Can the new Housing Law "eliminate" mini apartments?

The new Housing Law recently passed by the National Assembly has many new regulations related to investing in houses with many apartments for sale or rent, also known as mini apartments.

In particular, the new Housing Law stipulates that investors must establish projects similar to normal commercial housing projects.

New housing law tightens construction and management of mini apartments picture 1 — The new Housing Law stipulates that investors must establish projects. (Photo: DM)

Specifically, according to the new regulations, individuals who want to build mini apartments (houses with 2 or more floors, each floor has apartments, or 2 or more floors and a scale of 20 apartments) for sale or rent will have to meet the conditions of being an investor in a housing construction project.

Apartments that are eligible for a certificate under the land law (pink book) will be sold, leased, or lease-purchased according to the provisions of the Housing Law and the Real Estate Business Law.

In addition, investing in mini apartments for rent must meet construction requirements issued by the Minister of Construction. The building must meet fire prevention and fighting requirements as prescribed by law.

Mr. Pham Duc Toan, General Director of EZ Real Estate Investment and Development Joint Stock Company (EZ Property), said that tightening the construction and management of mini apartments is necessary because this type of apartment has been developing rampantly for a long time with many violations.

Mini apartments in the near future will be almost impossible to sell to people without an investment project. The development of mini apartments will therefore be significantly limited due to strict procedural regulations.

Meanwhile, setting up investment projects and meeting the conditions to be the investor of housing construction investment projects will be a huge challenge. Because mini apartments are high-rise buildings, built on an area of 200 - 300 m2 mainly, located in deep alleys. Therefore, having to set up projects like normal commercial apartments is almost impossible.

“With alleys less than 2 meters wide, it is impossible to establish a 1/500 planning because many factors are not guaranteed such as: fire prevention, infrastructure, population indicators and environmental impact assessment. Meeting these requirements with current mini apartments is almost impossible,” Mr. Toan analyzed.

According to Mr. Toan, with commercial apartments, project licensing and planning can take several years, while with mini apartments this period will be even longer.

Besides, mini apartments are mainly built in central areas, so the regulations on building height are very strict, usually a 200 m2 plot of land can only be built about 5-6 floors. With this density and height, investors cannot make a profit, so no one will do it.

In fact, currently, up to 95% of existing mini apartments are built without permission, because if they were built according to regulations, investors would see losses before they even start.

"If you buy a 200 m2 plot of land for 10 billion, but can only build 5 floors and build 70% of the area, that is 700 m2, the cost of both land and construction is about 22 million VND/m2. If you sell it for 25 million VND/m2, then clearly the investor will not make a profit by building 5 floors," Mr. Toan explained.

Therefore, according to Mr. Toan, in the coming time, the mini apartment type is at risk of falling into decline because having to set up a new investment project to be built will make it impossible for many people.

For mini apartments that meet the conditions for construction, the cost will also be very high, not competitive with commercial apartments because the investment cost is too expensive.

Meanwhile, Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), said that investors in mini apartments are individuals who must comply with legal regulations like large investors developing commercial housing projects.

Specifically, individuals must comply with the provisions of the law on fire prevention and fighting; sales, leases, and hire-purchases must comply with the provisions of the law on real estate business.

In addition, home buyers in mini-apartments are granted a Certificate (pink book). Management and operation must comply with the regulations on management and use of apartment buildings and clearly define the responsibility of inspection and supervision of People's Committees at all levels to ensure safety and protect the legitimate rights and interests of residents living here.

“This regulation will increase the responsibility of local authorities in cases of mini apartments,” said Mr. Chau.

Source