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Deposit agreements need to be properly managed

Van Ly
Monday,  Jul 24,2017,22:13 (GMT+7)
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Deposit agreements need to be properly managed

Van Ly

Homebuyers inspect a residential development project. Agreements in which property developers use to sell their products should be properly managed - PHOTO: VAN LY

HANOI – Agreements in which property developers use to sell their products should be properly managed to guarantee the rights of the parties concerned: the investor, the homebuyer and the bank.

Placing a deposit is a commitment to a deal between the investor and the customer despite a lack of necessary documents for sale of future housing.

As investors meet regulatory conditions to put their housing products on sale, their customers will pay the agreed-on price when placing a deposit. Otherwise, the buyer will lose their deposit as some cases have occurred.

Nguyen Tran Nam, chairman of the Vietnam Real Estate Association, said this home sale method is intended to satisfy the needs of homebuyers who want to have their own apartments as soon as possible.

Nam said property developers can sell their products after they have completed procedures, secured land ownership, paid land tax, and obtained construction and sale licenses, among others. Such an agreement between the seller and the buyer is governed by the Civil Code.

The customer has to place a deposit for a particular product on a first-come, first served basis in line with international practices. This deposit agreement is in line with prevailing laws as well. The bank that enters into such a contract must comply with the banking regulations, said Can Van Luc, deputy general director of the Bank for Investment and Development of Vietnam (BIDV).

Financial expert Vu Dinh Anh said this kind of agreement is actually a real estate derivative which is not prohibited by law.

Pham Thanh Hung, deputy chairman of Cen Invest, said such agreement helps property developers assess the commercial viability of their projects.

Deposited money is kept in escrow accounts, so property developers cannot use it for other purposes. This business practice helps developers actively map out business plans, make business projections, and build pricing strategies, Hung noted.

Meanwhile, Nam said, the Government should cap the size of a deposit at 10-20% of a home’s value. The contract should be designed in a way that protects the rights of the homebuyer.

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