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Locals No Longer Get Freehold of Apartments?

Posted by Khoi Pham on June 10, 2022

After the proposal of the Ministry of Construction in the outline of the Law on Housing (amended): the provision of an apartment use term for locals is only 50-70 years instead of freehold ownership, has raised many controversies and worries among people.

Especially those who feel their lifetime fortune are at risk of disappearing.

Even, many people began to compare and speculate about the upcoming apartments price that is likely to drop sharply.

Or, instead of buying an apartment, renting will be more beneficial in the future.

Compare the cases of renting or buying an apartment

Realtique cites 1 case, if a local has 2 billion VND in hand to buy an apartment, there will be 2 options:

Compare the case of renting or buying an apartment when ownership is only 50 years. Design: Realtique

Compare the case of renting or buying an apartment when ownership is only 50 years. Design: Realtique

  1. Buy an apartment and stay for 50 years. After 50 years it is not clear what will happen. 2 billion / 600 months (50 years) = 3.3 million VND / month. This is considered as a long-term rental, but the local cannot change the place for 50 years even if it deteriorates and after those 50 years, the future is left unopened.
  2. Deposit 2 billion into the bank at the interest rate of 7% / year. Each year get 140 million VND. That means the local will have more than 11 million VND / month to rent. If the apartment is old, the local can change to a new one. After 50 years, the right to decide is still in his/her hands.

Of course the above case is a fictitious assumption, excluding factors such as inflation and variable interest rates. Many other factors, if included, could change the situation in 5-10 years, rather than waiting 50 years.

At this point, it can be understood that the public opinion is confusing when suddenly “asset” becomes “liability”

In addition, in Vietnam, the household structure is still the foundation constituting the society. At the fourth session of the 10th National Assembly in 1998, it was decided that residential land was used indefinitely, a stable and sustainable place for households, from generation to generation. To do otherwise, society will be unstable.

So what is the point of this slanderous proposition that goes against the intentions of Congress and the social resilience?

In general, it is due to congestion in the regulations on the renovation of old apartments.

With the proposal of owning the apartment to be shortened to 50-70 years, the managers believe this is the solution for renovating the degraded apartments – the conundrum that has remained for several decades, unresolved.

For example: Hanoi has 1,600 old condominiums formed from 1960-1999, but up to now only 1.2% have been renovated, or 19 projects.

Ho Chi Minh City has 474 old apartments from before 1975, now only 28% of repairs have been completed, or 132 projects, completely late with the target of 50% by 2020.

Why is it so late?

The renovation of old condominiums have been implemented slowly because of unrealistic regulations in construction procedures. For example: for an apartment that is badly damaged, in danger of collapsing, requires major repairs, priority is given to doing it immediately, with 100% consent of the residents.

However, what in life is there any case of 100% consensus.

In the world, what are they doing with this old apartment renovation problem?

According to resource management expert Dang Hung Vo:

How the world owns land and housing? Design: Realtique

How the world owns land and housing? Design: Realtique

Socialist countries like Vietnam, China:

Regulates that all types of land can only be used for a short term, including residential land. However, such a provision does not mean that when the time limit expires, the land will be acquired for other jobs. The planning is stable and long-term, the land with a term is low priced and if the term expires, the user can pay for the next term.

Many other countries inside or outside ASEAN:

Investors can choose the form of long-term or fixed-term residential land use, adjusted by the tax tool. To be coherent, everything in the market economy must be converted into money to determine.

For condominium land, other countries are not as complicated as Vietnam:

Renovation of an apartment building when it is degraded should be given to the community of residents, who have the right and responsibility to mobilize resources for maintenance and renovation. Everything related to the apartment is planned in advance and recorded in the apartment purchase contract. The complex problem of condominiums in Vietnam is caused by the management method, not much related to the land use term.

In industrialized countries (G7):

The concept of the household also fades, each individual becomes the cell of society. Young people believe that renting a place to live is the right condition because they have enough money to pay for rent in their own salary. Investors in real estate projects are also free to choose to lease short-term or buy long-term depending on the analysis and balance of costs – tax benefits and land prices that are most beneficial. The conditions in Vietnam are very different, so it is impossible to follow them.

In short, housing management is always the big picture. An inappropriate decision can cause the whole system to conflict with each other when condominiums account for 80% in big cities. If considering housing for low income people, this is even more a strange question mark.

In theory, the Housing Law and the Land Law are two separate laws

Should not ramble together. When the Land Law is considering amendment, the Housing Law should focus on adjustment within this legal profession, not encroach on other specialized areas to avoid leading to: Confusion of Public Opinion, Proposing for Self-dismissing.

Realtique Co., LTD

[email protected]

+84866810689 (Whatsapp/Viber/Zalo/Wechat)

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