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Do real estate bonds violate laws?   2008-05-28 - VNN

More and more real estate developers are now seeking capital by issuing bonds. However, it remains unclear if the bond issuances violate current laws.

Hundreds of billion VND within three days

At the end of January 2008, Sacomreal issued VND100bil worth of bonds with the face value of VND500mil/bond to raise funds for the project on Phu Loi 1 apartments. The real estate developer promised to pay the interest rate of 8.8% per annum, and in return, clients would have the right to buy apartments at the discount of 5%.

Sacomreal successfully mobilised VND100bil just within one day.

After that, in March 2008, Sacomreal once again issued VND750bil worth of bonds with the face value of VND1.5bil, interest rate of 12% per annum for Phu My project. The bond holders have the right to buy an apartment at Phu My project with the discount rate of 8%.

500 bonds were sold just within three days.

Similarly, if clients lend to Van Phat Hung Company sums of money equal to 20% of apartments’ values, they will get the interest rate of 12% per annum and be first on the list to buy apartments.

Violating Housing Law?

Some experts say that real estate developers have been violating the Housing Law and the Real Estate Business Law by issuing bonds, which they consider a type of capital mobilisation.

Article 39 of the Housing Law stipulates that investors can only mobilise capital from buyers or lessees when the construction of a building’s foundation is completed.

Moreover, the experts say, Decree153 dated in 2007 guiding the implementation of the Real Estate Business Law, stipulates that investors can make the first capital mobilisation only when the projects enter the technical infrastructure period.

No, we apply Securities Law!

Dang Hong Anh, General Director of Sacomreal, said that his company follows the regulations of the Securities Law in mobilising capital by issuing bonds.

Anh also denied the fact that his company violates the Housing Law. He said that clients have the right to decide whether to buy apartments. If they do not want to buy apartments, they will get their money back when the bonds mature. If they want to buy apartments, the two sides will sign contracts on selling and purchasing apartments – when a project’s foundation is completed.

Nguyen Van Duc, Deputy Director of Dat Lanh Company, admitted that real estate firms have been dodging laws to mobilise capital. However, Duc said that this should be seen as initiative by the firms which should be encouraged in the context of short capital as nowadays.

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