December 16, 2019 17:31

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Officetels prove popular but face difficulties

09:15 | 10/08/2019

VCN- A type of real estate combining an office and accommodation, also known as "officetel", was developed not long ago from the need to rent office space and short-term accommodation. However, just like condotels, the legitimacy of officetel has not yet been acknowledged.  

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From 2015 to September 2017, there were 71 licensed officetel and condotel projects nationwide. Photo: collection.

Lack of legal basis

Officetels are mainly concentrated in big cities, especially in Ho Chi Minh City and Hanoi, and have increased rapidly in recent years. This is a modern multi-purpose office model that can be used as a working office and overnight accomodation. However, the status of this hybrid accommodation is also facing a dilemma in terms of reputation.

According to experts, in the future, officetel projects are likely to increase due to the strong growth of foreign direct investment (FDI), especially as Vietnam is joining many big FTAs. However, the legalization of this type of complex real estate is facing many obstacles.

Recently, the Ministry of Construction sent a letter to the Prime Minister to report on the implementationof research and promulgating operation management regulations for officetel, which emphasized difficulties when building a circular on this type of real estate. According to the Ministry of Construction, the research and development process of officetel management and regulation faces a number of difficulties. Thereis a lack of legal basis for the ministry to develop and promulgate a circular on the management and operation of office apartments, because the current legal system, including the Land Law, Investment Law, Construction Law and Real Estate Business Law, as well asconstruction standards, do not include the concept or legal regulations on officetels. In addition,the Government's Decree No. 81/2017/ND-CP stipulates the functions, tasks and powers of the Ministry of Construction without regulations on the management and operation of office apartments (or construction work in general) under the authority of the Ministry of Construction.

In terms of accommodation and accommodation management, the Ministry of Construction said that, unlike traditional offices, this type of real estatehas a short-term stay function and office function,meaning users can temporarily reside in the apartment outside ofworking hours.Thus, thisaccommodation needs to have conditions and needs to be limited in time,it also needs a strictaccommodation mechanism to avoid abuse, increasing populationand overloading the urban infrastructure system. However,the Ministry of Construction saidthatthis was under the authority, functions and duties of the Public Security sector, not the Construction sector.

Given that the promulgation of management regulations for operating officetels in the form of a circular has not ensured the legal basis as prescribed, the Ministry of Construction proposed the Prime Minister to allow the Ministry of Construction to research, build and submit to the Government for promulgation a Decree regulating the management and operation of office apartments in combination with short-term accommodation. Manyargue that the difficulties in developing a decree on officetels is that the decree is a document guiding the implementation of the law,but the current legal systemdoesnot have a legal basisto develop a decree of this type.

Previously, in April 2019, the Prime Minister issued Directive No. 11 on a number of measures to promote the real estate market to develop, in which, the legal system for real estate marketstill has some contents that have not met the practical needs and have not been amended.The Prime Minister asked the Ministry of Construction to promulgate amendments and supplements to construction standardsfortypes of apartment buildings, tourist apartments (condotel),resort villas andofficetels, whileissuing regulations on management and operation of officetelsin the third quarter of 2019.

Inadequacies

Regardingthis issue, Ho Chi Minh City Real Estate Association (HOREA) has also made recommendations on officetels. HOREA said that according to statistics from 2015 to September 2017 of 16 provinces and cities directly under the Central Government, there were 71 licensed officetel and condotel projects with a total of 25,639 units, of which, there are 10,629 officetel apartments (3,726 are in Hanoi, 6,424 are in Ho Chi Minh City and 479 are in other provinces).

According to Mr. Le Hoang Chau, President of HOREA, officetel projects have both office functions and hotel-type functions to meet the needs of investors, especially,foreign investment in the process of investment and implementation of projects in Vietnam, creating modern living and working space, contributing to diversifying real estate products in the market. In fact, some caseshave been transformed into residential apartments.

There areno technical standardsfor officetels(lobby, elevator, corridor, emergency exits, parking spaces),no regulations on population targets affecting the urban infrastructure system, no specifications for trading in the Real Estate Business Law,no regulation that foreign individuals can buy and own officetels, and no specifications on land finance to avoid budget revenue loss.

Referring to some inadequacies in the policy for officetels, the HOREA representative said that if anofficetelwas in the same apartment building, it would be recognized as a stable and long-term land use right, but if officetelwas an independent building, even if the officetel building was in the same condominium project (with two or more buildings), it would be subject tothe regime of non-agricultural land use and"commercial and service" land categories with a definite period, and project investors would pay lower land rents (50or 70 years)into budgetsif they pay residential land use fees.

The problemis that with the same type of officetel,some cases were recognized as residential land, while the restwere subject to landallocation with a definite time, and the obligation to pay residential land and land use feesdiffered among officetel projects.

At present, the establishment of a legal basis for officetels is facing difficulties when the Government recently submitted a report to the National Assembly requesting the withdrawal of the drafton amendments and supplements to some articles of the Land Law from the process of drafting laws and ordinances in 2019 because draft contents still contain some issues,including hotel apartments, office apartments, and hotel houses.

According to another figure, there are about 20,000to 30,000officetel apartments in HCMC. Mr. Nguyen Van Duc, Director of DatLanh Real Estate Company, saidthat setting up this type of project was wrong when the law had no regulationson officetels and theyhad not been approved for construction. While banning small apartments for the poor,the government allowed many investors to build tens of thousands of apartments measuring 25m2 in urban and suburban areas.The construction of officetels in apartment buildings also affected the general utility of the people 's activities, making it easier to create disputes. Accordingly, Mr. Nguyen Van Duc did not agree with developing a decree to legalize this.

Mr. Nguyen Tran Nam, former Deputy Minister of Construction, Chairman of Vietnam Real Estate Association, saidthat the market was facing many difficulties when waiting for many laws and related documents in the adjustment and completion period, such as the Law on Planning and the Housing Law, regulating the purchase of houses forforeigners, condotels andofficetels. Mr. Nguyen Tran Nam petitioned the Government, ministries and agencies to amend and issue the legal framework soon.In order to promote the development of the real estate market, in the future, it is necessary to continue to improve legal institutions and the business and investment environment, reform administrative procedures, contributing to creating favorable conditions for investors in the process of carrying out business investment activities.

By Hoai Anh/ Binh Minh