Recently, the Ministry of Construction proposed to reduce apartment ownership to between 50 and 70 years, a change from the long-term ownership buyers previously received. The proposed amendments to the Housing Law have garnered a lot of attention and have been panned by critics.
Issues Surrounding 50-Year Ownership
Currently, the lifespan of an apartment project is determined according to the construction quality and what is deemed as the ‘useful life’ or lifespan.
Su Ngoc Khuong, Senior Director of Investment at Savills HCMC, commented that the lifespan of first grade buildings is over 100 years, the life for second grade buildings is between 50 to 100 years, third grade is 20 to 50 years, and less than 20 for fourth grade buildings. The lifespan should be based on construction quality, which links to the safety of a building.
Several pressing issues need to be tackled if this law is to be passed. First, issues surrounding ownership need to be defined clearly as ownership certificates mean that owners have the right to dispose or use the land. The second issue pertains to the long-term land ownership held by the investors.
Mr Khuong highlighted: “After 50 to 70 years, the right to dispose of, own, and use assets on the land will be terminated. However, the rights attached to long-term ownership have not been clearly defined. These rights need to be clearly stated in the Ministry of Construction’s plan so that owners understand their rights, use, and length of ownership.”
In adjusting the Housing Law, Mr Kuong also said that the Land Law and the Construction Law also need to be reviewed. For example, according to the Construction Law, after 50 to 100 years, second grade buildings, must be demolished. However, before this happens, ownership needs to be defined and legislators also need to consider if people have the right to use the land.
Mr Khuong also pointed out that if buyers only have rights for 50 to 70 years, this will create complications when buildings come to the end of their lifespan. For example, if a building is demolished after 70 years, there will be problems with how to value the land and then divide this amongst the owners. People will also struggle to solve basic housing needs as they will not know the exact value of their properties, making finding another property difficult.
Currently, apartment projects are remodelled periodically, which extends the lifespan of a building. Therefore, if a building is safe enough for people to live there after 50 or 70 years, it is essential to extend the lifespan in line with the inspection results.
It is not only important to consider how this law will influence individuals, but also developers. Currently, investors and developers pay land use fees for long-term ownership; however, if ownership is reduced to 50 or 70 years, this fee should also decrease.
Apartments are Essential to Urban Housing
On a social level, the proposal, if approved, could mean that people will not live in dilapidated apartments, especially in crowded cities like HCMC and Ha Noi.
Apartments are key to solving the housing problems big cities face. If this proposal is approved, people might decide to buy landed property, which will push up property prices and influence liquidity.
“All apartment buildings are renovated periodically, and this plays an important part in extending the nominal lifespan. What we should keep in mind is that apartments are key in crowded cities like HCMC, and changes in ownership laws could influence housing in the city, Mr Khuong added.
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