Condotel investment craze surges in Vietnam

SGGP
Thousands of people are pouring money into condotel projects with hopes of getting the 8-12 percent interest as promised by owners, despite a nearly non-existent market and undefined legal rules for this type of building.

Feliz en Vista condotel project in District 2, HCMC

Feliz en Vista condotel project in District 2, HCMC

There are reportedly 77 large scale resorts with a total area of 18,019ha which consist of 16,537 hotel rooms, 12,056 condotel apartments, and 11,174 resort villas across 16 municipalities. From 2015 to September 2017, there were 71 licensed condotel and officetel projects with a total of 25,639 apartments.

Contrary to most countries, there are currently more condotels in Vietnam than regular hotel rooms at a ratio of 14 to 11.

The total number of condotel apartments were 16,000 in 2016, and expected to reach an average of 20,000 in between 2018 and 2019, each about 45 square meter in area.

In order to mobilize capital for these investment projects, heads of municipalities have implemented favorable treatments regarding land zoning and administrative procedures. Owners would sell condotel apartments to secondary investors to raise capital in the same way future residential housings are sold, despite current laws not permitting this sales method.

Owners can benefit greatly from this approach thanks to quick recovery of investment capital, additional funding sources to replace credit loans, reserved rights to make business with condotel apartments sold to secondary investors, better interest than bank loans, and having the burden of risk shared among themselves and the investors.

According to real estate experts, the gov’t should continue to apply the limit of 50-70 years on tourism land used for condotels in order for condotel model’s sustainable development. Regarding land finance, it is necessary to maintain reasonable income and avoid revenue lost from the state budget.

In addition, the Ministry of Culture, Sports and Tourism is advised to improve condotels’ appeal to tourists, in particular domestic and foreign visitors to use services at condotel.

By Do Tra Giang - Translated by Tan Nghia

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