Proposal to change the time investors receive deposits
Ho Chi Minh City Real Estate Association (HoREA) has just issued a document contributing opinions to the Government's Submission on the direction of amending the 2023 Real Estate Business Law with a number of recommendations specifically for real estate deposit activities.
The draft revised Real Estate Business Law currently still stipulates that investors are not authorized to authorize other organizations or individuals to sign deposit contracts, purchase or lease-purchase of real estate formed in the future.
Contributing opinions on this issue, HoREA proposed to change the time investors are allowed to receive deposits. Accordingly, the Draft currently allows collection of up to 5% of the selling price or rental price when real estate is eligible for business.
HoREA believes that if we have to wait until this milestone, the deposit limit of 5% is no longer really necessary, because the investor at that time can sign a contract to buy and sell houses formed in the future and collect a maximum of 30% of the contract value for the first time.
According to HoREA's point of view, depositing at the stage where real estate is eligible for business can be left to the investor and customers to negotiate according to the provisions of the Civil Code.
Instead, this organization wants to open up the possibility of receiving deposits earlier, when the project has been approved for investment policy, approved for investors; or there is a basic design appraised by the State agency and the investor has one of the land use right documents. The maximum deposit amount is still 5% of the selling price or lease-purchase price, calculated in the first payment and the deposit agreement must clearly state the selling price and lease-purchase price.
HoREA believes that early deposits create opportunities to access products at "original prices" and "finalize" selling prices or rental prices immediately in the deposit agreement. At the same time, the Association assesses that receiving a maximum of 5% at this stage "almost does not pose risks" for customers because the project has reached certain legal milestones.
Real estate selling prices may be affected
However, some experts believe that the above proposal may lead to a situation where investors massively "sell young rice", causing risks of disputes and pushing risks towards buyers. Dr. Nguyen Duy Phuong, Director of Financial Consulting for DG Capital fund, said that if the proposal is approved, the boundary between legal deposits and illegal capital mobilization may become more fragile.
Investors can take advantage of regulations to collect money right from when the project is still very rudimentary, while land allocation procedures, financial obligations or construction permits have not been completed. At that time, buyers will be the ones to bear most of the risk if the project is delayed. Investors can use cash flow from later projects to handle difficulties of previous projects. With low deposit receiving costs, many agents and exchanges, investors can easily participate in "holding deposits" in large quantities, and then transfer purchase rights when the project is eligible for sale.
Some opinions also suggest that accepting deposits like this may increase information such as "booking out, running out of beautiful houses, upcoming price increases in the official opening sale". This information easily creates a psychology of scarcity, causing buyers to worry about missing opportunities (FOMO) and accept to deposit money faster, even when there is not enough information about the project.
If this phenomenon is widespread, speculation may form very early, causing house prices to be pushed up right from the stage before opening for sale. Meanwhile, buyers with real housing needs are even more difficult to access products.
Regarding this proposal, lawyer Nguyen Dang Tu, Ho Chi Minh City Bar Association, said that for housing projects formed in the future, the investor is the one who decides on the project implementation progress, completes legal procedures, organizes construction, mobilizes capital sources and meets the conditions for opening for sale according to the provisions of law.
Meanwhile, buyers are completely unable to control these factors. Businesses need more tools to access the market and mobilize resources to develop projects, while buyers need to be guaranteed that the money they spend is always protected by law.
Therefore, according to Lawyer Nguyen Dang Tu's point of view, if the law expands the right to receive deposits for investors, it is also necessary to design a mechanism so that businesses can access the market more conveniently, while buyers are still guaranteed safety for the money given.
