Legal Update Hospitality & Leisure Real Estate Vietnam 22 December 2014 New Housing Law and Real Estate Business Law for Vietnam On 25 November 2014, the National Assembly passed house ownership period is 50 years and can be the Housing Law and the Law on Real Estate extended. For foreign entities, house ownership shall Business. The passage of these two laws regarded as a not exceed the period stated in the investment long-awaited legislative breakthrough that certificate, including extensions of the term operating establishes a transparent legal framework to meet in Vietnam. The law also permits foreigners to the changing needs of Vietnam’s real estate market. purchase houses for leasing purposes. The two laws will take effect on 1 July 2015 and are The individuals or entities mentioned above may expected to have a positive impact on the real estate purchase, lease-purchase, receive as a donation or market. Hereunder are some of the most significant heritage, or possess not more than 30 percent of the changes under the new laws: apartments available in a condominium. For separated residential houses, including villas and Opening the Door to Foreign Entities and attached houses in a population area equivalent to a Individuals to Purchase Residential ward administrative unit, the permitted subjects may Properties purchase, lease-purchase, receive as a donation or Five years ago, the National Assembly passed heritage, or possess up to 250 houses. Resolution 15, which allowed some foreigners to purchase houses. However, under that resolution, a Rights of Foreign Entities and Individuals foreigner could only purchase one condominium to Purchase Offices and Factories; Rights apartment in commercial housing projects for a of Foreign-Invested Enterprises to Lease period of no more than 50 years; the houses Offices for Lease-Out Purposes purchased could only be used for residing and not for The 2014 Law on Real Estate Business permits leasing, office use or other purposes; and the types of foreign entities and individuals to purchase persons or entities entitled to purchase houses were constructed facilities for use as a head office, working limited. office, or production/business/service undertakings Under the 2014 Housing Law, broader categories of in conformity with their functions. Foreign-invested individuals and entities are entitled to purchase enterprises may also lease constructed facilities for houses, including the following: leasing purpose. • Investors with residential house construction With these updates, the 2014 Law on Real Estate projects in Vietnam; Business is regarded as introducing positive changes • Foreign-invested enterprises, branches and that meet the practical market demands in the real representative offices of foreign enterprises, estate sector. foreign investment funds and branches of foreign banks operating in Vietnam; and Guarantee for Sale or Lease-Sale of • Foreigners permitted to enter Vietnam. Residential Houses to Be Built in the Future Under the 2014 Housing Law, any foreigner with an Before they can sell or lease out/sell residential entry visa is authorised to purchase a house, and houses that have yet to be built, investors in real practically almost forms of investment by foreign estate projects must be guaranteed by credit entities are permitted. For foreign individual, the institutions licensed to operate in Vietnam for such Assignment of the Whole or Part of a Real sale and lease out/sale so that, should they fail to Estate Project hand over residential houses as agreed in the sale, While investors under the current laws may only lease out/sale contract, the purchaser or the lessee- assign the whole of a housing project, an industrial purchaser may ask the guarantor to return the zone infrastructure project or a new urban area advances and other payments they have made to the project to another investor, the 2014 Law on Real investors. Estate Business permits an investor with a real estate The new law marks the first time that regulations on project (not limited to the three above types as in the guarantee for sale of future construction are part of current laws) to assign the whole or part of such a the law. These regulations will help house purchasers project to another investor for the latter’s continued feel more secure in their transactions, help identify investment. The assigned project must satisfy certain capable investors and eliminate the improper conditions, as stipulated, must not change the appropriation of the purchasers’ monies when objectives and contents of the project, and must construction progress lags, as has commonly protect the interests of the customers and interested occurred in the past. parties. Legal Capital Requirements for Real No Restrictions on Minimum Areas of a Estate Investors Residential House The 2014 Law on Real Estate Business stipulates that Under the current laws, the minimum construction the legal capital requirement to engage in the real floor area of each condominium apartment shall be estate business shall be determined by the 45m2; the minimum area of an attached house shall government but shall not be less than VND20 billion. be 50m2, with the front width not less than 5m; and, This requirement is considerably higher than the for a villa, the height must not be more than 3 floors legal capital requirement of VND6 billion under the and the construction area must not be more than 50 current laws. However, as today’s real estate projects percent of the land area. require large capital investments, the law’s Under the 2014 Housing Law, the standard area of adjustment of the legal capital requirement is each commercial residential house shall be as reasonable as a first step in eliminating real estate decided by the project investor in conformity to the investors who do not have sufficient financial detailed construction zoning plan, the construction resources. standards and regulations, and the document Real Estate Transactions Without Trading approving the investment project. As such, the minimum area for each house type shall be decided Platforms by the investors themselves and not be regulated by The current laws stipulate that entities and the 2014 Housing Law. individuals conducting real estate business must sell, assign, lease out or lease out/sell their real estate on the trading platform. In the 2014 Law on Real Estate Business, whether or not transactions are conducted via trading platforms will be subject to agreement among the entities and individuals conducting the transaction and the trading platforms, and not mandatory as under the current laws. This provision will reduce certain procedures in real estate transactions. 2 Mayer Brown JSM | New Housing Law and Real Estate Business Law for Vietnam Contact Us For inquiries related to this Legal Update, please contact the following persons or your usual contacts at our firm. Hoang Anh Nguyen Partner T: +84 4 3825 9775 x101 E: [email protected] Nguyet Thi Nguyen Senior Associate T: +84 8 3513 0351 E: [email protected] Mayer Brown JSM is part of Mayer Brown, a global legal services organisation, advising many of the world’s largest companies, including a significant portion of the Fortune 100, FTSE 100, DAX and Hang Seng Index companies and more than half of the world’s largest banks. 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