Content Summary
Real estate is one of the fields that many investors are interested in when investing in Vietnam. However, this activity is limited by many provisions of current laws.
Scope of real estate business
The scope of real estate business of FDI enterprises includes:
- Renting houses and construction works for sublease;
- For land leased by the State, it is allowed to invest in the construction of houses for lease; invest in the construction of houses and others for sale, lease, or lease-purchase;
- Receive the transfer of one part or the whole real estate project of the investor to build houses, construction works for sale, lease, lease- purchase;
- For land allocated by the State, it is allowed to invest in the construction of houses for sale, lease, or lease-purchase.
- In addition, foreign organizations and individuals have the right to provide real estate brokerage services, real estate trading, real estate consulting, and real estate management following the Law on Real Estate Business in 2014.
Thus, the scope of the real estate business of FDI enterprises is narrower than that of domestic enterprises. Accordingly, there are two business activities that foreign investors are not allowed to conduct as follow:
- Firstly, foreign investors are not allowed to subdivide plots for the sale of land, invest in building the technical infrastructure of cemeteries and graveyards to transfer land use rights associated with such infrastructure.
- Secondly, the foreign investors are not allowed to buy for sale, lease, or lease-purchase the houses and constructions, but can only lease these properties for sublease.
How many houses can foreign investors own?
According to the provisions of Article 161 of the Law on Housing 2014, the following entities: foreign-invested enterprises, foreign investment funds and foreign bank branches operating in Vietnam, and foreign individuals entitled to Permits to enter Vietnam are allowed to buy, rent-purchase, receive as gifts, inherit and own no more than 30% of the number of apartments in an apartment building. In the case of a separate house, including villas and townhouses, in an area with a population equivalent to a ward-level administrative unit, they may only buy, rent-purchase, receive as gifts, inherit and own no more than 250 houses.
Decree 99/2015/ND-CP issued on October 20, 2015, provides more detailed regulations on this issue, according to which:
In case there is an investment project to build commercial housing in an area with a population equivalent to a ward-level administrative unit, including separate houses for sale or lease-purchase, organizations or individuals Foreigners are allowed to own the following number of individual houses:
- Where there is only one project with less than 2,500 individual houses, foreign organizations and individuals may only own no more than 10% of the total number of houses in that project;
- In case there is only one project with the number of separate houses equivalent to 2,500 units, foreign organizations and individuals may only own no more than 250 apartments;
- In case there are two or more projects where the total number of separate houses in these projects is less than or equal to 2,500 units, foreign organizations and individuals may only own no more than 10% of the number of units of each project.
Limit the advanced money before buying and selling real estate formed in the future
The payment of contract value related to real estate formed in the future is made in installments and depends on the construction progress. Before handing over houses and construction work to customers, foreign-invested enterprises only can collect up to 50% instead of 70% value applies to domestic investors.
The risk of land expropriation
Many real estate project investors are unable to complete the project on time so their land is expropriated. The cause of this issue is that investors still face many problems in terms of administrative procedures and the failure to reach an agreement with the people when conducting compensation, clearance, and ground clearance.
At the same time, to be approved, real estate investment projects for business must be consistent with master plans, land use plans, urban planning, rural construction planning and must be following plans implementation approved by the competent state agency.
This situation causes many difficulties for foreign investors because they do not know the regulations on land as well as relevant administrative procedures at Vietnamese state agencies, affecting their investment activities investment in Vietnam.
To minimize risks when doing business in this field in Vietnam, please don’t hesitate to contact a lawyer for advice. AZLAW is always ready to accompany and support investors in researching and investing in the Vietnamese market.
Contact us at:
AZLAW LAWFIRM & ACCOUNTING
No. K28, lane 68 Trung Kinh, Yen Hoa ward, Cau Giay district, Hanoi
Hotline: 0987.748.111 – 0987.553.289 VND
Email: info@azlaw.com.vn
