Property Sector: Positive regulatory changes
05/03/2020 - 08:11
Every little bit helps
1) Minimum condo size is reduced following the Ministry of Construction’s Circular 21/2019 / TT-BXD on standards for condominiums. The circular was announced on Dec 31 and takes effect on July 1 of this year.
Requirements for small condos include 1) the minimum usable area of each unit is set at 25 sqm, 2) small apartments defined as those with area of 25–45 sqm must not exceed 25% of the total number of apartments in each project, 3 each unit must have at least one living room in excess of 9sqm in area (and one restroom too), and 4) the population density of the projects with small units must conform to the respective jurisdiction’s master plan.
2) Clarity on the Law on Bidding. Decree 25/2020/ND-CP (issued on Feb 28) provides detailed implementation guidance on the procedures and responsibilities of investors and the relevant authorities. Specifically —
The decree addresses some of the key bottlenecks in the bidding process, including land allocation, leasing, and project implementation. This should be critical for local authorities in carrying out land allocation and land leasing for bid winners. Numerous projects have not been implemented despite having completed the bidding process due to delays in land allocation / leasing. The decree increases the likelihood for such projects to be restarted.
3) Restarting infrastructure projects in HCMC? The domestic media in recent days have reported that construction of Metro Line 1 is now c. 71% complete, should achieve 85% by yearend, and should be completed by the end of 2021. In addition, infrastructure projects in Thu Thiem New Urban Area and other key projects have recently been approved to continue.
Our view: The news is incrementally positive for property developers.
Smaller units = lower prices. Circular 21/2019/TT-BXD will not restructure the entire property market, but the per-unit price of smaller condos should obviously be lower and thus within the reach of a wider range of buyers for residence and speculation. However, any building design changes will require approvals, so the effects of Circular 21 on might only be seen after a one-year lag.
Expanding landbank by bidding should be easier for developers following the promulgation of Decree 25/2020/ND-CP. This should also help local governments attract real estate investment. However, our understanding is that the decree does not resolve the administrative problems currently confronting most developers in HCMC, which are related to the land acquisition process.
Allowing infrastructure projects to be carried out is an unmitigated positive given that 1) the infrastructure is very much needed to boost residents’ quality of life and 2) infrastructure spending should provide a positive boost to economic growth amid the current global macro headwinds.
For the complete report, please access here: Sector update
Analyst: Tam Nguyen, firstname.lastname@example.org