The draft of amended Law on Real Estate Business is scheduled to be voted by the lawmaking National Assembly on November 25, 2014. Accordingly, the minimum legal capital of a real estate company is brought down to VND20 billion (less than US$1 million). However, many still face closures with this new limit.
The draft law reduced the minimum legal capital of a real estate company from VND50 billion to VND20 billion. However, according to economic experts, more than 60 percent of existing companies will fail to meet this limit.
Many deputies expressed their disagreement with the lowering of legal capital of a real estate company because this level is too small in relation to the current growth of real estate market. This will also make the property market development unstable and difficult to control.
Deputy of Hanoi City, Pham Huy Hung, former Chairman of the Board of Directors of the Joint Stock Bank for Industry and Trade of Vietnam (Vietinbank), said that the minimum legal capital of a real estate company must be VND50 billion. He explained that the legal capital of VND20 billion is too small because a property project may cost hundreds of billions or trillions of Vietnamese dong. The amount will prove that such companies will not be able to do anything.
Deputy Dinh Thi Phuong Lan (from Quang Ngai province) said there must be a mandatory requirement for a certain relation ratio between legal capital and total project investment that a real estate company must meet to do. How can a company with just VND20 billion of legal capital carry out a project worth trillions of Vietnamese dong?
According to Phan Trung Ly, Chairman of the Law Committee of the National Assembly, current statistics show that only about 60 percent of real estate companies have registered capital from VND6 billion to VND20 billion and only about 26 percent have the registered capital of VND50 billion or more.
Therefore, he said that if the limit of VND50 billion is approved, just a small proportion of existing companies can meet. For that reason, the Standing Committee of the National Assembly suggests keeping the minimum legal capital of VND20 billion.
Nguyen The Diep, Chairman of Reenco Song Hong Joint Stock Company, said the minimum legal capital of VND20 billion set for real estate companies is appropriate for the time being. But, in the long run, this limit must be raised because many companies with a very small legal capital are still carrying out big projects relative to their scales. This will distort and destabilise the market.
And, some experts believed that the legal capital of VND20 billion is still too high for real estate companies.
Nguyen Van Duc, Deputy Chairman of the HCM City Real Estate Association, said the bottom limit of VND50 billion as suggested in the draft law is infeasible. Currently, a lot of real estate companies have a legal capital of just VND6- 7 billion. If the draft law is ratified by the National Assembly, raising the registered capital is an enormous challenge for these companies.
He added that if this law is adopted without giving effective management solutions, real estate companies still use to dodge the law in one way or another. In fact, some property companies have just a small amount of cash but they still register the chartered capital of trillions of Vietnamese dong.
Luong Tuan
Vietnamese
