Luxury Vietnam Apartment Owners Left Hanging as Land Seized
(Bloomberg) -- A luxury residential project jointly developed by Novaland Investment JSC, one of Vietnam’s biggest property firms, is in limbo.
Novahome Madison JSC sent letters to buyers of its Madison project in Ho Chi Minh City last month, saying the 187 apartments couldn’t be handed over because of a force majeure event that resulted in the land being seized by the government. The development, managed by Savills Plc, was completed in December 2018 but residents have yet to move in, people familiar with the matter said.
“We regret to inform you that the project will continue to undergo the prolonged legal and administrative procedure by the competent authorities,” the letter, a copy of which was obtained by Bloomberg News, states.
According to the letter, the reclamation is linked to a criminal case involving Phan Van Anh Vu, a businessman and ex-official at Vietnam’s Public Security Ministry who was detained in January last year and subsequently sentenced to 15 years’ jail for abusing his position and power while on duty. Vu was chairman of Bac Nam 79 Construction JSC, which was granted the right to use the land upon which the Madison project was built by the Ho Chi Minh City People’s Committee, the people said, declining to be identified because they’re not authorized to speak publicly.
A representative of Novaland and Novahome Madison declined to comment. A Ho Chi Minh City government representative directed inquiries to the involved investor, saying the case is still under investigation, without elaborating. A representative for Savills in Vietnam said: “Savills is only the facilities and operation management for Madison building, so we’re only responsible for the operation inside the building.”
Novahome Madison has offered a few options to buyers including one that would allow them to receive their apartment once the legal status of the project’s land is resolved, and another that gives purchasers the right to a full refund, plus interest. Around 80% of buyers have agreed to wait it out, one of the people said.
Novahome Madison was founded by Bac Nam 79 Construction and Novaland to distribute Madison units, a local newspaper reported in February, citing information from Public Security Ministry.
The average selling price of the apartments was $6,000 per square meter, the people said. The average cost of a home in Ho Chi Minh City is $103,057, rising to $403,270 for a luxury property, CBRE Group Inc. said in a report earlier this year.
Singapore-based Kwan Ng is one buyer who spent around $500,000 for a two-bedroom apartment that he planned to use as an investment property.
“I like Vietnam. I think it’s a country with decent potential,” he said. “It’s not impossible that in a generation it would catch up with Thailand, or even Singapore or Hong Kong.”
However, Ng said he was disappointed by the turn of events. “I expect better from one of the biggest developers in an ambitious country with a very bright future.”
The Madison apartments are advertised for sale on CBRE’s local website as Novaland’s latest addition to its “glitters by day and glows by night” portfolio. “Just a three-minute walk from the Park Hyatt Saigon, Madison offers an upscale living environment right in the center of Ho Chi Minh City,” the site says.
©2019 Bloomberg L.P.