Vietnam saw a record number of international arrivals in 2016 – more than 10 million tourists and a 25% increase over the previous year – and 2017 is already on track to surpass that.

During the first six months of the year, Vietnam recorded more than 6 million international arrivals, 30% increase over the same period a year earlier. It should be no surprise that the hospitality and property development sectors are expanding to cater to tourists seeking to enjoy Vietnam’s diverse attractions and rich culture.

Such figures are driving remarkable growth in the second, or holiday, home segment, with condotels (a blend of hotel and condominium: resort hotel levels of service with the independence of a condo) taking center stage.

For local and international guests this will mean an ever-increasing choice of options across the budget spectrum as resorts compete with fresh appeals.

With exciting new and established brands to experience and an abundance of new properties to choose from, at no doubt often heavily discounted rates during start-up periods, the next couple of years will be a great time to discover or rediscover Vietnam.

This is particularly true in Nha Trang, Cam Ranh, and Phu Quoc Island. Growth in these markets has been in the double digits, and with an abundance of new resort and hotel properties in the pipeline will no doubt, at some point, have to overcome a case of supply “indigestion”, just as Da Nang coped with a few years ago.

Duong Thuy Dung, chief market researcher at real estate consultancy firm CBRE, said at a recent press briefing that Da Nang has “too many” condotels and there will also be tough competition in Nha Trang and Phu Quoc.

In fact , a survey showed that 7,000 new apartments were completed in Khanh Hoa last year, and 70 percent of them were condotels. But industry insiders think that oversupply could be a problem.

Duong Thuy Dung said Da Nang will have 32,000 condotels by the end of this year, but it’s uncertain if the city will receive enough tourists to fill them.

The supply of condotels to the market in 2016 actually failed to meet demand or bolster existing tourism infrastructure, Mr. Nguyen Ngoc Thanh, Deputy Chairman of the Vietnam National Real Estate Association (VNREA), told at a workshop entitled “Condotel Market and Fears of Oversupply” held by VET on August 10 in Hanoi.

Meanwhile, Nguyen Ngoc Thanh, the vice chairman of the Vietnam Real Estate Association, is worried more about legal issues. He said Vietnam does not have comprehensive regulations regarding ownership rights and management for this form of property.

Developers are quick to name projects located in or close to a destination as condotels but the concern is the “tel” part of condotel. In many cases, we see little regard for the hotel part of the project and the long-term management implication this entails. The concern is that to have any chance of matching promised returns, projects need an impressively performing hotel component. But in most cases this seems to be missing or, at best, incomplete.

One more important things is ,according to the Housing and Real Estate Market Management Agency under the construction ministry, red books (documents that confirm ownership in Vietnam) are currently not issued for condotels. That puts subinvestors at high risk, experts said.

The legality of condotels needs to be clarified to better manage this new type of property gaining popularity in Vietnam, a representative from the Ministry of Construction has said.

According to Le Hoang Chau, President of the HCM City Real Estate Association, regulations are needed to ensure transparency in profit sharing in the long term and the rights of buyers, adding that profit sharing now relies mainly on developers’ guarantees, with yet a solid framework for buyers’ benefits protection.

Similarly, Mr. Nguyen Manh Ha, Chairman of the Board of Management at Phu Quy Land, said the company has worked with customers from South Korea, Hong Kong, and Singapore, and they are very much interested in Vietnam and its real estate resort products but the legal framework is problematic. “An open legal corridor should be proposed for foreigners to develop condotels and exploit economic potential,” he added.

The construction ministry is working with the finance and environment ministries to come up with a specific legal framework for the new market.