Finding “a way out” for resort real estate

After a period of “inactive” due to legal problems and a huge decrease in demand, many resort real estate projects in the South are urging to change and find new development orientations.

Many resort real estate projects need a new development plan. Image: VIR

The negative effects of “inactive” projects

The resort real estate market started to grow and develop rapidly since 2015 with a series of condotel, hotels, resorts projects…, meeting the needs of customers and investors.

However, the outbreak of the Covid-19 epidemic dealt a blow to the developers of the resort real estate project, causing a lot of secondary investors to struggle.

According to aggregate data from Ho Chi Minh City Real Estate Association (HoREA), the country currently has about 82,900 tourist apartments, 28,100 tourist villas, 15,660 tourist townhouses. Condotel projects are concentrated mainly in localities with strong tourism strengths such as Da Nang, Binh Dinh, Khanh Hoa, Binh Thuan, Kien Giang, Quang Ninh, Ba Ria – Vung Tau … Total investment capital in these projects are estimated at about 100,000 billion VND, currently in a state of “inactive”.

Mr. Le Hoang Chau, President of HoREA acknowledged that the resort real estate segment is revealing many limitations and shortcomings after a period of development, but it has not really ensured transparency, stability, sustainability and appears to signs of oversupply.

Another noteworthy issue is that there is no specific law on conditions for capital mobilization and sale of tourism apartments to be formed in the future and there is no model contract for buying and selling condotels. But in fact, many investors have arbitrarily raised capital right from the moment of project implementation, putting customers in a very risky situation.

How to “troubleshoot” the problem?

Khanh Hoa province is one of the three localities with the highest number of condotel apartments in the country with 30 licensed projects. Mr. Tran Nam Binh, Director of Khanh Hoa Provincial Department of Construction said that all condotel projects that have been built in the province are “inactive” because they have to wait for the opinions of ministries and agencies to bring these products into the management framework.

Currently, in Khanh Hoa, completed resort real estate projects are facing the legal framework, while projects that are or have not been implemented also have “residential land does not form housing units”, so it is impossible to continue to deploy.

To troubleshoot the problem, many investors choose to adjust the project. For example, the Bao Dai luxury resort project (Nha Trang city) almost had to adjust from the beginning to eliminate the factor “residential land does not form housing units” … However, in the process of applying for adjustment of real estate business, investors continue to encounter re-valuation procedures.

Also in Da Nang, some investors also moved to convert condotel into apartments. However, in principle, if you want to adjust from a condotel project to an apartment project, you must consider the planning of the project. Accordingly, only condotel projects formed on residential land and in accordance with the plan will be considered, because if converting to a residential unit, social infrastructures such as trees and schools must be considered…

To find “a way out” for resort real estate, Mr. Nguyen Van Dinh, Deputy General Secretary of the Vietnam Real Estate Association, said that the most problematic issue that needs to be solved today is the legality of the project. Accordingly, it is necessary to have specific and clear regulations related to resort real estate in the law, promote the issuance of Certificates of land use rights for condotel projects sold to customers who are in trouble, and define rights, interests, and responsibilities of related parties. Besides, it is necessary to stimulate domestic tourism demand, creating a driving force for this segment to recover.

A new solution offered by BHS Real Estate Joint Stock Company (SHB Group) is “securitization of real estate”. According to Mr. Nguyen Tho Tuyen, Chairman of SHB Group, the core issue for the resort real estate market is demand. In the current context, investors often focus on “solid, durable” real estate products such as land plots, long-term properties with Certificates of land use rights. Meanwhile, condotel, sea resort villas do not have these legal problems.

Assuming that the limited-owned resort product line must have a reasonable price in order to attract investors, Mr. Tuyen emphasized that the division of resort real estate products in the form of “securitization real estate” is very suitable for market demand.

That is, when the resort real estate has good growth and occupancy, it is necessary to socialize the investment in the product. At that time, not an individual would buy a condotel or villa but would divide the property and sell it to many people. “Thus, even if only one million investors can invest, participate in the market”, Mr. Tuyen analyzed.

BHS Group has researched very carefully and is cooperating with an investor in Van Don (Quang Ninh) to develop the above investment model. After the pilot achieves good results, BHS Group will proactively deploy and multiply to contribute to the sustainable recovery of the resort real estate market.

ASL LAW is the top tier Real Estate law firm in Vietnam for. If you need any advice, please contact us for further information or collaboration.


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