The condotels section continues to heat up real estate

In 2017 there was a boom in supply and quantity of resorts and condotels, concentrated mainly in Khanh Hoa, Da Nang, Phu Quoc...

Trouble in… concept

The term “condotel” refers to the type of hotel apartment, which is very familiar to countries with a developed tourism industry. It appeared in Vietnam a few years ago, but this real estate segment is developing strongly and receiving the attention of both domestic and foreign investors.

According to the Vietnam Association of Real Estate Brokerage, it is only since 2017 that there has been a boom in supply of properties and condotel resort transactions. These have concentrated in the market areas of Khanh Hoa, Da Nang, and Phu. In addition, there are also transactions in some developing tourist provinces such as Quang Ninh and Thanh Hoa.

In Khanh Hoa, 2017, the condotel supply reached 11,872 units with large projects such as Arena Cam Ranh, Panorama Nha Trang. In Da Nang, December 2017, there were more than 7,000 condotel units in the market in large projects such as, Cocobay Danang, TMC Luxury Hotel Da Nang Beach. This type of condotel has only just appeared in Quang Ninh, but it has developed rapidly and become a new investment trend. In 2017, there were 1,336 condotels opened for sale in Quang Ninh.

However, besides the positive outlook, there are still many inadequacies in investing, transferring and operating in this segment. According to the Vietnam Real Estate Association, the delayed completion of a legal basis for the condotel segment and some investors commit the high annual return and do not pay as committed, has affected the property market. It is known that up to 60% of the amount of money in real estates is poured into this segment, however, the legal status of it is unclear, affecting the interests of investors when pouring money into condotels. There is a fear related to ownership issues and even disputes have occurred between the investors and the customers.

According to Nguyen Manh Khoi, Deputy Director of the Housing and Real Estate Market Department Agency (Ministry of Construction), there are two points of view on condotels. The first is that the condotel is a kind of housing; Secondly, it is a non-residential business. Meanwhile, the state prohibits the use of residential apartments for other purposes, except for housing. The law does not recognize condotel as housing. If it is for housing, the customer will be a long-term owner, otherwise, if not housing, they only own it during the project term of 50 or 70 years. Mr. Nguyen Manh Khoi wonders, when dealing with this type of apartment, which law will be adjusted when a dispute happens, and how will financial obligations will be implemented and will it be managed as a hotel or housing?

"We have reported to the Government on this issue. Without clearly defining the concept, there will be many controversial disputes in 2018, causing unwarranted risks for individual investors and institutional investors who have invested in condotels", said Mr. Nguyen Manh Khoi.

When does the feeling of “both happiness and worry” end?

Since the segment is legally unclear, investors in this segment have to live with the feeling of happiness and worry. Currently, the Ministry of Natural Resources and Environment is submitting to the Government to propose a draft law amending and supplementing some articles of the Land Law 2013. Accordingly, the Ministry of Natural Resources and Environment proposed two options to identify the land for constructing condotels in the direction of determining whether this is residential land or commercial land. According to experts, long-term ownership of condotels property approved by the Congress, is a huge psychological barrier for investors.

According to the Ministry of Construction, in this segment, there are about 300 large-scale projects in the whole country (with an urban area of over 50 hectares, rural land over 100 hectares, with a total investment of over 3,000 billion vnd, and with an apartment scale of over 1,500 units). Over the past years, the Ministry of Construction has conducted surveys and research on this type of new real estate and reported to the Prime Minister, proposed solutions and actively coordinated with relevant ministries to amend and / or supplement the standards related to these types of real estate. According to the Ministry of Construction, some types of new products such as condotel, officetel, shop-house... are not regulated in legal documents, and there are signs of abuse and manipulation by investors with guests. The supply of this type of real estate is very high, so it needs to control the supply of these types of real estate in the future.

In this regard, Dr. Dang Hung Vo, former Vice Minister of Ministry of Natural Resources and Environment, said that because there is no legal regulation to manage the condotels segment, there are different local behaviors for it. "Thus, in order to avoid differences in behavior among local authorities, there must be a guideline for creating a uniform behavior. Something that is based on the Civil Code, and based on Land Law… the Law needs to provide guidance to people based on the current legal framework, rather than let people wait for the law", Dr. Dang Hung Vo said.

According to Mr. Dang Hung Vo, if we want to develop the tourism economy to become a key economic sector, we must create conditions to attract cash flow into this area. If local authorities allocate land for this type with indefinite periods, investors can sell each part and each apartment as permanent residential land. The local authority allocates land to investors, investors deal with buyers under a contract, and so it is not complicated.