An uncompleted housing complex in Ha Noi, captured in 2011. A great number of projects now face financial difficulties and remain unfinished, resulting in less confidence in the property market. — File Photo

HA NOI (Biz Hub) ― The Ministry of Construction announced recently that it was drafting regulations that would require housing developers to take out insurance for homebuyers to protect customer interests, but some experts said this might be unpractical in the current context.

Deputy Minister Nguyen Tran Nam said that a great number of projects now faced financial difficulties and remain uncompleted although property investors had received deposits from buyers. This causes a big waste of resources, less confidence in the property market and chaos in the society.

The regulations were expected to prevent buyers from losing money in case the projects couldn't be finished, he said.

He added that the implementation of such stipulations needed the support of commercial banks, such as easing financial pressure on property firms by extending the time for them to pay debts, and the ministry would discuss this matter with the State Bank of Viet Nam.

Property expert Pham Sy Liem said, however, almost all investors were currently running out of capital and many were holding several projects at the same time, so it would be impossible for them to seek insurance policies.

"Who will dare to provide this kind of insurance now?" Dat Lanh Real Estate Co deputy director Nguyen Van Duc told Giao duc Viet Nam online. "With the property market remaining frozen and investors failing to deliver houses to customers, I think no one will."

Another problem was whether insurers could afford to compensate homebuyers in case incidents happen, he said, calculating that the sum insured for every incident of this kind could amount to 30-40 per cent of a project's total value.

He noted that for occasional incidents like fire or house collapse, insurance companies only pay at levels of 0.1-0.5 per cent.

Duc also pointed out that if property developers were to compulsorily take out the insurance, they were likely to include the insured amounts in their costs and this would push up house prices.

"Currently it's already hard to sell property with prices of VND12-13 million (US$570-620) per square metre. What will the situation be if 30-40 per cent, or VND4-5 million ($190-238), is added into the prices?"

"For these reasons, I think that the regulations may be infeasible," he said. ― VNS