For a country whose regime was founded as a land-to-the-tiller movement, one would expect the Vietnamese government to be more sensitive to real estate issues. While abuse and corruption have been a persistent irritant in the countryside, they’ve increasingly spread to the cities and impacted the middle and emerging middle classes. Land has always been a very sensitive issue in Vietnam. Technically, the state owns all land, but since the Doi Moi reforms and the implementation of a contract based agricultural system in the mid-1980s, people can acquire leases. Yet, not all land is created equal, and the best often goes to local officials and their cronies. Local-level officials routinely appropriate land for development projects or to profit from urban sprawl. Farmers complain of unfair compensation. And even when compensation is market value, the forced sale is an irritant. Farmers are often not provided with new skills to make a living. Social media has amplified these cases, resulting in an increased number of civil demonstrations. To respond to the growing unrest, the National Assembly recently passed legislation that consolidated a myriad of existing local-level security forces to augment the police. RFA reported some 3.5 trillion dong (US$145 million) was earmarked for what could be a 400,000-man force, with powers of arrest. But corruption and a lack of government accountability in the real-estate sector is also being felt by the urban middle class, though in very different ways.
Vietnam’s real estate market has been booming
By 2021, the real estate sector accounted for at least 12% of GDP, up from 2% in 2018, fueled by the country’s burgeoning middle class.
Workers at a construction site in Hanoi, Vietnam in 2023. (Hau Dinh/AP) Property developers rushed to develop apartment complexes, luxury villas, and malls. The more politically connected they are, the cheaper the land and faster the approvals. In return for approvals, local officials receive bribes or real estate. Proceeds of land sales are supposed to go into local coffers to pay for government services, but are routinely misappropriated. Developers tried to finance their projects through pre-sales, but this was never sufficient. Beginning in 2016, developers began turning to the nascent corporate bond market to raise funds. And raise they did. For the developers, it was literally minting money. NovaLand, alone, raised some 160.7 trillion dong (US$6.5 billion) through the bond market by 2021. Some US$15 billion in real estate debt alone will mature in 2025. Defaults, followed by investigations But then the defaults began. So, too, did the investigations. In the first half of 2022, at least four high profile real estate executives were arrested for either stock price manipulation or fraud in financial disclosures in bond sales. Then came the big one: Truong My Lan, the CEO of Van Thinh Phat. The Ministry of Public Security (MPS) said upon her arrest on October 8, 2022, Lan had “fraudulently engaged in the issuance and trading of bonds in contravention of the laws to appropriate thousands of billions of dong from the people.” They were not even close. In the end, the MPS concluded that she had raised 30 trillion dong (US$1.23 billion) in bonds and embezzled some US$12.53 billion from Saigon Commercial Bank that she secretly controlled, through more than 900 shell companies.