The Empire Group could not pay annuity for its CocoBay condotel buyers since next year. Photo vneconomy.vn

HÀ NỘI – Đà Nẵng authorities need to carefully review the offer to convert the Cocobay Đà Nẵng condotel project into apartments as it could harm the city’s economic development plan, experts have said.

The project developer, Thành Đô Investment Development and Construction JSC (Empire Group), had guaranteed to pay 12 per cent profit on the value of investors' condotel purchases from January 1, 2020, but has since announced it cannot fulfil this commitment due to financial woes.

Condotels are often sold to investors and then leased back to the developer or an operating firm to manage rentals to holidaymakers, which is where the 12 per cent profit was supposed to come from.

A lack of regulations on condotel development and ownership has also harmed the project. The project's developer has said it can only pay condotel owners until December 31, 2019.

Condotel owners who want to convert their properties to condominiums must register before December 20, with a conversion fee of about 15 per cent of their investment value paid to Empire Group. The fees will fund the construction of garages, schools, parks, healthcare stations and community houses.

About 1,016 of the 1,856 available condotels in three buildings and 554 units out of 1,657 condotels under construction at Cocobay Tower could be converted from condotels into apartments.

Lê Hoàng Châu, Chairman of the HCM City Real Estate Association (HoREA), said the change would reduce the land area for tourism development and increase residential land.

He said having a residential area in a tourism property region will harm the development of the locality and reduce the value of the complex as well as investment attraction in tourism.

Châu said land use and construction planning are very important for socio-economic development.

The law allows the adjustment of tourism land use planning if the planning is not feasible or no longer suitable to the socio-economic development plan. Planning should be not adjusted to benefit investors and harm the community.

Experts said in fact, condotels are located on commercial services land but not used as a residential buildings. Therefore, when condotels are converted into apartments, there will be many problems, including security and infrastructure ones.

Vice Chairman of Đà Nẵng Real Estate Association Võ Văn Cường said local authorities should review the planning and capacity of infrastructure to determine areas that can be converted from condotels to apartments.

Đà Nẵng has a lot of condotel projects but it has not allowed conversion to apartments because to do so would run contrary to municipal planning.

Cường said when adjusting planning, State agencies must strictly supervise the change to meet standards of an urban area and ask the investor of the project to build education, health and parking facilities as well as other services.

According to the experts, many firms have developed tourism apartments, known as condotels, while most of their buyers have little knowledge about this segment and have not carefully read the terms of their contracts.

The Ministry of Construction has identified three major issues surrounding this segment, including its land use regime, lack of regulations on condotel ownership rights, and operational management, according to Nguyễn Mạnh Khởi, deputy head of the Housing and Real Estate Market Management Agency.

He said the Ministry of Construction is devising criteria to define the condotel and officetel segments, and more importantly, condotel and officetel management regulations. The Ministry of Natural Resources and Environment is tasked with enforcing regulations on the land use regime in this segment.

Currently, there are no regulations governing the condotel segment even though condotel projects have been mushrooming in many parts of the country, especially in seaside areas such as Đà Nẵng, Nha Trang and Phú Quốc.

Condotel buyers face great risk of losing their money if developers do not honour their commitments. Moreover, authorities do not issue condotel ownership certificates.

Cocobay Đà Nẵng is a 51ha hospitality and entertainment complex in Ngũ Hành Sơn District, Đà Nẵng City. Construction began in 2016 at a cost of over US$5 billion to build some 10,000 condotels plus villas, hotels and houses. The project has so far built 3,000 condotels and sold 1,700 units. - VNS