HCMC homebuyers upset as greedy developers go back on promises

[ASEAN NOW News]

An artist's impression of a property project in HCMC which has not been constructed for years even though buyers have put down deposits. Photo acquired by VnExpress

 

People are regretting their decision to pay for apartments in HCMC even before their construction since many developers are delaying the work for years, to get higher prices.

 

According to VN Express, the developers are then free to make a large profit because land prices have surged manifold during the delayed years.

 

The main ruse used by developers is to have buyers sign deposit contracts instead of purchase contracts.

Tin and his wife put down a deposit of over VND600 million ($26,117) two years ago for an apartment in Binh Thanh District, but its construction has not begun to date.

 

Tin contacted the developer many times to find out what was happening but received the same answer each time: the developer was working on legal procedures for construction to begin.

 

Then, a few weeks ago, Tin and some other buyers of the same project received an offer from the developer to refund their deposits with an annual interest of five percent as the project could no longer be continued.

 

Tin and many other buyers have refused to sign the contract liquidation form that the developer has prepared, which enjoins them to accept the deposit plus 10 percent.

 

Last week, they made placards and protested the developer’s offer, saying that the five percent per annum compensation was lower than the interest paid by banks, while the developer has acquired a lot of money from them for years.

 

"HCMC house prices have been surging in the last two years. This compensation does not even match inflation. It is also too late for us to find a similar home with the same budget," Tin said.

 

He is one of many homebuyers in HCMC who are caught in a difficult situation after putting down deposits on property projects only to find the developers not fulfilling their promises and failing to begin construction, even.

 

In 2019, Phung put down a deposit of VND190 million, or 10 percent of the price tag for an apartment in Thu Duc City, but it has been three years and construction has not begun yet.

 

The developer, who’d initially promised many benefits including European style designs, has recently told Phung and other homebuyers that they can either continue to wait for construction to begin or take their deposit back with an interest of 8 percent per annum.

 

"They told me in February that construction would begin in the first quarter. It is now the second quarter, and nothing has begun. I don’t know if the construction will begin, ever," Phung said.

 

She does not intend to take the deposit back as she needs a home and has lost opportunities to buy similar apartments with her original budget, as prices have been surging over the last three years.

 

Kha, who put down a deposit in the same project, is not even eligible for the eight percent interest as he bought the apartment from another buyer and not directly from the developer.

 

"I have no choice but to wait, as I need a home."

 

Minh in Thu Duc City has a similar story to tell. He spent VND500 million four years ago for an apartment, but the developer is now forcing him to take back the deposit without any interest.

 

"I had to accept the developer’s proposal because if the contract is liquidated, I would lose more money," he said.

 

"This means I gained no profit in the last four years, not to mention losing big to inflation."

 

The developer, however, will gain big profits as prices have been surging in the last four years, he added.

Increasing trend

 

Nguyen Loc Hanh, the CEO of Ngoc Chau A real estate firm, said the contract liquidating trend was increasing as real estate prices surged.

 

Buyers of future homes have fallen into "traps" and only those who are lucky can get the property they wanted in the first place, he said.

 

This is happening because there is no legal framework to protect homebuyers when developers fail to fulfill their commitments, because the latter use deposit contracts to take money from buyers, not purchase contracts, he added.

 

Developers have been intentionally waiting for prices to surge so they can "refresh" the project and sell at higher prices with bigger profit margins, Hanh said.

 

The prolonged delay in administrative procedures also gives developers the opportunity to stop developing the project and liquidate the contracts.

 

This has resulted in homebuyers losing opportunities to own their desired properties, he added.

 

Hanh said he would advise homebuyers not to invest in pre-construction projects unless the developers can prove that they have acquired all the necessary permits to begin construction.

 

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