Hanoi: Loose Management of Housing Projects

5:09:32 PM | 10/2/2014

In recent years, Hanoi has witnessed a rapid urbanisation which has contributed to a relatively abundant supply of housing. Nevertheless, it has also revealed inadequacies in management.
 
Oversupply
The fact that supply is growing quickly particularly middle and high level segments while people can only afford cheap apartments has led to loss of liquidity of a large number of urban areas. At the seminar "Vietnam real estate market: 20 years looking back," which was held recently, Deputy Minister of Construction Nguyen Tran Nam said that at present, the housing fund has exceeded the needs of the people. Specifically, there are currently over 4,000 real estate projects approved with a total investment capital estimated at nearly VND4,500 trillion. If all the projects are carried out, the number of houses will far exceed the needs of the people.
 
Mr Nam assumed that the number of projects approved, if completed, will provide the market with over 416 million square metres (equivalent to approximately 3 million units). In particular, in Hanoi, the total number of houses under planning is more than 520,000, Ho Chi Minh City more than 570,000. Currently, investors have only embarked for 17 percent of investment value due to the lack of capital of many projects.
 
That the level of project implementation is too low has reflected the situation that licensing in localities is not based on the actual needs of themselves. Mr Nam cited, in Hanoi, if approved projects are 100 percent implemented, the market will be provided with more than 520,000 units (excluding the number of houses built by the people themselves which is relatively the same number). With that number of licensed projects, the amount of capital needed to deploy is at about VND9000 trillion (equivalent to US$45 billion). Meanwhile, the metropolitan area of Hanoi has only about 730,000 households with a population of approximately 3 million.
 
Mr Nguyen Tran Nam said that, as of 20th August 2014, the total value of real estate inventory was VND82,295 billion, down about VND12,163 billion (equivalent to 12.88 percent compared with the end of 2013). In particular, apartment inventory is at about 17,000 units (equivalent to VND26 trillion) and residential land inventory more than 8.7 million square metres (equivalent to VND28,500 billion).
 
Management agencies are to blame
According to the report on the results of monitoring the observance of the law of investment in commercial projects in the area, Hanoi People's Council revealed that the Department of Construction is the lead agency, yet was not active in advising the authority in planning in accordance with housing development programs and inspecting the observance of law and handling violations. The Department of Natural Resources and Environment is not following up investors in implementing procedures, recording financial obligations after adjusting project planning; lack of review and supervising the investment of wastewater treatment plants and environmental impact assessment of urban housing. The Department of Planning and Investment lacks investment evaluating and projects’ progress monitoring.
 
According to the report by the Department of Natural Resources and Environment, through inspection, Hanoi has 352 projects of land lease and allocation with signs of violation. The number of commercial housing projects is big, however in the years of 2006 - 2009, each year, the Department of Construction inspected only 2 projects; in 2012, 2013 and 2014 this number is 30, 17 and 30, respectively.
 
Most urban areas lack wastewater treatment plants according to plan, thus wastewater goes directly into public water systems. Some do not supply enough tap water in hot weather and suffer from flooding in heavy rain due to weak drainage infrastructure.
 
After a long development period then falling into "frozen" state and lost market liquidity, a series of projects have to delay. To deal with such projects, the coordination between state management agencies and local authority does not work effectively.
 
Luong Tuan