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Vietnam Real Estate - Property developers in Ho Chi Minh City have objected to a Construction Ministry’s plan to ban them from negotiating compensation directly with owners of land taken for real estate projects.

Under the proposed new system, revealed last month, local administrations will compensate landowners based on prices set by the government. The land will later be auctioned to developers.

Allowing developers to negotiate compensations with landowners has led to many accusations of unfairness which threatened to delay projects, the ministry said.

However, Ho Chi Minh City developers told a seminar last Friday the proposal was irrational.

Government-set land prices, which would be used as the base for compensation, were likely to be lower than the market value even though the prices would be adjusted annually, developers said.

A similar system, which was used prior to July 2004, caused delays in many projects because owners refused to leave their land.

“Imposed compensation made it difficult for landowners to find new homes,” Binh Dan company director Le Ngoc Tu told the seminar.

This problem was only solved when the government asked developers to negotiate compensation directly with landowners in July 2004, he said.

“It’d be irrational now to return to the old system where the government takes care of compensation and land clearance.”

The developers said the government could instead intervene in cases where a handful of landowners from an area earmarked for development demanded unreasonable compensation or refused to negotiate.

In cases where the government had to clear and auction land, it should negotiate with land owners, they said.

The government this year shifted responsibility for setting land prices to the Ministry of Natural Resources and Environment (MoNRE) from the Ministry of Finance.

In a proposal of amendments to the 2003 Land Law last month, MoNRE suggested banning compensation negotiations between developers and land owners.

It promised to set land prices that would best benefit the residents.

Affordable housing

The Construction Ministry’s proposal is part of its solution package designed to stabilize the real estate market.

Property prices in major cities surged as much as 100 percent last year.

The ministry’s proposals included imposing higher tax on speculative transactions and encouraging the development of affordable housing.

According to a Ho Chi Minh City Real Estate Association (HoREA) report presented to Friday’s seminar, rocketing real estate prices were caused by a demand-supply imbalance, speculation and banks’ easy property loan policies.

The real estate association called for a revision of the Construction Ministry’s proposal concerning affordable housing.

Under the ministry’s proposal, state-owned social housing development companies, similar to those in Japan and South Korea, would also build affordable housing for rent.

The ministry also wants housing project developers building on 10 hectares or more to set aside 20 percent of the land for affordable housing for sale or rent.

But HoREA wanted the 20 percent affordable housing requirement to apply to projects of 50 hectares or larger.

The real estate body also raised objections to the social housing development companies, and suggested the ministry instead set up a special agency to manage a social housing program to ensure transparency and fair competition.

Source: Thanhnien News

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