Residents in Trung Hoa- Nhan Chinh residential zone in southwest Ha Noi are among those waiting for their rights to be protected under the new Law on Real Estate Business. — VNS Photo Truong Vi

HA NOI (Biz Hub) — Homebuyers will soon get protection for their money and rights as a regulation making bank guarantees mandatory for future property purchases will come into effect next week.

Following Article 56 of the Law on Real Estate Business, property developers, before selling or leasing unfinished properties, must obtain guarantees from eligible commercial banks as assurances of their financial obligations to buyers.

Speaking at an online discussion on "Property guarantees – will there be risks," held in Ha Noi on Wednesday, Vu Van Phan, deputy director of the Construction Ministry's Housing and Real Estate Market Management Department, said several countries have implemented property guarantees. For example, South Korea has been applying this guarantee norm for years at 0.5-1 per cent fee.

"The purpose of the article is to protect homebuyers' money. If property developers fail to hand over apartments to buyers despite commitments, banks will be responsible for returning buyers' money, in line with signed contracts. In addition, this will help improve the sense of responsibility of investors," Phan observed.

Customers have lost their trust after several real estate projects collapsed in the past few years, affecting the realty market," he added.

Vu Quoc Hiep, chairman of the GP Invest Company's Management Board, agreed, saying that this can be considered as the second shield, together with the purchase of contracts between investors and homebuyers. Customers can ask real estate developers to provide images or videos of their projects' progress regularly.

Hiep noted that the ministry will promulgate a decree or circular outlining the implementation of the regulation.

He also asked about the fee for a guarantee and proposed the ministry to specify the rules for the collection of fees.

Meanwhile, some said that a property guarantee will present more risks for banks than other normal guarantees.

Doan Thai Son, director of the State Bank of Viet Nam's Legal Department, pointed out that commercial banks already have this guarantee under Circular 28 issued by the central bank in 2012. In reality, several banks have implemented guarantees for property projects.

The central bank has prepared a list of commercial banks eligible to offer guarantees for real estate projects.

There are two forms of guarantees, trust loans and mortgages. It is easy to implement mortgages for both property developers and banks.

Son suggested that banks should carefully review developers' ability while offering guarantees under trust loans.

He proposed a guarantee fee of 0.1 per cent, 1 per cent, and 2 per cent or higher, depending on a bank's assessment.

He calculated that with an average housing price of VND25 million per square metre, 100sq.m. can have a total value of VND2.5 billion. The guarantee fee will be calculated on 70 per cent of the total value, or VND1.7 billion. If the fee is 0.5 per cent of the total value, investors will have to pay VND8 million or VND32 million for a fee of 2 per cent.

However, several people worry that developers will add the additional fee to housing prices.

He suggested that a guarantee fee should be negotiated between banks and investors depending on each project and its risks. — VNS