The Covid-19 pandemic was a massive blow to the global economy. On the pandemic woes, the once vibrant real estate market has slowed down gradually. Vietnam International Arbitration Center interviewed Mr. Dang Hung Vo - Former Deputy Minister of Natural Resources and Environment; Arbitrator of Vietnam International Arbitration Center (VIAC) for a closer look at the situation and practical solutions.

The real estate industry’s operations and profits plummeted recently. The prolonged and unpredictable pandemic has interrupted demand for real estate, while real estate investors struggled to retrieve losses during and after the pandemic.

In your opinion, in such a situation, what options do investors have to ensure cash flow? Should buyers invest in real estate at this time?

As all economic activities are disrupted due to the pandemic, it can be said that there are hardly any chances to secure money from investing in real estate.

In the real estate market, tourism-resort real estate suffers the largest fall, sharing a similar pattern with the hospitality sector in general, followed by offices for lease, houses and retail stores.

Regarding concluded leasing transactions, tenants are affected but little damage is served. Force majeure clauses can be invoked so that businesses can hold out when all economic activities give way to pandemic treatment.

By invoking force majeure, parties can agree to exempt or reduce the rent for a certain period to maintain performance of contract and partly alleviate the financial burden.

At present, amid business closures, layoffs, increased online work, etc., new leasing transactions will not be feasible.

Some businesses "hold on" by conducting online transactions such as providing virtual reality images, then continue with field review for limited customers. However, they do not pose far-reaching impacts.

Clearly, real estate transactions cannot be built on sole trust resulting from image, map and satellite analysis but depend on customers’ first-hand experience. In general, the growth of real estate leasing will be slower; therefore, businesses should wait until the pandemic wears off and economic activities gradually recover. That’s when they can consider continuing investment promotion.

Many people wonder whether to invest in real estate at this time. Personally, I believe that Vietnam’s real estate market has been sluggish due to a lack of regulations rather than negative economic impacts. The delay in legal framework promulgation on tourism and resort real estate has caused condotel projects to shrink. The failure to promptly resolve legal conflicts in real estate laws render a fewer number of real estate projects approved in 2019.

In Hanoi and Ho Chi Minh City, the number of approved projects account for about 20% compared to previous years. In two to three years, the supply of real estate will decrease sharply. Real estate prices will increase while there will be an intervention of speculation and a possibility of a "fever" price. Thus, investing in real estate now is the right decision.

Without a doubt, however, specific transactions can only occur after social distancing. Now, investors should focus on analyzing and evaluating lucrative projects, segments, and locations.

Can you propose any measures to help businesses overcome the current situation?

Vietnam's real estate market has been recovering since 2014, but there have been many unresolved legal problems, resulting in imminent legal threats to real estate development projects. Modern tourism and resort real estate such as condotel, shophouse, officetel, etc. flourish due to tourism economic development, but there is an absence of a legal framework.

Promised legal reforms during project approval bear little resemblance to enforced legislation. Many real estate legal conflicts have not been resolved, causing a risk of supply shortage in the next two or three years.

For other real estate segments such as houses, office rent, commercial facilities, industrial facilities, etc., there are regulations being updated each year, however, a remarkable risk lies in legal overlaps. In order to implement projects, an investor faces a tremendous legal barrier.

Several provisions in the laws on Investment, Land, Environmental Protection, Housing, and Bidding still overlap and contradict each other. Legislators are afraid of bearing the consequences of  State-owned property’s losses or wastefulness crime, so they are reluctant to approve real estate projects.

There are regulations on land auction and bidding in projects using. However, if projects involve only ten meters of "land used for public purposes" in the form of old canals and alleys, they are discontinued because the law requires land auction. Although directives to resolve legal contradictions from the Prime Minister has come into force for a few years, there have not been significant changes. Covid-19 is also hampering legal reforms in the real estate sector.

To the best of my knowledge, project investors have only 2 options. One is investing in projects with a stable legal framework such as housing, office buildings, commercial center, industrial park infrastructure, high-tech zones. Another solution is venturing into real estate segments with high legal risks like condotel and shophouses.

If there are fewer risks, profits are lower, and vice versa. It is difficult for investors to overcome legal risks by themselves because only state agencies have legislative power.

To many people, although already put in place, there are not enough business support policies. What is your opinion and should there be further support?

I disagree with the opinions that there are not enough support policies.

Vietnam's current priority is implementing medical measures to control the pandemic, minimize its impact and maintain stability so that the economy can quickly recover. At present, financial pressure is a common concern of all industries, not just real estate.

In difficult times, fiscal policies are very important, the state budget is contributed by the people, therefore, businesses should not consider how much support they can request. They should keep in mind the principle of market fairness.

The current policy focuses on reducing interest rates, extending loan terms, reducing taxes and fees, and delaying financial obligations. I think this is enough for businesses to hold out in the current shutdown and stay out of bankruptcy or dissolution.

Enterprises with poor business performance may also consider mergers and acquisitions. It is common while doing business

"During the pandemic, the real estate market is interrupted, however, it can continue immediately when the pandemic is over. In my opinion, the market cannot crash. In recession, demand for real estate is much higher than supply.

In order for the market to be more efficient when continuing operation, during this rest period, State agencies should focus on completing real estate policies and laws, businesses should research the current market situation and find solutions, and individual investors should learn how to be professional. This is the best approach for those not on a frontline against the pandemic. "