Abstract: Condotel (also known as hotel apartment) firstly appeared in Miami, USA in the 1980s. This type
of real estate has come to Vietnam in the past few years and has become one of the most attractive
investment channels. In 2017, the real estate market in Vietnam witnessed an explosion of hybrid real
estate types, including condotel. According to the expected data for the period 2017 - 2019, each year,
there will be 27,000 - 29,000 condotel apartments supplied to the market. In theory, in Vietnam, there
has not been a specific study on the characteristics, influencing factors and impacts on condotel real estate
products and the condotel market. In practice, at present, the local and central governments are still
confused in managing the condotel market; the condotel management policies and the condotel market
have not been formed and completed. Secondary investors are also hesitant to invest in this type of real
estate because there are still many shortcomings.
Keywords: Condotel, Condominium, Hotel
INTRODUCTION
Condotel is a type of hotel apartment. Condotel stands for Condo and Hotel. Condotel is designed like a
high-end apartment with a full living room, bedroom, kitchen, bathroom... It is operated as a hotel but
has its own owner.
According to some sources, condotel are inherently derived from Europe where the tourist real estate
market has long existed, namely in Spain since the 1970s. In fact, the condotel market was officially born
in early 1980 in Miami (USA) when people implemented a project to renovate old hotels built in the 1950s
and sell the right to own them to improve the efficiency of investment, business and meet the growing
demand for resort tourism here. This project has brought tremendous advantages for both developer and
secondary investors. At first, secondary investors only needed to pay about $100,000 in order to have the
right to buy and own a condotel as a “second home” for short-term holidays. As such, most condotel in
Miami are built to meet the needs of the locals. Around 1986, various reasons led the local government
to change the tax code to prevent buyers from using condotel as a place to launder money and evade
taxes. As a result, condotel was not further developed and used until the late 1990s.
In the 2000s, the owner of an apartment building called Mutiny in Coconut Grove, FL on the outskirts of
Miami wanted to sell the building, he came up with the idea to change the entire architecture and
structure of the building, and then sell the newly renovated building which was designed similarly to a
hotel. It was this bold change that brought the owner of the building unexpected success when the selling
price has increased 10 times compared to the original purchase price. Not only did it bring financial
success, but this renovation was also an inspiration for a new school of real estate development. Since
then, the Condotel market has officially been born and developed from several Condotels in Miami (USA)
built in 2002 to more than 100 countries around the world and among them Vietnam.
In 2009, the very first condotel appeared in Vietnam: Nha Trang Plaza Tower. Nha Trang Plaza is built on
35 000m2 of land with 40 floors and 240 5-star apartments. Then a series of Condotel projects were built
in tourist cities like Phu Quoc, Nha Trang, Da Nang, Quang Ninh…
1. Characteristics of condotel
Operation: Basically, the condotel is operated like a high-end hotel. The only difference is that each room
is owned by an individual, rather than a common owner of the developer. To own a condotel, the client
must pay a sum of money for ownership (just like purchasing a property). Condotel owners will authorize
the company that runs its asset management.
Design: Traditional hotels usually have 1-2 rooms with a lower price compared to condotel, which is an
advantage of traditional hotels if the customers just need a place to stay and relax. As the condotel is
designed like a normal apartment, the inside space will be extremely large and comfortable. Condotel is
developed in tourist cities.
Possibility of profitability and risk: Condotel has attracted a lot of investors due to its commitment to
profitability. With profit sharing policies (an average of about 60%-85%) from condotel sub-lease business,
investors who are apartment owners receive a higher annual profit than many traditional investment
channels such as gold, foreign currencies, deposits. Many developers also make commitments to ensure
the profitability of condotel apartments (from 8 to 12% per year) for customers from 5 to 10 years. The
commitment to profitability helps the owners be completely assured of profitability as well as stability
and safety for the money invested in this type of real estate.
However, condodel still contains many risks, including:
- Legal problems: condotel is a type of real estate "hybrid" of two types of real estate (apartments and
hotels) so the legal system related to this type of real estate also needs to have a flexible and reasonable
combination. However, in some countries with undeveloped real estate markets, the problem of state
management of condotels is still lacking. Investors may be apprehensive about their legal rights to
condotel. In addition, legal changes such as tightening regulations on construction, transaction and
ownership of condotel can also make it difficult for developers, secondary investors and other
stakeholders.
- Profit commitment problems: The profit commitments coming from developers are subjective. The
actual profit depends on the business situation, marketing strategy, sales strategy, the occupancy... On
the other hand, even if the developers earn enough profit to pay the promised profits to secondary
investors, there is still a risk of commitment not being fulfilled.
2. Characteristics of condotel market
First, the difference between the goods and the place of transaction.
For ordinary goods, the trading location is usually where the goods are traded, while for real estate goods,
the place of transaction is separate from the real estate goods traded. It is due to the characteristics of
real estate goods: having a fixed location, which cannot be relocated. Real estate transactions are usually
conducted on virtual real estate markets. These "markets" are very diverse, can be large transaction
centers (real estate markets), can also be a small location with minimal simple items, also at home, at
restaurants, over the internet... Especially for condotel which is usually located in tourist cities. There is a
possibility that the buyers live in other cities or countries and buy real estate via phone or the internet.
Second, the regional market.
Real estate not only cannot be relocated but also is impacted by the natural, economic and social
conditions of each area. Therefore, the supply and demand of real estate in areas are very diverse in
quantity, model, quality, level of development and so on. On the other hand, real estate is customized by
local’s architecture, tastes and religions.
Each condotel has its own characteristics, making the most of the tourism advantages of the region. These
advantages can have natural origin (landscape, climate) or man-made origin (culture, customs, festivals).
Third, the imperfect market.
Firstly, the number of participants in supply and demand is small, which has not guaranteed the criteria
for perfect competition yet. Secondly, condotel products are not identical. Each developer differentiates
its products in product quality, features and marketing.
Fourth, the high entry barrier.
Real estate goods are not sold in the market like other types of goods, real estate buyers and sellers do
not have the opportunity and enough information to choose the right market for real estate to trade.
Moreover, since real estate often has high value, real estate buyers and sellers often have little experience
in trading for this type of goods. When it comes to the transaction procedures, both buyers as well as
sellers spend a lot of effort to search for information and understand them.
Condotel is a type of real estate that not everyone can become a developer and seller in the primary
market. The developers need to have a very large amount of capital to be able to invest and build
condotel. In addition, condotel are often built in tourist areas, on land leased by the state and have an
extremely potential location, favorable for the development of tourism real estate. In order to have the
right to use this type of land, the developers must also go through a lot of stages and procedures that not
everyone can do.
Fifth, demand depends on supply.
With the normal real estate market, the supply and demand relationship usually takes place according to
the general rule that “if there is demand, there will be supply”. However, in the condotel market, we can
easily witness the appearance of supply has created the demand for owning and using condotel.
Sixth, the lack of legal management.
As mentioned above, condotel is a new type of real estate for many countries. Although there are many
countries in the world that have taken pioneering steps in managing this type. However, the management
environment in each country is different, so it is impossible to apply all management processes. Therefore,
the condotel market is still on the rise and requires a clear and strict legal system to manage and develop
the market.
3. Factors affecting the condotel market
3.1. Legal factors
Planning: Planning is the determining factor in the size and number of types of real estate, including
tourism real estate, thereby holding back or promoting the development of the market.
Rights and obligations of stakeholders: Law was born to protect the interests of citizens. Having a
complete system of regulations on the rights and obligations of the real estate stakeholders (including
developers, investors, construction companies, management companies, financial companies and so on)
ensures the condotel market is transparent and safe, which makes the investors feel secure and makes
transactions convenient, easy.
3.2. Economics factors
The development of tourism: Condotel is a type of tourism real estate with short-term accommodation
functions, so it is usually located in areas with tourism potential. Therefore, the condotel market is greatly
affected by the situation of the tourism industry in the region. Usually, when tourists come to stay at a
location, they can choose the following forms of accommodation like hotel, resort, motel, floating hotel,
tourist villa, condotel, cruise ship, guest house, homestay, camping sites and other. As tourism develops,
the tourism real estate market will have more opportunities to reach domestic and foreign customers.
The competition between condotel and other types of accommodation is a factor affecting people's
consumer sentiment, thereby promoting the development of the condotel market in particular and the
tourism real estate market in general.
GDP growth: Any type of property has high value. This requires the stakeholders involved in buying and
selling real estate to be financially able to transact real estate. Economic growth leads to increased
household income, enhancing the demand for investment, consumption, travel... In contrast, low
economic growth reduces production and business opportunities, leading to lower incomes and living
standards of households, at which point they tend to cut spending and save more.
Inflation: When inflation rises and the currency depreciates, people may not want to keep cash or deposit
in banks because it will cause their wealth to decline. At this time, people will tend to switch to holding
gold, strong foreign currencies or real estate...
Interest rate: The expectation for real interest rate has an impact on consumer and investment decisions.
Once inflation is determined, if investors think the actual interest rate will be negative, they will be
inclined to withdraw savings deposits and invest in other types (such as real estate) to protect purchasing
power.
3.3. Psychological Factors
Any investment and consumption activity is greatly affected by psychological factors. Especially for highvalue goods such as real estate, psychological factors play an even more important role in the process of
making buying, selling decisions. Psychological factors can cause investors to buy and sell condotels more
or less. Some forms of psychology that can influence the decisions of investors in the condotel market can
be mentioned as follows:
Herding: According to Keynes (1936), herding behavior reflects human response to uncertain issues and
limited information. In the volatile market, real estate investors not only follow their own judgment on
the future direction of real estate value, but also consider the judgment of other investors, because they
are well aware that they cannot fully update all information, it may be wiser to refer to or mimic the
actions of others before making a decision. For small investors, because of the limited information, these
people are easily caught up in "trend-creating games" or simply the "price-making games” of developers.
At the same time, rumors and low-quality non material information are sometimes "taken advantage" of
by small investors and end up creating a crowd that acts the same in an unreasonable way.
Over-optimism: This is the tendency in which people tend to overestimate their ability to analyze
information. This makes them often overly optimistic about the market, economic system and investment
potential. Farlow (2004) argues that over-optimism is the most important form of bias in the real estate
market. The results showed that households believe that buying a home does not contain too much risk
and that house prices will rise by an average of over 11% per year. This shows excessive optimism. Overall,
households are overly optimistic about future interest rates, and often react too slowly to the risk of
interest rate changes.
Available information: This is the tendency in which people choose an investment based on the available
information (advertising, recommendations from consultants, friends, etc.) and do not re-analyze their
investment decisions. Investors based on the available information will choose to invest in a field limited
to their understanding. Adair and colleagues (1994) point out that investors regularly pour money into
informative projects.
Past experience: Dependence on experience makes people make decisions easily and quickly. This
occasionally leads to decision mistakes, especially when objective conditions change, and can even lead
to overestimated decisions.
4. Condotel management experience of some countries
Thailand
Thailand is one of the countries in Southeast Asia, with natural, economic and political conditions
relatively similar to Vietnam. In Thailand, condotel is one of the familiar products in major tourist cities
such as Bangkok, Pattaya ... Condotel appeared in Thailand before entering the Vietnam market, so the
Thai government has some experience managing condotel.
Thailand has built a separate legal system for condominiums (Condominium Act) and hotels (Hotel Act).
These two laws have a reasonable intersection. The Law on Apartments does not exclude apartment
buildings that are used as hotels. And the Hotel Law also includes regulations for hotels to operate in an
apartment. This interference ensures the flexible operation of hotel apartments.
In addition, the country also allows apartments converting into condotel if they meet technical
requirements. Thailand argues that the condotel is first and foremost a "second home" so it must be
guaranteed the technical elements for an apartment. In particular, the works must meet the Set of
Environmental Impact Assessment (EIA). Then the owner will be licensed to use the building for the
purpose of the apartment.
However, if owners want to use the building as a hotel apartment or intend to convert the purpose of use
into a hotel apartment, the design of the building must be suitable for the hotel in terms of parking area,
elevator design, water supply and drainage, fire protection, security and medical... At this time, the owner
needs to carry out legal procedures to apply for permission to operate the building for hotel purposes.
The building also needs to meet the requirements in the EIA set of standards for hotels and must receive
permission from the authorities to be put into business as hotel apartments. If the license is lacking and
still conducts business, the owner will be fined. This has made it easier for Thailand to manage the quality
of properties used for hotel business purposes and ensure tax revenues from this type of property.
Indonesia
Condotel also appeared in Indonesia before appearing in Vietnam. In this country, condotel has finite use
duration from 50 to 80 years, depending on the types of land use certificates include:
- Certificate of Right to Use (Hak Pakai)
This is the right to use on state-owned land or property owned by a citizen or private/organization for a
specific purpose for a finite period of time. The total duration of use can last up to 80 years.
- Building Rights Certificate (HGB)
This is the type of certificate allowing the owner to establish and own buildings on state-owned or owned
land, with a maximum term of 30 years and can be extended for a maximum of 20 years.
In addition to the land use regulations, Indonesian law also protects the rights of condotel owners through
the Consumer Protection Act, The Condominium Act... to resolve conflicts between the owner and
developer, the operator managing the condotel.
The Philippines
Under Article 5 of the Condominium Act, foreigners are allowed to own real estate (including condotel) in
the Philippines, making the Philippines become one of the attractive destinations for foreign investors.
In addition, under Article 8 of this law, in terms of buildings with many owners (such as condotel), after a
50-year land lease term, the owners have the right to contribute the opinions to the decision if the
property will be sold or destroyed for a new property to be developed on the area. The owners then will
receive an amount that is equivalent to the value of ownership right of the property. That is, after 50 years
of investing in condotels, this investment will be given back.
The U.S
The U.S. is known as the cradle of condotel with the most vibrant condotel market in the world. With half
a decade of condotel management experience, the U.S. has adjusted its laws to facilitate the sustainable
development of the condotel market. In the current period of the real estate market development, from
a financial management perspective, the U.S. government is very concerned about the liquidity of
condotel. In 2013, the Securities and Exchange Commission passed SEC Rule 506(c), which highlights the
authorization to trade condotel as a "security". This act has facilitated the investment and transaction of
condotel. Some of the points in Act 506(c) that changed the condotel market are as follows:
- Allow the public offering of condotel as a form of "securities" to investors who can meet minimum net
income standards.
- Allow the promotion of hotel brands and condotel rental programs. Previously, condotel buyers were
not given any information before purchasing the condotel.
- Allow the provision of relevant financial information about investments (e.g. hotel performance,
comparable real estate value, cash flow forecast and related costs...)
- Require the condotel owner to participate in the management of hotel operations.
- Allow to limit the time of use of the owner's apartment.
- Allow the owner to sub-lease the apartment if it exceeds the permitted use time.
- Allow condotel developers to manage condotel operations themselves.
- When the condotel is traded as a "securities", the brokerage companies must have real estate brokerage
license and securities brokerage license.
In Indian Wells, California, a condotel tax policy has also been adopted. Condotel tenants are subject to a
tax rate of 9.25%, which is equal to the tax rate imposed on ordinary hotels. Condotel owners are subject
to a tax rate of up to $25 per day if they reside in an apartment for more than 60 days a year. In addition,
the owner must also pay an annual fee of $2,400.
These laws have helped increase the liquidity of condotel as well as ensure the interests of developers,
investors as well as a stable source of income for the authorities.
Experience for Vietnam
From the management experience of some countries around the world, we can learn some lessons as
follows:
- When developing regulations for condotel, the architectural and technical regulations for apartments
and hotels must be implemented simultaneously to ensure the rights of stakeholders as well as be flexible
in terms of the use of the building.
- Extend the time of land lease to invest in condotel in a flexible way, suitable to the needs and actual
situation.
- Determine the direction of settlement of expired land and the rights of the parties involved in that land.
- Determine the rights of the owner over the condotel, for example, the owner is allowed to use the
condotel for mortgage, capital contribution,...
- Require the developers to publish the legal and economic benefits that investors can receive when
owning condotel and have appropriate legal policies to ensure the agreement between the two parties.
- Identify financial issues related to condotel (tax, fees...) to ensure stable revenue for the government's
budget.
THE CONDOTEL MARKET IN VIETNAM
1. The condotel supply in Vietnam
Since about 2014, there has been an investment trend for condotel projects, mainly focusing on coastal
and island areas. In particular, Nha Trang, Da Nang and Phu Quoc are three attractive areas. According to
the Ho Chi Minh City Real Estate Association (HoREA), the resort apartment market has experienced
strong growth in recent years.
According to statistics of 16 provinces and cities, large-scale resorts (50 hectares or more) have 77
projects, with a total area of 18,019 hectares; 16,537 hotel rooms, 12,056 condotel apartments, 11,174
resort villas.
From 2015 to September 2017, the country had 71 condotel and officetel projects licensed with a total of
25,639 units. Of which, there are 15,010 condotel (Hanoi 4,114 units; Ho Chi Minh City 208 units; Da Nang
4,565 units and other provinces 5,823 units).
According to preliminary statistics from market research units, every year tens of thousands of condotel
are sold, usually the value of condotel ranges from more than 1 billion to 5 billion vnd per unit. On average,
tens of trillions are invested into this market each year. For the most part, investors are pouring money
into Da Nang and Nha Trang, where condotel projects are booming.
From 2016, the supply of condotels has continuously been expanded to the market. Preliminary statistics
show that in 2016 about 12,000 condotels were sold. In the first months of 2017, the new condotel project
continued to be launched on the market.
HoREA forecasts that in 2018-2019, an average of about 20,000 condotels will be opened for sale each
year, with an area of less than 45m2. This leads to the risk of oversupply. Because of that reason, in early
2018 up to now, many developers have reduced the supply. According to data from CBRE and DKRA
Vietnam, in the first quarter of 2018, supply decreased to 15% to 33% compared to the fourth quarter of
2017.
2. The condotel demand in Vietnam
According to the Vietnam Association of Realtors, 2017 was a boom year for supply and transactions of
resort real estate, especially condotel and concentrated mainly in two markets, Khanh Hoa and Da Nang,
and some other locations such as Phu Quoc, Quang Ninh... The average consumption rate was from 43%
to 67%.
However, according to DKRA, the condotel market has started to cool down since the end of 2017. Despite
the sharp decrease in supply, the consumption rate of the condotel segment in the first quarter of 2018
was only about 19%, equivalent to 387 units, down 677 units - equivalent to 36% compared to the same
period in 2017. Thus, condotel consumption decreased by 64% compared to the last three months of
2017.
According to the Vietnam Association of Real Estate Brokers, some new projects are open for sale only in
F1 transactions which means the buying and selling market is no longer vibrant. Starting from the fourth
quarter of 2017, F1 buyers are difficult to transact because of poor liquidity.
This shows that the condotel market has shown signs of shortfall. The supply to the market is abundant
but the consumption is relatively low.
3. The development of condotel market in Vietnam
Although condotel appeared late, the condotel market in Vietnam exploded very strongly and developed
rapidly because of new investment channel, attractive profit investment... Some achievements can be
mentioned:
- Maintain stable supply, with a series of projects which are increasingly improved in quality. Most of all
condotel projects in Vietnam meet international 5-star standards, with many high-end facilities such as
spa, gym, mini golf course... to increase the value and increase the stay duration of customers, thereby
increasing the income of rooms for rent.
- Diversify types of products for the real estate market in Vietnam, open up many investment
opportunities for domestic and foreign investors.
- Facilitate the idle cash flow in the population to be used effectively.
- Contribute to changing the appearance and urban landscape of areas where condotel projects are
located.
- Promote the tourism industry, especially resort tourism.
- Increase revenues for the government budget from the collection of land use tax, corporate income
tax,...
The development of the condotel market in Vietnam can come from the following main reasons:
First, the demand for high-end resorts of foreign and domestic tourists is high.
Vietnam has many natural and human resources favorable to be able to develop the tourism industry.
Especially in recent years, the increasing number of tourists has led to the growth of demand for the
quantity and quality of accommodation facilities in tourist destinations. The latest report of the Vietnam
General Administration of Tourism said that in 2017, Vietnam welcomed nearly 13 million international
visitors, an increase of nearly 30% compared to 2016 and serving more than 73 million domestic visitors.
According to Vietnam Real Estate Association (VNREA), this is the biggest cause of the development of the
condotel market in Vietnam.
With a total target of about 100 million tourists and an average stay of 2.4 days, by 2020, Vietnam needs
about 300,000 rooms, especially in cities with great tourism potential such as Da Nang, Nha Trang, Ha
Long, Phu Quoc which is accounted for 60% of nationwide available room equal to more than 180,000
rooms. The number of 3-star or higher standards rooms must also increase sharply, to meet the increasing
demand of visitors.
However, at the present time, the total number of hotel rooms and condotels of 3 stars or more in
mentioned destinations has about 102,758 rooms. Thus, over the next 3 years, these tourist destinations
need about 78,000 more rooms. This is the room for the resort real estate segment, especially condotel
projects to develop.
Second, the policies of the government and each locality facilitate for the condotel segment to develop.
Vietnam oriented the tourism development to become a key economic sector of Vietnam, the
government and localities always put in place policies to promote the tourism environment. In recent
times, condotel has been developed by prestigious developers and has brought many benefits to the
locality, such as enhancing the appearance and tourist areas, creating stable jobs for people, creating a
stable source of revenue for the local budget from tax collection.
Third, the middle class is growing fast in quantity, has idle money and wants to invest.
According to a study by PwC, in the period 2016-2050, Vietnam's real GDP per capita growth will be at
4.5% per year, above the countries that are often mentioned as the most attractive consumer markets,
which are China, India, the Philippines and Indonesia. This remarkable economic growth is driving the
rapid expansion of Vietnam's middle class which means consumers will have more disposable income
after covering all the essential expenses, thus, aim for a better quality of life. This will not only drastically
stimulate total spending in general, but will also lead to remarkable changes in consumer behavior.
Recognizing this opportunity, developers with experience in market analysis and effective marketing
strategies have sought to attract this middle class with commitments, compromise the benefits that will
be received when investing in condotel. As Vietnam is lacking long-term investment channels with high
stability, attractive income, condotel immediately attracts idle cash flow among the people, when
developers commit a return ranging from 8% to 12% per year for about 5-10 years depending on each
project. This is the highest profit compared to traditional investment channels such as rental property,
bank deposits, gold, securities... This has created a "herding effect" in the short term. Especially hot
markets such as Da Nang, Nha Trang, Phu Quoc... We've seen a wave of condotel investments in 2016.
Condotel has become one of the attractive investment trends for real estate investors.
4. The limitations of condotel market in Vietnam
Some issues that need to be solved to make the condotel market stable can be stated as follows.
First, the planning and constructing standards.
Since the condotel has not been clearly defined as residential or commercial property, there are many
problems that have occurred. First of all, about planning. Current condotel projects are built on both
residential and commercially serviced land. This can lead to a disruption of planning, putting undue
pressure on the area's infrastructure. In addition, the calculation of technical architecture targets of works
with condotels is still unclear. Should condotel be designed and built according to technical architectural
indicators for residential or for commercial real estate, resort tourism?
Second, the issuance of land use right certificates.
The Vietnam Real Estate Association believes that condotels are products, offered for sale, so they also
need to be recognized as ownership. However, the regulation on the issuance of land use right certificates
is still controversial. Condotel is built on commercial land with a term of 50 years, so in theory, condotel
owners will only be granted land use certificates with a term of 50 years. However, the mindset of many
investors wants to have a long-term land use certificate such as owning an apartment. This causes
developers to make sales policies according to the will of investors, leading to passive real estate
governance.
Third, the rights of condotel owners.
Regulations related to the rights of condotel owners such as business, transact or the condition of selling
products formed in the future, guarantees for lease purchase and especially regulations on selling
apartments to foreigners are unclear. In addition, owners who have not been granted land use right
certificates may have difficulties in inheritance, mortgage, bank loans...
Fourth, the commitment on profit share of the developers.
The condotel business form of the developers is actually sold and leased. Accordingly, the developers will
become the authorized recipient of the lease to the customer. The contract of authorization for the
operation of the apartment (which can be in the form of a provision of the "rental commitment program"
in the contract of sale) will include a number of key contents such as the term of the lease commitment
and the rate of profit distribution. There are currently two main forms of profit distribution, which are:
- As soon as the contract is signed, the developer will pay in advance the rent for 3 years equal to 15-25%
of the selling price of the apartment. From the 4th year onwards, the owner will receive a portion of the
actual profit earned from the condotel rental, which can be 60%-40%, 70%-30% or 85%-15%.
- For 10 years, regardless of the actual business situation, the owner will also receive returns of 5%, 8% or
12%. After a 10-year period, the owner also receives a portion of the actual profit, which usually falls to
around 15%.
According to experts, this is a fairly high level of committed profit. In Southeast Asia, condotel in Thailand
only commit to profits of 7% over a period of 3-5 years and in Indonesia 7% for a period of 2-3 years. This
creates a great attraction for foreign investors. However, the commitment problem is based on the
prestige and implementation capacity of the developer.
Fifth, authorities at all levels are not uniform in the management of condotel.
In fact, in the Tourism Law 2017, condotel has been referred to as "tourist apartment". That is, the
condotel is a type of tourism real estate. However, because condotel is a "hybrid" type of real estate
between apartment and hotel, the main obstacles stem from the use of condotel as an apartment.
In addition, local authorities always want to attract more developers to their areas to gain many benefits
for their areas. Therefore, many localities have offered a lot of incentives that are inconsistent with the
law for condotel developers. Typically, the issuance of land use right certificates. If the certificate is issued,
it must be according to the Land Law, because condotel is not a residential property, so the certificate
must state the property as the tourist apartment. Some localities have not clearly defined this type of
property, some phrases stated in land use right certificates in a spontaneous way that does not follow any
legal basis such as "residential land does not form residential units" leading to inconsistencies among
localities and higher authorities must also think about how to deal with the consequences from the
issuance of certificate.
Causes of problems in condotel market in Vietnam
Condotel is a new type of real estate in Vietnam, so there are still many controversial issues and they have
become bottlenecks for real estate managers. Some of the reasons can be mentioned as:
- Condotel is a type of "hybrid" real estate that requires more complex management than simple real
estate.
- The legal framework for condotel has not yet been formed.
- Real estate investors are limited in knowledge and easily attracted to investment by herding behavior,
overly optimistic and information available in the condotel market.
- Condotel is still not clearly defined so many people still have false misconceptions and desires for this
type of hybrid real estate.
- The untimely intervention of the government at the time when the condotel market is developing too
hot, condotel investment craze brings many inadequacies in the process of real estate management in
general and condotel management in particular.
- Pressure from developers and condotel owners causes some local authorities to come up with temporary
solutions to stabilize the market in the short term but can have a negative impact in the long term.
SUGGESTIONS
1. Complete the legal system for condotel market
The management of real estate transactions is a fundamental requirement of the economy. However, too
many legal documents may lead to overlap and cause many difficulties in the implementation. Therefore,
in order to create a legal environment for the stability and development of the condotel market, it is a
must to complete the legal system. Those are some suggestions that can be concerned:
- Review the legal documents related to condotel (hotel apartments) and the condotel market issued
(including short-term documents and issued by localities), identify unreasonable and overlapping factors.
Depending on that basis, the government should quickly issue amendments or new laws to proceed to
manage the market.
- Issue an inter-ministerial circular on condotel, clarify new concepts and the definition of condotel.
- Issue regulations on land with mixed-use mechanisms with a finite life, issue land use right certificates
with corresponding finite life, do not issue certificates with a permanent term to avoid disrupting the
planning.
- Issue regulations on condotel building density in each project as well as tighten the necessary
requirement for licensing investment and construction of condotel, especially in tourist cities that are at
risk of condotel oversupply.
- Flexibly adjust the land use term for condotel projects.
- Make real estate development plans in the short and long term.
- Have appropriate policies to resolve as soon as possible the consequences of land use right certificates
not forming residential units of some localities.
- Develop a set of construction technical standards for condotel and other types of hybrid real estate.
- Make policies related to the ownership of condotel of foreign individuals and enterprises to be able to
attract more foreign investors.
- Accelerate the issuance of land use right certificates with a term in accordance with the duration of
condotel projects.
- Manage the profit share commitment which is earned from condotel investment between the
developers and the condotel owners through bank commitments or other forms of guarantee.
- Issue legal documents to ensure the rights and responsibilities of parties involved in the condotel market.
2. Raise awareness of condotel market participants
In order to improve the ability of participants in the real estate market, the authority should take action
such as:
- Research and develop a system of indicators to evaluate the real estate market to unify the awareness
and forecast of the market situation, including: Real Estate Price Index (RPI), Housing Price Index (HPI),
Real Estate Market Index (REMI)... This will be an indicator of price fluctuations and real estate market
status, providing market-oriented information for real estate market participants. Therefore, investors
can choose the right type of investment.
- Quickly publish legal issues related to condotel.
- Expand the scale and quality of training and research on real estate in educational institutions.
- Organize short courses on real estate investment.
In addition, some recommendations for participants in the condotel market are:
- Condotel developers need to build and stabilize other revenue sources to ensure committed profits for
the owners.
- Condotel consultants, sales and developers need to improve professional ethics and comply with the law
to be able to fully ensure the rights of customers both financially and legally.
- Investors also need to have knowledge of real estate and real estate investment, avoiding investment
according to herding effect; make an informed assessment and consider the terms of the agreement in
the contract so as not to face difficulties and disadvantages in the condotel investment process.
CONCLUSIONS
Condotel (hotel apartment) has appeared and gradually formed a new investment trend in Vietnam.
However, the market has not been completed and there are still shortcomings that harm the real estate
market in particular and the economy in general, especially the limitations of legal policies.
In order to be able to solve the violations that have occurred when the legal system on condotel is not
completed as well as promote the market to develop in a sustainable way, the government needs to put
in place policies and guidelines to promptly intervene. In addition, there should also be implications for
stakeholders' perceptions to ensure their rights when entering the market. From there, exploit, use
reasonably, maximize the potential and real estate resources to devote to economic development.
Participants in the condotel market also need to actively raise awareness, analytical and decision-making
capabilities to ensure legal and financial rights.
REFERENCE
2.
Adair, A.S., Berry, J.N., & McGreal, W.S. (1994). “Investment Decision Making: A Behavioural
Perspective”. Journal of Property Finance.
An Huy (2018). “The middle class opens up many great opportunities for businesses”. The Saigon Times.
3.
Condotel Investment Seminar: Reality, Prospects and Solutions. (2018)
4.
Decree 168/2017/ND-CP detailing a number of articles of the Vietnam Law on Tourism.
5.
Desmond Hughes (2016). “The condo-hotel conundrum”. Phuket Gazette
6.
8.
Duy Khánh (2018). “Supply exceeds demand, will the legal fate of condotels change in 2018?”. Khanh Hoa
TV.
Farlow, A (2004). “The UK Housing Market: Bubbles and Buyers”. The Credit Suisse First Boston
Housing Market Conference.
Fehl Dungo (2017). “Can a Foreigner Buy a Condo in the Philippines”. Philpad.com.
9.
Hải Yên (2017). “HoREA proposes to manage condotel and officetel projects”. The News.
1.
7.
10. Jim Butler, Bob Braun, Guy Maisnik (2014). “The “new breed” of condominium hotels — Key to financing
new hotel development? Selling condo hotels as “securities” under new SEC Rule 506(c)”. HotelLawBlog
11. Jim Butler (2006). “New model for Condo Hotel regulation? In lieu taxes?”. HotelLawBlog
12. Keynes, J.M (1936). “The General Theory of Employment, Interest and Money”
13. Lizarza Abogados (2013). “Condo hotel / condotel: introduction; its comercial and legal beginnings”.
14. Minh Anh (2017). “Struggling to issue land right use certificate for condotels and officetels”. The Leader.
15. Morris Newman (2008). “Hotel-Condos: A Broken Promise?”. National Real Estate Investor.
16. Nam Phong (2017). “Despite the warning of oversupply, many developers still pour money into making
condotels”. Cafebiz news.
17. Ngọc Mai (2017). “Ministry of Construction responds to condotel - hotel apartments”. Tien Phong news.
18. Nguyễn Thị Hải Yến (2015). “Personal investment in the real estate market in Hanoi area”.
19. Nguyễn Văn Lộc (2016). “Real estate business in a new form: Be careful with the legal system”. Newspaper
of Business Forum.
20. Nhật Minh (2018). “Condotel tends to decline sharply”. Economic and financial information channel in
Vietnam.
21. Paradise Property Group (2017). “Bali Property Ownership: Hak Pakai vs HGB”.
22. Peter M. Gunnar, Christopher W. Hart, and C. Starr Atwood (1982). “The Commercial Condominium Hotel:
Considerations for Developers”. The Cornell H.R.A Quarterlly.
23. Sudiman Sidabukke, Sriwati (2017). “Model of Legal Protection for Condominium Hotel Owner in
Surabaya”. Journal of Law, Policy and Globalization.
24. Thiên Minh (2018). “Condotel consumption continues to fall deeply”. Vietnamnet e-news.
25. Vũ Lê (2018). “The middle class is changing real estate”. Vnexpress news.