COLLIERS INSIGHTS VALUATION & ADVISORY SERVICES | ASIA | MARCH 2019

DECODING SOUTH EAST ASIA REAL ESTATE: INSIGHTS FOR OWNERS FOREWORD

With the growth in cross border investment in general and the focus on intra-Asia investment, the ASEAN countries have seen greater interest from foreign investors especially from North Asia.

The challenge for investors is how to find ways to enter and cash in on growth without taking an unreasonable amount of risk. This is of course easier said than done! Basic caution needs to be exercised before making an investment decision whether the ‘new’ market makes it a worthy addition to a portfolio.

In this paper, we look at some basic facts for six emerging markets across South East Asia highlighting where the opportunities lie in each market, some basic information on the land ownership, taxation and suggestions as to the sectors and geography foreign investors are likely to focus on in the next one to two years.

We are happy to discuss any aspects of this report with you and provide further information about these markets as you need.

DAVID FAULKNER Managing Director | Valuation & Advisory Services | Asia Tel: +852 2822 0525 Email: [email protected] between 6and10%. the typical yields availableare Dependent onproperty type, in TOD’s andindustrialestates. investments anddevelopments We seeopportunities inproperty industrial estatedevelopments. for transit-oriented (TODs) and seaports. Thiscreates opportunities LRT, high-speedrail), airports,and roads,toll mass transportation (MRT, the maingovernment focus, including Infrastructure development isnow care andlogistics. foreign investment, suchasinhealth- changes, openingmore areas for increased due to government policy Foreign anddomesticinvestment has Islands. development elsewhere onJavaand improvements are helping and Surabaya, though infrastructure in the two major cities–Jakarta The property market isconcentrated INDONESIA

COUNTRY PROFILE

1,916,862 sq km 261.9 million 3.9 people Area Population Average Household Size

54% 66.7% USD970.6 billion Urban Proportion Labour Force Participation Rate Gross Domestic Product (GDP)

USD3,707.1 5% 28.6 years GDP/capita GDP Growth Average Age of Population

Jakarta 5.1% Capital Economic Growth Jakarta Surabaya JAKARTA Soekarno Hatta International Airport Economic Centres Pelabuhan Tanjung Priok

SEMARANG Ahmad Yani International Airport Pelabuhan Tanjung Emas

SURABAYA Juanda International Airport Pelabuhan Tanjung

MAKASSAR Pelabuhan Soekarno Hatta

MEDAN BALI Kualanamu International Airport Ngurah Rai International Airport Pelabuhan Belawan Pelabuhan Benoa

YOGYAKARTA Adisutjipto International Airport

Legend Capital Major City Economic Centre Major Airport Major Port

| 4 INDONESIA

PROPERTY OWNERSHIP

Land Title in Indonesia Hak Milik (HM) or Right to Own Hak Guna Bangunan (HGB) or Right to Build Hak Pakai (HP) or Right to Use >> HM is the most complete >> HGB is the right to construct and own buildings on land. > HP is the right to use and/or to land title available under HGB is transferable and may be encumbered. Land with harvest from land, which is the Indonesian law. HM an HGB title may be owned by (i) Indonesian citizens and directly controlled by the State, is transferable and may (ii) legal entities established under the Indonesian law and or land of other persons. be encumbered. HM is domiciled in Indonesia, including foreign-owned companies HP may be encumbered. equivalent to freehold land or (known as Perseroan Terbatas Penanaman Modal Asing Ordinarily, HP is granted for a fee simple absolute under the – PT PMA). HGB is granted for a period of up to 30 years period of up to 25 years and common law system and extendable for a further 20-year period can be extended for 20 years

PROPERTY INVESTMENT POLICIES SECTOR TRENDS Foreigners are not able to own freehold property in Vacancy Stock Supply Yield* their own name. Right-to-use titles, or “SHP” (Sertifikat % , , sq m , , sq m % Hak Pakai), are essentially leaseholds that are open to 18.1 9 694 699 1 409 662 6–7 foreigners. Leasehold titles are granted for 25 years sq m sq m and can be extended for another 45 years for a total 22.3% 340,789 240,000 6% of 70 years. OFFICE JAKARTA SURABAYA The preferable way for foreign to invest and develop 16.4% 4,648,998 sq m 434,760 sq m 7–8% property in Indonesia is by way of establishing an Indonesian based company under the Indonesian law. 21.6% 1,087,303 sq m 150,000 sq m 7% The company shall domiciled in Indonesia. RETAIL JAKARTA SURABAYA Indonesian citizen investors may get more favourable terms and conditions. 40% 41,173 rooms 4,087 rooms 10%

FOREIGN OWNERSHIP FOR 41% 16,346 rooms 2,634 rooms 10%

PROPERTY HOTEL JAKARTA SURABAYA Foreigner having an appropriate stay permit (Resident 13.3% 201,817 units 41,677 units 5–6% Foreigner) may own a house or an apartment with Hak Pakai (Right to Use). 18.6% 34,998 units 31,417 units 5% If the Resident Foreigner is deceased, the house or apartment can be inherited as long as the heir is a APARTMENT JAKARTA SURABAYA Resident Foreigner. 5.8% 11,518 ha 100 ha 8–10%

For strata title apartments (known as Hak Milik Atas INDUSTRIAL JAKARTA-BEKASI Satuan Rumah Susun or HMSRS), the title of the * Yield means the current average capitalisation rate underlying land will remain as a HGB title. The title can Note: The above data refer to prime assets in the respective city and sector; Vacancy means the existing average vacancy rate; Stock means the existing completed stock; Supply means the anticipated supply in the be converted into a Hak Pakai strata title (known as Hak next 3 years. Pakai Atas Satuan Rumah Susun or HPSRS). Resident Foreigners can own an en-bloc apartment once the ownership of all units have been unified and the land can be converted to Hak Pakai title. TAXES Land and Building Tax¹ 0.3% New conditions imposed for 1st hand residential strata- Duty on the acquisition of land and building rights 5% title transaction that is a HPSRS which is derived from the conversion of a HMSRS it is valid for 30 years and Value Added Tax (VAT) 10% can be extended for 20 years + 30 years renewal. Income Tax (Final) 10% on rental revenue 2.5% on sales revenue According to the local regulation, Resident Foreigner can purchase apartments in Jakarta with minimum unit Luxury Tax² 20% price of IDR3,000,000,000 or USD205,500¹, while in Super Luxury Tax³ 5% the other cities it would be lower. ¹ The tax due is calculated by applying the tax rate on the sale value of the tax object (Nilai Jual Objek Pajak/NJOP) deducted by non-taxable NJOP. The non-taxable NJOP is set at Rp 10 million at the minimum. ² Transaction Price > IDR 10 billion. ³ Transaction Price > IDR 5 billion. ¹ USD1 = IDR14,600 | 5 reducingwith time. 5.5% to 6.5%. We see vacancies sectors. Yields are in the region of investment are in the officeand retail Favourable areas for property concentrated around . Property market opportunities are of Government inlate2018. continues to evolve following the change to foreign capital.Thesituation is to improve Malaysia’s attractiveness and ServiceTax (SST) regime. Theaim improvementsMalaysia via Sales tothe relieving the cost ofdoingbusiness in stabilising the property market, and digitalising the industrialsector, address these prioritiessuchas Tax incentives are proposed to help in netexports. demand andpositive growth by continued expansion indomestic GDP grew by 4.7% in2018,supported entrepreneurial economy. being ofMalaysiansand to foster an ensure the socio-economic well- implement institutionalreforms, to focusing policiesin three areas: to The MalaysianGovernment is MALAYSIA

COUNTRY PROFILE

329,613 sq km 32.6 million 4.03 people Area Population Average Household Size

77.1% 68.5% USD347.29 billion Urban Proportion Labour Force Participation Rate Gross Regional Domestic Product (GRDP)

USD10,703 4.7% 28.1 years GDP/capita GDP Growth Average Age of Population Kuala Lumpur Capital Kuala Lumpur Economic Centre

PETALING JAYA () KUALA LUMPUR Kuala Lumpur International Airport GEORGE TOWN, Penang International Airport Penang Port

Sapangar Bay Port

Sandakan Port KOTA KINABULU () International Airport Kemaman Port Kota Kinabalu Port Port Port Bintulu Port Port CITY Port of Tanjung Pelepas () Kuching International Airport

JOHOR BAHRU Senai International Airport Port

Legend Capital Major City Economic Centre Major Airport Major Port

| 7 MALAYSIA

PROPERTY OWNERSHIP

Land Titles in Malaysia >> Freehold ownership in perpetuity >> Leasehold –– For fixed terms (30, 60 or 99 years) and upon expiry of the said fixed term, the land will revert to the State government –– When a lease expires, an application for a renewal or extension of lease can be made, subject to the payment of premium to the land office

PROPERTY INVESTMENT LAWS corridor by companies, subject to status >> Companies with endorsement from the Secretariat of the Malaysian For foreign acquisition of property, the Economic International lslamic Financial Centre (MIFC) Planning Unit (EPU) Guidelines apply. Approval is also needed from State Authorities. Investment rules >> Residential units valued at RM100,000 (USD24,805) and above to be occupied as a hostels for company‘s employees, subject to state authority approval in Malaysia are affected by policies that benefit the Bumiputra i.e. the ethnic Malay and indigenous peoples >> Acquisition of industrial land by a manufacturing company groups in Malaysia. >> Properties in privatisation projects, whether at the Federal or State level, involving companies that are the original signatories in the contracts for the Under the EPU Guideline, two situations require their privatised projects approval for the acquisition of property: >> Acquisition of properties by companies that have been granted the >> For acquisition of property valued at RM20 million status of International Procurement Centers, Operational Headquarters, (USD4.96 million) and above that involves the dilution Representative Offices, Regional Offices, offshore companies and in the ownership of the property held by Bumiputra Bio-Nexus or other special status by the Ministry of Finance, Ministry of and/or government interest. International Trade and Industry and other ministries, Economic Planning Unit, >> When there is an indirect acquisition of property by Prime Minister’s Department other than Bumiputra interest and/or government agency, having property more than 50% of its total SECTOR TRENDS assets, and the said property is valued more than RM20 million (USD4.96 million) Vacancy Stock Supply Yield In order to acquire a property as mentioned above, a 18.9% 8.89 million 1.44 million 5.5–6% company needs to satisfy the equity and paid-up capital sq m sq m conditions as follows: PURPOSE BUILT OFFICE: KUALA LUMPUR >> Equity condition – companies to have at least 30% Bumiputra interest shareholding 14.7% 3.03 million 663,300 6–6.5% >> Paid-up capital conditions – local company owned sq m sq m by local interest or foreign interest to have at least RM100,000 or RM250,000 (USD24,805 or RETAIL: KUALA LUMPUR USD62,013) paid-up capital respectively 13.5% 473,884 143,284 3–5% For direct acquisition of property, the equity and paid-up units units capital conditions imposed by the EPU must be complied with before the transfer of the property’s ownership and RESIDENTIAL: KUALA LUMPUR within one year after the issuance of written approval. Note: The above data refer to prime assets in the respective city and sector; Vacancy means the existing average vacancy rate; Stock means the existing completed stock; Supply means the anticipated supply in the next 3 years; State authorities can vary the EPU Guidelines on the Yield means the current capitalisation rate. acquisition of property by a foreign interest based on the location and type of property. TAXES

Corporate Income Tax 24% FOREIGN OWNERSHIP FOR PROPERTY Capital Gain Tax 0% Sales and Services Tax (SST) 15% Foreigners require EPU approval of any property acquisition except in the following circumstances: Stamp Duty 4%

>> Residential units under the “Malaysia My Second Transfer Tax 0% Home” Programme Real Property Gains Tax (RPGT) 30% and 10% for disposals within and after >> Multimedia Super Corridor (MSC) status companies 5 years after acquisition, respectively acquiring property in the MSC for operational needs Real Property Tax Individual states in Malaysia levy ‘quit’ rent >> In approved areas in any regional development and assessments at varying rates

| 8 vacancy levels. of up to 10.5%, though withhigher apartments alsooffer highyields Investments inofficesandserviced yields around 8%. available. Vacancy rates are at5%and leisure activitiesbecome increasingly wide offeringsofentertainment and withas lifestyledestinationmalls providing investment opportunities Colliers see the retail market as around the economic centre –Yangon. Investment opportunities occur mainly overall spending. into higher consumption and in Myanmar isgrowing translating The number ofmid-income families finance sectors. liberalisation of the bankingand the insurance sector,andfurther wholesale regulations, relaxation of investors suchas the newretail and laws andregulations to attract foreign Government continues to enactnew MYANMAR

COUNTRY PROFILE

676,578 sq km 55.1 million 4.3 people Area Population Average Household Size

34.7% 65.1% USD69.32 billion Urban Proportion Labour Force Participation Rate Gross Regional Domestic Product (GRDP)

USD1,298.9 6.7% 27.7 years GDP/capita GDP Growth Average Age of Population Nay Pyi Taw Capital Yangon Economic Centre

NAY PYI TAW Nay Pyi Taw International Airport MANDALAY Mandalay International Airport

Sittwe

Kyaukpyu

YANGON Yangon International Airport

Pathein (Moulmein) Thilawa Port of Yangon/Rangoon

Dawei

Legend Capital Major City Economic Centre Major Airport Major Port

| 10 MYANMAR

PROPERTY OWNERSHIP

Freehold Land Grant Land Government Leased Land >> An outright title with no >> From government and usually for perpetual use. >> Government owned land, most restriction to lease, transfer Build-Operate-Transfer (B.O.T.) land, is also leased from common basis of a foreign or sell interest to a Myanmar the government, for 50 years plus two 10-year extensions invested project citizen and shall be transferred back to the government once >> Long term leases of 10/60/90 the lease expires >> Owner can only lease to years a foreign investor for a >> May lease to a foreign investor with approval from >> Lease directly from the maximum of one year. If MIC if lease is over 1 year (the lease period typically is Government or sub-lease if longer, it will be subject 60 years and can be renewed perpetually unless required government lease allows to Myanmar Investment for public use. Commiions (MIC) approval

PROPERTY INVESTMENT LAWS SECTOR TRENDS Via the BOT agreement, foreign investors can lease the Vacancy Stock Supply Yield* land for initially 50 years, extendable for two consecutive 28% 387,903 225,748 10.5% 10 years, with necessary Government approvals. Lease sq m sq m agreements shall be registered at the register office of Deeds and Assurances. OFFICE: YANGON

There are three common types of property investment 5% 403,747 180,816 8.4% practices: a) incorporated joint venture with a local entity sq m sq m contributing the land for lease, b) unincorporated joint venture with a local landholder, c) locally-owned foreign RETAIL: YANGON company or joint venture with BOT (Built-Operate- 57% 5,334 1,693 8.7% Transfer) contracts for government-owned land. keys keys

Investors who invest in the least developed and remote UPPER-SCALE HOTEL: YANGON regions will get longer periods for the rights to lease and use land. 21% 2,242 2,413 9.7% units units While local investors have the rights to invest on their owned land or property, Myanmar citizen investors may SERVICED APARTMENT: YANGON get more favourable terms and conditions. * All yields are indicative due to limited information Note: The above data refer to prime assets in the respective city and sector; Vacancy means the existing average vacancy rate; Stock means the existing completed stock; Supply means the anticipated supply in the next 3 years; Yield means the current average capitalisation rate – office refers to Grade A developments and serviced apartment FOREIGN OWNERSHIP FOR refers to Grade A developments PROPERTY Myanmar does not allow transfer/acquisition of TAXES immoveable property to foreigners by sale, purchase, give, Corporate Income Tax 25% away, gift, pawn, exchange or transfer. For inheritance of property, it requires government’s approval in accordance Withholding Tax >> 15% on all interest payments made to a non-resident with the Inheritance Act in case of death or departures >> 0% resident national from Myanmar. Withholding Tax on >> 2% on goods and services from local providers Goods and Services >> 3.5% on services from foreign providers Joint ventures are permitted and commonly found in >> 0% on goods from foreign providers residential (apartment and condominiums), housing near industrial areas, commercial, low- cost housing, and new Income Tax >> 35% for non-residents deriving salary in Myanmar townships developments. >> 25% for foreigners working in Myanmar as residents Capital Gains Tax >> 10% Resident companies and individuals 100% of foreign investment is allowed only under a BOT >> 40% for non-resident companies and individuals contract for infrastructure, hotels (four and five-star), commercial, townships and office developments. Property Taxes Not to exceed 20%, 12%, 15% (including general tax, lighting, water, conservancy tax respectively) Approval is required from MIC for lease terms over one Undisclosed 30% for buyers of immovable property who are unable year for a foreign company. Income Tax to demonstrate the tax of the funds used Stamp Duty 1.5% for 1–3 years lease

| 11 infrastructure projects. and areas besideupcoming major in the fringeareas ofmajor CBDs foreign capital.Opportunities are Government policiesare friendly to increases. Yieldsare about4.5%. of developable landandprice beslowlywill affected by thelack believesColliersfuture that take-up in anewrecord highof54,000 units. Residential take-up for 2018resulted assets are in the region of5.6%. most tenants. Yieldsfor primeoffice (PEZA)-accredited buildingsattract Philippines Economic Zone Authority companies continue to fueldemand. YoY growth insupply. Outsourcing level inspiteof the substantial36% robust, maintaininga5% vacancy Metro ’s officesector remains airport to the northofManila. new roads, railways, andanew infrastructure improvements including Government isinvesting inlarge scale is concentrated inandaround Manila. Economic activity in the Philippines PHILIPPINES

COUNTRY PROFILE

300,000 sq km 105 million 4.38 people Area Population Average Household Size

60.2% USD313 billion USD2,987 Labour Force Participation Rate Gross Regional Domestic Product (GRDP) GDP/capita

6.2% 23.4 years Manila GDP Growth Average Age of Population Capital Makati Economic Centre

MANILA Clark International Airport Ninoy Aquino International Airport Sunic Port Port of Capinpin (Bataan) North Harbour MAKATI Batangas Port

Mindoro

Kalibo International Airport

Iloilo International Airport

Puerto Princesa Iloilo Port Mactan- International Airport International Airports CEBU New Bohol-Panglao International Airport Dumaguete Port Port of Tagbilaran

Port of

DAVAO Port of Zamboanga Port of Talicud Davao International Airport

Legend Capital Major City Economic Centre Major Airport Major Port

| 13 PHILIPPINES

PROPERTY OWNERSHIP

Freehold Leasehold >> Private freehold land is only available for Philippine nationals or corporations of >> Foreign investors may lease private land for which 60% of the equity is Filipino-owned a maximum period of 50 years and may be renewed once for another 25 years at the >> Foreign nationals and corporations may own condominium units, subject to the option of the landowner provisions of the Condominium Act

PROPERTY INVESTMENT LAWS SECTOR TRENDS In case of a Filipino-owned Condominium Corporation, Vacancy Stock Supply Yield no interest may be transferred to a foreign individual or 1% 3.3 million 286,000 5.6% corporation that will exceed 40% of capital stock which sq m sq m is owned by foreign nationals. There is a REIT Law passed in 2009, which did not take-off due to ownership OFFICE: MAKATI CBD structure and taxation issues.

However, government agencies have announced that a 2% 470,300 73,000 USD30.7 sq m sq m Ayala Center – new Implementing Rules and Regulation for REIT will be Rental Rates released which will relax ownership requirements and allow tax exemptions for initial transfers of properties. RETAIL: MAKATI CBD (AS OF 3Q 2018) 79% 3,000 1,200 USD120 FOREIGN OWNERSHIP FOR rooms units Room Rate PROPERTY HOTEL: MAKATI CBD It is required that at least 60% of the capital of a real estate property must be owned by Filipino citizens 10.8% 27,000 1,700 4.5% and corporations or partnerships. Foreign acquisition units units Prime 3BRs of real estate in the Philippines is only allowed in the following cases: RESIDENTIAL: MAKATI CBD

>> Acquisition before the 1935 Constitution Note: The above data refer to prime assets in the respective city and sector Vacancy means the existing average vacancy rate; Stock means the existing completed stock; Supply means the anticipated supply in the next 3 years >> Acquisition by hereditary succession Yield means the current average capitalisation rate.

>> Purchase of not more than 40% of the units in a condominium project TAXES >> Purchase by former natural born Filipino citizens, subject to the requirements or limitations prescribed Income Tax 30% by law under BP 185 Value Added Tax 12% Capital Gains Tax 6% Document Stamp Tax 1.5%

Transfer Tax >> Provincial – tax must not exceed 50% of the (depends on the location of 1% tax base the real property) >> Metro Manila and any city in the Philippines – tax must not exceed 75% of the 1% tax base

| 14 property investment. investment, can also beconsidered for seaboard area, targeted for high-value Economic Corridor in the eastern The export-oriented Eastern around5.5%at thistime. higher rate ofreturn. Officeyields are of existing lead stockcanstill to a approximately 2years, refurbishment A stock to reach the market in the expectation for many newgrade experiencing stockshortage.Despite (CBD), where the market iscurrently Bangkok central business district office renovation projects in the Opportunities are available for in the region of6%. beverage (F&B)facilities. Yieldsare an extensive demandfor food and the Bangkok luxury sector with can capitaliseon this, aswell to increase, andhotelinvestors Tourist arrivals have continued office sectors. particularly in the hospitality and Bangkok drives the Thaieconomy, THAILAND

COUNTRY PROFILE

513,115 sq km 66.32 million 3.2 people Area Population Average Household Size

52.7% 68.1% USD455.4 billion Urban Proportion Labour Force Participation Rate Gross Domestic Product (GDP)

USD6,883.3 4.1% 37.3 years GDP/capita GDP Growth Average Age of Population Bangkok Capital Chiang Saen Port Chiang Khong Port Bangkok Mae Fah Luang Chiang Rai International Airport CHIANG MAI Economic Centre Chiang Mai International Airport

Udon Thani International Airport

BANGKOK Don Mueang International Airport Suvarnabhumi International Airport BANGKOK Bangkok Port

Laem Chabang PATTAYA Port PATTAYA U-Tapao International Airport

Samui International Airport Ranong Port Surat Thani International Airport Phuket International Airport PHUKET Krabi International Airport

Hat Yai International Airport

Legend Capital Major City Economic Centre Major Airport Major Port Eastern Economic Corridor (EEC)

| 16 THAILAND

PROPERTY OWNERSHIP

Freehold Leasehold >> Available on land and properties registered under full title deeds >> Foreign investors are able to lease land and properties for a period of up to either 30 or 50 years, depending on the >> Condominium law allows the purchase of individual strata titles intended utilisation within a building registered under freehold ownership

PROPERTY INVESTMENT LAWS SECTOR TRENDS Foreign investors can lease land from a freeholder for Vacancy Stock Supply Yield a period of either 30 or 50 years, depending on the 7.3% 3.43 million 467,000 5.5% property use. The condominium law allows foreigners sq m sq m to purchase up to 49% of individual strata titles within a building registered under freehold ownership. While local OFFICE: BANGKOK CBD investors have the right to purchase freehold property.

All land plots and property ownership are recorded 19% 11,436 3,051 6% keys keys at the local provincial land offices. And in order to register a sale and/or disposal of a property, it must be recorded in person at the land office i.e. cannot be done HOTEL: BANGKOK CBD electronically or by post. 27% 590,000 20,000 5% units units FOREIGN OWNERSHIP FOR PROPERTY CONDOMINIUM: BANGKOK CBD Foreigners are generally not allowed to own freehold 27% 22,000 3,200 5.5% property, according to Thai law. However, leaseholds ha ha can be purchased for a period of either 30 or 50 years in total length. INDUSTRIAL: EASTERN ECONOMIC CORRIDOR

Note: The above data refer to prime assets in the respective city and sector Vacancy means the existing average The Thailand Board of Investment (BOI) can provide a vacancy rate; Stock means the existing completed stock; Supply means the anticipated supply in the next 3 years permit for 100% foreign ownership for certain business Yield means the current average capitalisation rate. purposes, upon application.

Condominium law allows up to 49% of the strata titles to TAXES be purchased by foreigners. Corporate Income Tax 20% Capital Gain Tax 0% EASTERN ECONOMIC CORRIDOR (EEC) Property Tax 12.5% Stamp Duty 0.5% Thailand is targeting high-value investment in the eastern seaboard area by offering incentives to both foreign Property Transfer Tax 2% and local investors. The Eastern Economic Corridor, as the area is known, is a developing economic zone that Thailand wants to build export-oriented companies. The government is also keen to promote new industries, including healthcare and aircraft maintenance, in addition to the successful auto, petrochemical and logistics sectors. Logistics infrastructure, and an ease of doing business, will provide opportunity for investors of industrial and supporting industries, such as in hospitality and serviced apartments.

| 17 VIETNAM also attractive. with yieldsin the order of5.5 to 8.5%, sectors enjoy low vacancy levels, and In the major cities, the officeand retail an asset class to lookoutfor. and leasebackstructuring.Thus,itis businesses taking advantageofsale investors, andmore foreign parks across Vietnam,by foreign and acquisition dealsinindustrial Colliers expect to seemore merger operations. destination for their industrial by globalbusinesses asanattractive years, asVietnamisincreasingly seen strong growth in the next couple of The industrialsector ispoisedfor furniture products. electronics, clothing,footwear and key manufacturing hubfor The country hasbecome a property investors. Japanese, Singaporean, andother 2018. Itisapopular destinationfor approximately USD300 in billion foreign direct investment of The country attracted total registered VIETNAM

COUNTRY PROFILE

331,210 sq km 97.13 million 2.58 people Area Population Average Household Size

34.24% 76.81% USD223.9 billion Urban Proportion Labour Force Participation Rate Gross Domestic Product (GDP)

USD2,343.12 7.1% 30.5 years GDP/capita GDP Growth Average Age of Population Ha Noi Capital Ho Chi Minh City Economic Centre HAI PHONG

Lach Huyen Port Hai Phong Port Cat Bi International Airport HA NOI Noi Bai International Airport Vung Ang Port

DA NANG Da Nang International Airport Da Nang Port

Quy Nhon Port

Cam Ranh International Airport HO CHI MINH CITY Tan Son International Airport

Cai Mep Port Phu Quoc International Airport Cat Lai Port Vung Tau Port CAN THO

Legend Capital Major City Economic Centre Major Airport Major Port

| 19 VIETNAM

PROPERTY OWNERSHIP

In accordance with the Land Law (2013), all land used by allocation, which may require a land-use fee (LUF). The term of a households and individuals for residential purpose are regarded as land lease or land allocation cannot exceed 50 years (or 70 years land for stable and long-term use. Organisations and individuals in special circumstances). can acquire land-use rights (LUR) via a land lease or land

PROPERTY INVESTMENT LAWS SECTOR TRENDS According to the Law on Foreign Investment in Vietnam Vacancy Stock Supply Yield (2014), investment in real estate shall be made through 5.3% 311,000 129,000 8.5% (a) business cooperation through a business cooperation sq m sq m contract, (b) setting up a joint venture, (c) constitution of a 100% foreign capital company, (d) Opening a subsidiary OFFICE: HO CHI MINH CITY or a representative office but such entity will not have a legal status. The purpose is to allow investors to integrate 7.5% 1,000,000 202,000 5.5% and understand the market before making substantial sq m sq m foreign investment in Vietnam.

In order for foreigner to invest in Vietnam including real RETAIL: HO CHI MINH CITY estate, and the following documentations will need to be 24.7% 15,000 1,600 6.0% submitted to the government for approval – investment rooms rooms certificate; permission from the Vietnamese Government; valid visa; residency permit and working permit. HOTEL: HO CHI MINH CITY

FOREIGN OWNERSHIP FOR 17.4% 27 million 61 million* 10% sq m sq m PROPERTY

There are two most common regulations that related to INDUSTRIAL: HA NOI real estate for foreign owners: Housing Law and Law on * Expecting 14 additional industrial parks/zones will come in operation. Real Estate Business (2015) and the Law on Sale and Note: The above data refer to prime assets in in the respective cities and sector; Vacancy means the existing average vacancy rate; Stock means the existing completed stock; Supply means the anticipated supply in the Transfer of Real Properties (2015). next 3 years.

Foreigners can buy property by simply having a tourist visa and there is no limit to the amount of properties TAXES one can buy (previously only one property). However, foreigners are restricted to acquire a maximum of 30% of Corporate Income Tax >> Standard: 20% the units in a condominium development and cannot own >> Oil and gas industries: 32% to 50% more than 10% of the properties in a landed development. >> Prospecting, exploration, exploitation of mineral resources: 40% to 50% For houses, foreigners cannot own more than 250 of the Value Added Tax Standard 10%; 0% and 5% rates applicable for certain houses in a given ward. (VAT) areas of the economy For leasehold assets, the lease term is 50 years with Land Tax Progressive tax rates from 0.03% to 0.15% for right of renewal. non-residential property

Please note that there is no clear guideline by the government regarding the issuance of property titles to foreigners.

| 20 Our Specialists in the Region

DAVID FAULKNER Managing Director Valuation & Advisory Services | Asia +852 2822 0525 [email protected]

VIETNAM DAVID JACKSON +84 28 3827 5665 [email protected]

PHILIPPINES THERESA TEODORO +63 2 858 9051 [email protected]

MYANMAR KARLO POBRE MALAYSIA +95 (0) 931 491 678 MELISSA LEE [email protected] +65 6531 8530 [email protected]

THAILAND RATCHAPHUM JONGAKDEE +66 2 656 7000 [email protected]

INDONESIA MONICA KOESNOVAGRIL +62 21 3043 6740 [email protected]

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