Expanded Condotel Type: Potential And Legal Challenges

The blossoming of the type of hotel (condotel) has brought new breath to the resort real estate market. However, legal barriers of this type still exist, causing many difficulties for investors and businesses.

Single benefit, double benefit

Along with the re-warming of the real estate market, the resort real estate segment has also grown tremendously over the past two years with diversified product lines for investors to choose, especially the appearance of affordable Condotel lineup with a large number of investors.

The condotel type has been deployed from the North to the South such as Quang Ninh, Hai Phong, Da Nang, Binh Dinh, Nha Trang, Phan Thiet, Mui Ne, Phu Quoc … with big names such as Vingroup, Sun Group, FLC, CEO, Empire, BIM Group…

The condotel type is flourishing in the coastal areas with tourism potential

With the investment price ranging from 1-3 billion VND and the high-profit margin, condotel attracts many investors and is the most exciting type in 2016, as well as being evaluated excitingly this year.

Talk to real estate investment reporters on the benefits of the “new menu” of this real estate market, Nguyen Tran Nam, Chairman of the Vietnam Real Estate Association (VNREA), said: “With the advantages of geography, nature, history and tourism of Vietnam has grown strongly over time, help the real estate to add a new commodity that is condotel. We know that this type will help us compensate for the lack of accommodation. “

By the same point, Le Ngoc Tuan, Department of Hotels (Tourism) said that the State stepped up the socialization, mobilizing all resources at home and abroad for investment in tourism development. Vietnam tourism is currently lacking large apartment complexes, high-end, diverse services, meet the needs of guests entertainment.

But there are still many barriers

Although there are many favorable conditions to develop, the condotel type is still the barrier to be able to break even stronger. First of all, in the name, Nguyen Tran Nam said: “We all know that condotel is a compound of luxury apartment and hotel (Condo & Hotel) but now it is condominium or hotel is the story of the legal status of this product. It’s about ownership, own-right, and usability; it does not have a legal basis”.

To solve these barriers, VNREA has proposed 8 recommendations to the Prime Minister, the Ministry of Construction, the Ministry of Natural Resources and Environment, the Ministry of Culture, Sports and Tourism, the State Bank of Vietnam.

Mr. Doan Van Binh, Chairman of CEO Group, Vice President of VNREA said: “We propose to include the residential land without forming unit in the coastal condotel into the 1/500 detailed plan of the project which suitable with the master plan. The proportion of residential land that does not form residential units will depend on the proposal of the project owner or the percentage of state agencies which suitable with local land use regulations and plans. “

Condotel Nha Trang

In terms of technical and operating regulations, according to VNREA, Condotel coastal are often designed according to hotel standards, but in fact, Condotel is more apartment-like than conventional hotels. Therefore, Condotel should be subject to some standards like the apartment.

However, if the full application of technical regulations for the construction of condotel on the coastal area would be inadequate, especially with the requirements of the condominium serving the purpose of living of the households. Therefore, VNREA requested the Ministry of Construction to soon issue separate technical regulations for coastal Condotel based on the purpose and requirements of the real estate.

The issue of “red book” for customers buying condotel coastal is the biggest problem, because the law has no clear mechanism. In order to ensure the legitimate interests of buyers of condotel apartments, VNREA recommends the Ministry of Natural Resources and Environment (MONRE) to coordinate with concerned ministries and sectors to provide specific guidance on the issuance of certificates for this type.

A happy sign, according to VNREA recently, the Ministry of Construction has written in response to the recommendations of the Association. In particular, the construction law, according to the Ministry of Construction, should study and promulgate specific standards for this type of construction (Ministry of Construction will soon study and promulgate according to competence).

Regarding the land legislation, it is necessary to modify and supplement the regulations on the classification and the mechanism of using mixed land (both used as residential land and commercial land); and to issue certificates of land use right, ownership of houses and other assets associated with land for this type of real estate (propose the Ministry of Natural Resources and Environment to chair the study).

While waiting for guidance from the ministry for the condotel type, some local real estate projects have thrived in recent years such as Da Nang, Nha Trang, Phu Quoc, Thanh Hoa … The first steps were taken to remove this type of land by converting commercial land into uninhabited land for tourist resort.

Condotel Da Nang

According to information from the Department of Construction Danang announced at a recent seminar, Kien Giang province has issued a decision on the regulation of land management tourism land to build tourism villas in Phu Quoc island district. Accordingly, allow individuals, organizations to receive the transfer and long-term ownership. To ensure that no unit is formed in tourism projects, the Kien Giang People’s Committee specifies conditions, procedures for conversion; forms of use, exploitation, management.

Specifically, the project size is at least 40 hectares; Maximum conversion area is 10% of project land area; To complete 100% of technical infrastructure and transfer villas, to complete at least 30% of architectural works and not to build social infrastructure works; Only used for vacation purposes, not registered household. This regulation applies to project investors. The owner is responsible for contacting the owner of the condotel and the tourist villa is not formed housing unit.

Also in Khanh Hoa province (where many condotel projects are located), this locality allows individuals and organizations to receive the transfer and long-term ownership of Condotel projects. In order not to form a unit, the Khanh Hoa People’s Committee issued a document regulating the management and supervision of Condotel projects.

Accordingly, the owner has a commitment and is specified in the investment approval document is to use as hotel, not the accommodation unit. At the same time, the owner owns at least 30% of the apartment (if the whole project apartment) or owns a number of hotel rooms, apartments at least 30% of the total number of apartments and hotel rooms ( If the project is a mixture of apartments and hotels); individuals , organizations receiving transfer contracts have contracts with investors not using them for residential purposes but are used for purposes such as hotels.

However, according to Prof. Dang Hung Vo, former Vice Minister of Natural Resources and Environment, although some localities show a solution, it is still difficult, because it is outside the scope of the Land Law 2013. Besides, the current planning and laws stipulate that the investment projects must be suitable with the planning. Moreover, the inadequacies of tourism development projects, especially coastal tourism which is often plotted as commercial and service land for a definite period of time.

“So far, the question of whether land use in 50 years or longer has not happened. Because in the past, traditional investment was an investor investing in a real estate resort and vacation rental property directly for tenants and the current term of land use is 50 years, in special cases, it can last for 70 years and there is no use of land indefinitely for tourism services”, Mr. Vo said.

Meanwhile, Mr. Tuan suggested, need to condotel law, because this type is not yet listed in the statistics of travel or housing statistics, although this is a high-end accommodation.

“Cost accounting, profit sharing between management units and owners are quite complex, so the State should strengthen management measures, avoid loss of revenue”, Mr. Tuan said.

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