On 7 May 2020, the Department of Construction of Ho Chi Minh City (the “HCMC DOC”) issued Official Letter No. 4801/SXD-PTDT (the “OL 4801”) seeking opinions on the draft report to the People’s Committee of Ho Chi Minh City (the “HCMC PC”) on the proposed procedures for development of commercial housing projects in Ho Chi Minh City as directed by the Vice Chairman of the HCMC PC in Official Letter No. 2837/VP-DT (the “OL 2837”).
Currently, in Ho Chi Minh City, to develop a commercial housing project that has not obtained lawful residential use rights, developers are required to perform a five or six step procedure (depending on specifics of the case) to lawfully implement the project. A developer is required to complete the financial obligations including payment of land use fees before being eligible to perform the process to be recognized as the developer of the project and to obtain investment approval. Only upon receipt of such approval may the developer apply for appraisal of the basic design and technical design for the construction permit. This procedure is extremely time-consuming in practice.
According to the Real Estate Association of Ho Chi Minh City, commercial housing projects need huge investment and usually take five to seven years to implement and complete the preparation for investment and construction of infrastructures and foundations of the projects. All of this must happen before the developer can proceed with the mobilization of capital. In addition, the time period for evaluation and calculation of the land use fee by the relevant authorities in Ho Chi Minh City is quite lengthy, and usually takes from two to three years. Only after paying in full the land use fee may the developer start the procedure to obtain necessary approvals and appraisal to implement the project. This results in increased investment cost and eventually increased purchase prices for housing units**.
To ameliorate these difficulties, the Vice Chairman of the HCMC PC issued Official Letter No. 1578/VP-DT dated 3 March 2020 and subsequently OL 2837 directing the HCMC DOC to propose a revised plan for development of commercial housing projects in Ho Chi Minh City.
Under OL 4801, the HCMC DOC proposes a newly reduced procedure in its draft report to the HCMC PC. For projects which have not obtained lawful residential land use rights, the current six step procedure will be reduced to four steps by merging the fourth, fifth and sixth steps. This will permit developers to simultaneously perform the tasks of applying for recognition as the developer of the project, obtaining investment approval, and submitting the appraisal of basic design and technical design to obtain the construction permit. For projects which have obtained lawful residential land use rights, the current five step procedure will be reduced to four steps by permitting the developer to simultaneously apply for investment approval, appraisal of basic design and technical design, obtain the construction permit, and to perform additional financial obligations in case the architectural planning criteria is changed after the developer obtains land use rights certificates.
The following flow charts summarize the proposed steps to be taken by developers should this revision of local regulations be approved:
Projects for which the developer has not obtained lawful residential land use rights
1. Current six step procedure
2. Proposed four step procedure under OL 4801 (Item II, Article 1)
Projects for which the developer has obtained lawful residential land use rights
1. Current five step procedure
2. Proposed four step procedure under OL 4801 (Item II, Article 2)
The departments who have been asked to submit their opinions on the proposed changes are scheduled to submit their opinions to the HCMC DOC by 11 May 2020. After that the HCMC DOC will consolidate and report on the results to the HCMC PC. Official approval will occur sometime after that. If the proposed changes are enacted, they should help deal with the outstanding obstacles and difficulties in implementation of commercial projects currently experienced by developers. Hopefully, they will also increase the transparency of the property market in Ho Chi Minh City.
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**Official Letter No. 42/2020/CV-HoREA dated 10 April 2020.
