Tearing Down Old Buildings in HCMC Is A Smarter Plan

By: Keely Burkey

Over 75% of buildings in Ho Chi Minh City are currently unsound or unsafe. Many of the buildings in question are old residential buildings – condos or apartment complexes built before 1975. As The Vinh Tran, a member of the Ministry of Construction explains through an interpreter over a cup of tra da, although there are some 500 such old condos in and around Ho Chi Minh City, most are concentrated in Districts 1, 3, 5 and 10. “In total, there are around 50,000 apartment units that need to go”, he pointed out.

old-buildingsImage source: landtoday.net

This might come as strange news for anyone who follows real estate in the city. After all, land prices are soaring, and this is especially true for land in Districts 1 and 3. Some developers, Tran reports, have been waiting for land to become available for over 20 years. And it’s not just the developers – the government is equally prepared to develop new projects over old and unsafe projects. The holdouts? The tenants of the buildings themselves.

Location, Location, Location

According to real estate regulations in Vietnam, any building constructed before 1975 is considered liable for destruction or renovation. The problems come into play when tenants, who own apartments or have binding leasing agreements, refuse to give up their home to make way for new building construction. Legally, Tran explains, the government has no right to forcibly remove a resident from their proper home, even when the house is hazardous and potentially dangerous.

old-buildingsImage source: landtoday.net

When you factor in the monetary incentive that members of the Ministry of Construction are offering tenants, you have to ask: why stay? First and foremost, they live in prime locations, Tran says. Development plans in the city are widely known, and the tenants who live in the buildings know the worth of the properties they live in. Many tenants consider the compensation offered by government officials to be inadequate when judged against the property’s worth as well as other factors.

old-buildingsImage source: landtoday.net

After all, many tenants living in the degrading houses work in the centre of the city in a variety of lower paying jobs. Occupational options seem bleak when forced with the idea of relocation to affordable housing units on the outskirts of the city. However, as the years pass and the buildings degrade, these citizens are playing a dangerous game of chicken.

Building on the Edge

The Vinh Tran is adamant about this issue and considers it a keystone preventing the city from efficient development strategies. Rather than develop from the centre of the city and then slowly progress outward, as many cities naturally develop around the world, in Ho Chi Minh City we’re seeing a different path.

old-buildingsImage source: landtoday.net

Real estate companies, waiting years for land to become available in the city centre, have grown impatient. Now Novaland and other development companies have opted instead to invest money in land around the outer rim of the city. Tran considers this a less-than-optimal solution, as it results in uneven and ultimately uncontrollable real estate development.

Traffic congestion and even pollution would be less, he maintains, if development was allowed to go forward on old condo complexes.

Slow Progress

Despite the lengthy compensation negotiations, old buildings are gradually being torn down – just not at the rate that the city has targeted. For example, Vietnam News reported that since 2010 only 10 old apartment buildings were demolished.

old-buildingsImage source: landtoday.net

Recently, Tran reports, government officials have thought of a new incentive which has been attracting more old apartment tenants: a guaranteed spot in the new apartment building, and sometimes a job within the building as well. These stable jobs, often as security guards or cleaners, have appealed to many tenants in existing buildings, whose options continue to decrease in a continually competitive market.

old-buildingsImage source: landtoday.net

However, it seems as though for the moment The Vinh Tran will have to be content with the slow crawl towards uniform modernisation in the centre of the city. Without adequate resources to make existing tenants happy, including compensation and suitable alternative housing, these crumbling houses will serve as a visual reminder of the progress yet to be made.

 


Is Affordable Housing in High Demand in HCMC?

By: Keely Burkey

One of the keywords in Vietnam’s real estate today is urbanisation. Today, 34.1 percent of the country’s population live in cities, and this number is rapidly growing. The biggest question remains: where will everyone live? With an increasing FDI presence, a rising middle class and an influx of expatriates from wealthier countries, there’s no simple answer to this question.

Nguyen Van Duc, the founder and owner of Dat Lanh Real Estate Company Ltd., a real estate developing company that focuses exclusively on affordable housing in Ho Chi Minh City, knows this only too well.

houseImage source: by Thinh

With the help of his son, Nguyen Hung Tam, who acted as interpreter, Duc explained why he began devoting his life to affordable housing in 1976. He pointed out an obvious advantage to affordable housing development: “The land available is on the outskirts of the city, so it’s cheaper.” So far he’s built dozens of housing projects for low-income workers, mostly in District 12, and this demand will not let up anytime soon.

Adding Up the Numbers

Thousands of Vietnamese have been pouring into the city limits, attracted by the prospect of employment and educational opportunities. While this increase is clearly good news for manufacturing factories and schools, it has caused strain on the city’s housing and infrastructure developments.

houseImage source: tapchitaichinh.vn

One problem? Foreign Direct Investment (FDI) has been funneling into HCMC’s high-end real estate projects, but has so far turned a blind eye towards affordable housing. Duc considers the question for a moment before answering: “From my knowledge, there’s only been one foreign company that is investing in affordable housing. And I don’t know the name. It’s not a big presence.”

For local investors it’s also notoriously difficult to gather the money to complete these projects through bank loans. Dat Lanh Real Estate Company Ltd. has found another way to complete Duc’s projects: crowdsourcing from potential tenants.

Many low-income workers and families will learn of a real estate project and will invest money to ensure a place to live when the project is finished. I ask how many projects have required help from tenants, and Duc’s response is immediate: “Most of them.”

Rising Demand and a Shifting Future

Middle- to high-income apartments are only viable for 20% of Vietnam’s population. Recognising the need for change, the real estate market has already seen a shift in development. Last December, for example, Vingroup’s residential sector, Vinhomes, announced plans to develop condos with a VND 700 million price tag in the outer districts of Hanoi, HCMC, Nha Trang and other larger Vietnamese cities. While this goes in the right direction, more substantial plans are required to address the needs of the millions of students and workers who want affordable living space.

For Duc, the question of an adequate supply of housing depends on several factors. He’s adamant, for example, about the need to revise the necessary amount of square metres per apartment. In HCMC, every apartment needs a minimum of 45 m2; Duc would like this to be changed to 30 or even 20 m2, like the building limits in Binh Duong.

houseImage source: baotainguyenmoitruong.vn

Duc expressed his desire to find a like-minded foreign partner who could help fund affordable housing projects in Districts 12 and 9, though many foreign companies are likely put off by the low return on investment (around 10 to 20 percent). “It’s true,” he said, “the profit is not very high. But the benefit is, we always run out of the product.”

Banner image source: by Thinh

 


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