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Vietnam Business » Vietnam Real Estate Market News » Developers unhappy over new fees

Developers unhappy over new fees

Decree 69/CP, which becomes effective from the beginning of October, states that new land fees for real estate enterprises will be based on market prices. If the draft comes into effect unchanged, firms will be forced to pay the full market price, instead of 20 to 30 per cent as before.

Real estate companies said planned land-use and compensation fees would eat into their profits and could even force them into liquidation.

Le Hoang Chau, president of the HCM Citys Real Estate Association, said enterprises investing in housing projects would have to pay twice - first when buying the land from its owners and second when paying usage and clearance fees.

"This will cause land prices to soar as enterprises will have to increase the selling price of housing in order to offset their increased outlay," he said.

Lawyer Nguyen Thi Cam said the new regulation had several weakness that were detrimental to real estate firms.

She said the new decree should be modified because real estate companies would have to pay the same fees for land that had no infrastructure as that with infrastructure because market prices were based on developed land.

Nguyen Canh Ha, director of An Thien Ly Company, said his company acquired a housing project in Vinh City. He said his company had agreed to buy the land for VND4 million (US$ 210) per square metre, while selling it for VND4.5 million ($230) per square metre.

However, he said under the new regulation, his company would have to pay an additional fee of $230 per square metre for using the land. As a result, he said his firm had been forced to pull out.

Meanwhile, a representative from Binh Dan Company said his firm had invested in a 14,000-sq.m housing project in HCM City. According to the new regulation, his company would have to pay a land-use fee of around VND57 billion ($ 2.8 million), while the whole project itself was worth just VND60 billion ($3 million).

Nguyen Van Duc, deputy director of Dat Lanh Real Estate Company, also said the new law would make it hard for companies to earn money.

He said that under the new regulation, for a 10,000-sq.m housing project, a business would have to sell out about VND51 billion ($2.6 million), which would include compensation to land owners of VND40 billion ($2.1 million), spending for public purposes such as parks of about VND8 billion ($430,000) and roads VND3 billion ($160,000). For the whole project, his company could expect to earn just VND600 million ($32,000), he said.

Le Ngoc Khoa, deputy director of the Department for Public Assets Management, said HCM City real estate firms would be hardest hit because companies typically paid very high compensation costs for agricultural land, which was however cheap in comparison to developed land. Under the new rules, they would have to pay far more to develop rural land.

Nguyen Quoc Chien, director of Pricing Division under the HCM Citys Department of Finance, said relevant bodies would consider amending the new regulation if it was felt property developers were being unfairly treated.

Vietnam Business And Financial News Network. Source [english.vietnamnet.vn]

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