregulation making bank guarantees mandatory for future propertypurchases will come into effect next week.
Following Article 56of the Law on Real Estate Business, property developers, before sellingor leasing unfinished properties, must obtain guarantees from eligiblecommercial banks as assurances of their financial obligations to buyers.
Speakingat an online discussion on "Property guarantees – will there be risks,"held in Hanoi on June 24, Vu Van Phan, Deputy Director of theConstruction Ministry's Housing and Real Estate Market ManagementDepartment, said several countries have implemented property guarantees.For example, the Republic of Korea has been applying this guaranteenorm for years at 0.5-1 percent fee.
"The purpose of the articleis to protect homebuyers' money. If property developers fail to handover apartments to buyers despite commitments, banks will be responsiblefor returning buyers' money, in line with signed contracts. Inaddition, this will help improve the sense of responsibility ofinvestors," Phan observed.
Customers have lost their trust afterseveral real estate projects collapsed in the past few years, affectingthe realty market," he added.
Vu Quoc Hiep, Chairman of the GPInvest Company's Management Board, agreed, saying that this can beconsidered as the second shield, together with the purchase of contractsbetween investors and homebuyers. Customers can ask real estatedevelopers to provide images or videos of their projects' progressregularly.
Hiep noted that the ministry will promulgate a decree or circular outlining the implementation of the regulation.
He also asked about the fee for a guarantee and proposed the ministry to specify the rules for the collection of fees.
Meanwhile, some said that a property guarantee will present more risks for banks than other normal guarantees.
DoanThai Son, Director of the State Bank of Vietnam's Legal Department,pointed out that commercial banks already have this guarantee underCircular 28 issued by the central bank in 2012. In reality, severalbanks have implemented guarantees for property projects.
The central bank has prepared a list of commercial banks eligible to offer guarantees for real estate projects.
Thereare two forms of guarantees, trust loans and mortgages. It is easy toimplement mortgages for both property developers and banks.
Son suggested that banks should carefully review developers' ability while offering guarantees under trust loans.
He proposed a guarantee fee of 0.1 percent, 1 percent, and 2 percent or higher, depending on a bank's assessment.
Hecalculated that with an average housing price of 25 million VND persquare metre, 100sq.m. can have a total value of 2.5 billion VND. Theguarantee fee will be calculated on 70 percent of the total value, or1.7 billion VND. If the fee is 0.5 percent of the total value, investorswill have to pay 8 million VND or 32 million VND for a fee of 2percent.
However, several people worry that developers will add the additional fee to housing prices.
He suggested that a guarantee fee should be negotiated between banks and investors depending on each project and its risks.-VNA
Following Article 56of the Law on Real Estate Business, property developers, before sellingor leasing unfinished properties, must obtain guarantees from eligiblecommercial banks as assurances of their financial obligations to buyers.
Speakingat an online discussion on "Property guarantees – will there be risks,"held in Hanoi on June 24, Vu Van Phan, Deputy Director of theConstruction Ministry's Housing and Real Estate Market ManagementDepartment, said several countries have implemented property guarantees.For example, the Republic of Korea has been applying this guaranteenorm for years at 0.5-1 percent fee.
"The purpose of the articleis to protect homebuyers' money. If property developers fail to handover apartments to buyers despite commitments, banks will be responsiblefor returning buyers' money, in line with signed contracts. Inaddition, this will help improve the sense of responsibility ofinvestors," Phan observed.
Customers have lost their trust afterseveral real estate projects collapsed in the past few years, affectingthe realty market," he added.
Vu Quoc Hiep, Chairman of the GPInvest Company's Management Board, agreed, saying that this can beconsidered as the second shield, together with the purchase of contractsbetween investors and homebuyers. Customers can ask real estatedevelopers to provide images or videos of their projects' progressregularly.
Hiep noted that the ministry will promulgate a decree or circular outlining the implementation of the regulation.
He also asked about the fee for a guarantee and proposed the ministry to specify the rules for the collection of fees.
Meanwhile, some said that a property guarantee will present more risks for banks than other normal guarantees.
DoanThai Son, Director of the State Bank of Vietnam's Legal Department,pointed out that commercial banks already have this guarantee underCircular 28 issued by the central bank in 2012. In reality, severalbanks have implemented guarantees for property projects.
The central bank has prepared a list of commercial banks eligible to offer guarantees for real estate projects.
Thereare two forms of guarantees, trust loans and mortgages. It is easy toimplement mortgages for both property developers and banks.
Son suggested that banks should carefully review developers' ability while offering guarantees under trust loans.
He proposed a guarantee fee of 0.1 percent, 1 percent, and 2 percent or higher, depending on a bank's assessment.
Hecalculated that with an average housing price of 25 million VND persquare metre, 100sq.m. can have a total value of 2.5 billion VND. Theguarantee fee will be calculated on 70 percent of the total value, or1.7 billion VND. If the fee is 0.5 percent of the total value, investorswill have to pay 8 million VND or 32 million VND for a fee of 2percent.
However, several people worry that developers will add the additional fee to housing prices.
He suggested that a guarantee fee should be negotiated between banks and investors depending on each project and its risks.-VNA
