Real estate law in Vietnam: market liberalisation benefiting foreign investors
The laws of 2014 and 2015 on property rights in Vietnam facilitate foreign investment. Foreign investors must obtain a Certificate of Land Use Rights, which is limited in duration and purpose.
Details of property rights in Vietnam
Land in Vietnam belongs to the people and the state is responsible for its administration. Therefore, strictly speaking, the right to own property does not exist in Vietnam. There is a right of use, the duration of which is determined by law. Before the laws on housing and real estate, only Vietnamese citizens or Vietnamese companies could obtain the right of use. A foreign company could only acquire the right of use by having a Vietnamese partner in a joint venture.
Foreign investors wishing to invest in real estate in Vietnam may obtain a right of use in order to implement their investment projects:
- Investors can buy property for projects that are not related to real estate: e.g. agricultural projects, energy projects, industrial production. In these cases, buying real estate just helps support the core business. The use of the property must be strictly limited to the field of activity provided for in the investment certificate.
- Investors can make the specific choice of real estate. In this case, as in other branches of investment, investors in real estate must be licensed and must register their company. Foreign investors will have to obtain an investment license and a registration certificate. And mentioned before, except for transactions on a very small scale, it is necessary to establish a company to do business in the real estate market.
Obtaining the right of use certificate
There are 3 ways for an investor to acquire the right of use certificate for a property in Vietnam:
- by award: the State may assign the right of use through an administrative decision, but only for Vietnamese entities
- by recognition: the state can recognize the right of use for national entities, without them having to pay any fee
- by leasing: the State can lease the right of use on the basis of a contract with a national or foreign entity. Leasing the right of use is subject to a right of rental and is the only form of ownership available to foreigners.
Foreign investors who hold a valid visa may acquire rights of use for property in Vietnam. They can also use, sell, mortgage or inherit property. Moreover, foreigners can purchase homes for rent. They only need to notify the administrative authorities, prior to the rental, of their wish to rent the property.
Since 2014, foreign companies, subsidiaries and representative offices can also purchase and own real estate. Their ownership of the property may not be longer than the period stipulated in the investment certificate.
The law places no restrictions, in terms of residencies, that a foreigner can buy in Vietnam. However, foreign individuals and foreign entities can hold no more than 30% of the shares of a building or 250 properties in the same district.
Guarantees provided by Vietnamese real estate laws
Guarantees are also provided by real estate laws. Real estate developers wishing to build, for sell or rent, must guarantee the sale or rent through a bank, authorized by the Vietnamese authorities. This provides protection for the buyer or tenant if the developer fails to deliver the property. The buyer or tenant can ask the guarantor to hand back the prepayments and other amounts made that they would have given to the developer.
All organisations or individuals wishing to work in real estate must set up a company. The minimum share capital for such a company was previously 6 million VND and has now risen to 20 million. However, organisations, private households and individuals that sell, transfer or lease a single property, or small-scale properties, do not need to set up a company and therefore will not be subject to the minimum capital requirement.
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