By
Vu Pham, Minh Hue
Wed, August 7, 2024 | 9:46 pm GMT+7
A regulation limiting individuals to 10 transactions a year, each not exceeding VND300 billion ($11.9 million), can increase market transparency and minimize speculation as well as price inflation, experts say.
Prospective customers get introduced to a real estate project. Photo by The Investor/Minh Phuong.
The regulation is part of a new government decree detailing some articles of the Real Estate Business Law 2023, which came into force on August 1, five months earlier than its initial schedule.
The value cap will not apply if only one transaction takes place in a year, and such individuals do not need to set up a company, but must declare the transaction and pay taxes, according to Decree 96.
The decree has elicited mixed opinions. Those who disagree with it say that the more real estate transactions an individual makes, the more tax he/she will pay. Restricting transactions will limit tax revenues, given that the domestic real estate market has not yet truly developed, they argue.
Others have expressed high consensus with the government’s decree, saying it aims to limit speculation and price inflation. While tax collection is very important, the formation and bust of a real estate “bubble” can have huge consequences.
Real estate consultant Nguyen Hoang said the regulation showed that the government wanted to tighten individual real estate investment activities. The regulation limits individual investors’ rights in property investment and business.
Expressing concern about sanctions against those who violate the regulation, Hoang said restricting real estate speculation was necessary but it also needed to be synchronized with other regulations so that authorities do not face difficulties in enforcement.
Professional, transparent transactions
Nguyen Van Hau, CEO of Asian Holding Real Estate JSC, said the government’s new decree aimed to limit speculation and control the purchase of real estate in large quantities and then price inflation, thus making the market more transparent.
He noted that instances of “price inflation” have been seen recently. Many “sharks” in the know of important information about planning and infrastructure with big impacts on the market were able to buy many properties in advance and sell them for huge profits once the information was announced.
Echoing Hau, Nguyen Dinh, a real estate legal expert, cited the scam at Ho Chi Minh City-based Alibaba Real Estate Joint Stock Company, noting that it involved very large numbers of defendants and victims.
In this case, entities established businesses but all business activities were carried out by individuals, each making a lot of transactions.
“Therefore, the new regulation will help real estate transactions become professional and transparent,” Dinh said.
The director of a real estate business in HCMC who did not want to be named acknowledged that the regulation would have a positive effect on the market as a result of small-scale business criteria for individuals becoming clearer and more transparent.
“The rule will make it easier for individuals to carry out procedures for selling and leasing houses, construction works, and land use rights under their ownership,” he said.
In particular, this regulation will also limit real estate speculation and surfing, while making property business activities, especially those conducted by individuals, more professional.
However, after speculation was brought under control, the government should tax real estate transactions based on experiences of other countries like Singapore, the executive added.