Many real estate projects are selling at skyrocketing prices even though they are still on paper only, posing serious risks to buyers who are buying houses in the form of capital contribution.
Capital contribution to “on paper” projects
Many project owners have taken advantage of the recent “land fever” to sell their projects at high prices. Under DTiNews’ observation, a large number of apartment and villa projects have called out to capital investment even when their foundations have not been completed.
Some other projects calling for capital are even in their ‘paper’ stage only, posing a serious risk to customer as the projects can be suspended for many reasons.
Meanwhile, projects’ prices have kept rising rapidly. Many project owners have increased their prices by 30 to 50 per cent within merely a month. Experts say that at the moment, there are no clear criteria to evaluate housing and land prices. Moreover, the city construction planning is under development so it is difficult to estimate the original value of projects. In this context, the property price assessment depends much on investors.
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| Caution needed for capital contribution in property projects |
Customers should be cautious
Undeniably, the current demand for property is still considerably larger than supply, thus capital contribution is inevitable.
“It’s important to have customers for every project. In addition, banks at the moment are not very interested in lending to property business activities. Thus it’s necessary to mobilise capital from customers to kick off and complete the projects in time,” said Ta Van Trung, director of Song Da 1.01 Joint Stock Company.
Under current property law, capital mobilisation can only be conducted after the project’s foundation is completed. This regulation is aimed to prevent the ‘on-paper sales’ of projects.
Phan Thanh Mai, Manager of the Northen Vietnam network of real estate transaction centres, said that it’s legal for enterprise to raise money through capital contribution contracts, but it must be done according to law’s regulations. Otherwise the customers may face difficulties in obtaining housing and land usage certificates down the road.
