Photo: Khanh Chi
Conference hears of obstacles in office-tel management and development in Vietnam’s real estate market.
Office-tels, which combine residential and commercial uses and have been growing in popularity in Vietnam’s real estate market over the last three years, remain unrecognized in the country’s legal system and have difficulties in development as a result.
The issue was discussed at the “Office-tel Market: Development Needs and Difficulties to be Resolved” conference held in Ho Chi Minh City on March 17.
According to Mr. Nguyen Tran Nam, Chairman of the Vietnam Real Estate Association (VNREA), the office-tel model has been mushrooming for the last three years, especially in Ho Chi Minh City, where there are 40-50 projects. As it is new, however, the legal framework is yet to be adjusted, creating many concerns and problems for authorities, investors, and customers in regard to approval, licensing, investment, distribution and transactions.
“The greatest obstacle is the issue of granting land use right certificates because the apartment is neither fully used for accommodation nor as an office,” Mr. Nam said.
For example, in a ten-story building with seven floors for apartments, the owners of the apartments are entitled to a long-term land use rights certificate, while the owners of office-tels on the three remaining floors can only secure a 50-year license. As a result, there will be issues 50 years down the track as to how authorities will act, Mr. Nam said.
Lawyer Tran Duc Phuong from the Ho Chi Minh City Lawyers’ Association told the conference that the latest Property Law 2014 does not regulate office-tels, so the government must promptly complete the legal framework to recognize and regulate the segment.
Mr. Nguyen Manh Khoi, Deputy Director of the Department of Housing and Real Estate Market Management under the Ministry of Construction, said there are five main obstacles that need to be resolved when building the legal framework for this type of real estate.
Firstly, there needs to be an accurate definition of office-tels. Secondly, ownership is only 50 years. Thirdly, it is necessary to specify that investors are authorized to build office-tels on land that is planned for housing or for mixed-use developments. Fourthly, if defining it as a type of property for living, investors must pay other land use fees. Finally, office-tels must also have standards in design, utilities and infrastructure.
Cushman & Wakefield’s data show that the office-tel product line is well-suited to small and medium-sized enterprises (SMEs), startups, foreign companies wishing to open a representative office, or long-term foreign experts working in Vietnam. Forty per cent of tenants at most office-tel projects are startups and companies wishing to open representative offices, while 10-15 per cent of buyers have actual accommodation needs and the remainder are buyers planning to sub-lease.
CBRE Vietnam commented that with the combination of both commercial and residential elements, office-tels offer many benefits for both the investor and the user or owner. The economical element is also a positive point in the eyes of users, rather than paying office rents and other fees.
It also provides more options in terms of office rentals and contributes to enriching a real estate product’s structure and helps in recovering cash flow faster than other types of commercial property.