EARLY DEPOSITS COULD DRIVE UP HOUSING PRICES, EXPERTS WARN

A proposal to allow property developers to collect deposits before housing projects become legally eligible for sale could create new risks for homebuyers, particularly by encouraging early-stage speculation and pushing up property prices, experts say.

Vietnam’s Ministry of Construction is currently seeking comments on amendments to the Law on Real Estate Business. Under the current draft, developers would still only be permitted to collect deposits once housing projects meet the legal requirements to be put on the market.

However, the Ho Chi Minh City Real Estate Association (HoREA) has proposed allowing developers to accept deposits once a project has received approval in principle and an investor has been formally recognized. The proposed deposit would be capped at 5% of the property value.

HoREA argues that developers typically have to commit substantial capital during the early stages of a project, including costs related to land preparation, financial obligations and project development, while being unable to raise funds from customers. Allowing a limited deposit at this stage, the association says, could ease cash-flow pressure and provide developers with additional financial flexibility while they complete the remaining procedures.

Some industry representatives also support the idea, arguing that early deposits could help developers gauge market demand, assess purchasing power and adjust product structures or construction schedules accordingly. From the buyer’s perspective, the mechanism could allow customers to secure a unit and potentially lock in a price earlier in the development process.

Concerns over early-stage fundraising

Not all experts agree that the proposal would benefit the market.

Real estate consultant Le Quoc Kien cautions that allowing deposits before a project has fully met the legal requirements for sale could blur the distinction between legitimate deposits and unauthorized capital mobilization.

In his view, developers could potentially collect money while important procedures — such as land allocation, financial obligations or construction approvals — remain incomplete. If a project subsequently faces delays, buyers could be exposed to a significant portion of the resulting risks.

Another concern is that early deposits could create opportunities for disguised fundraising. The market has previously seen customers asked to make payments under various labels, including booking fees, reservation fees, priority charges or consulting and service fees, even when projects were not yet legally eligible for sale.

Experts warn that if such practices become widespread, deposits could effectively become an early form of capital mobilization rather than simply a mechanism for securing a property.

Economist Dinh Trong Thinh similarly believes that allowing early deposits on a large scale could encourage speculative activity. Developers launching multiple projects might gain access to customer funds before completing the necessary legal procedures, while brokers and investors could accumulate reservation rights and later transfer them once projects officially enter the market.

This could also fuel marketing narratives around limited supply, such as claims that units are being rapidly reserved or that prices are about to rise. Such messaging may create a sense of urgency among buyers and encourage them to commit funds before having complete information about the project.

If this trend becomes widespread, speculation could begin much earlier in the development cycle, potentially contributing to price increases even before official sales commence. This could make it more difficult for buyers purchasing homes for actual residential needs to access suitable properties.

Ministry of Construction favors maintaining current rules

In its review and revision document, the Ministry of Construction said that permitting deposits during the early investment-preparation stage could allow developers to raise funds from customers before projects have satisfied the necessary legal conditions.

According to the ministry, such a mechanism would not be consistent with the current regulatory objectives governing the real estate market.

The ministry also considers the rules governing deposits for future residential projects to be a key policy component of the 2023 Law on Real Estate Business. These provisions were introduced partly to address practices such as unauthorized fundraising, premature sales and large reservation payments for projects that had not yet qualified for commercial transactions.

For this reason, the Ministry of Construction has proposed maintaining the existing regulations rather than allowing developers to collect deposits at an earlier stage.

The debate therefore centers on a balance between two objectives: providing developers with greater financial flexibility during project preparation and ensuring that buyers are protected from the risks associated with projects that have yet to complete their legal requirements.