The Vietnamese real estate market is currently experiencing difficulties due to the impact of the global economic crisis and the tight control of the Vietnamese government in recent times. The 2024 Land Law, the 2023 Housing Law, and the 2023 Law on Real Estate Business, which come into effect in August 2024, are expected by investors to create a clear legal environment and help the real estate market develop strongly in the future. By the end of April 20, 2024, foreign direct investment (FDI) in real estate has more than quadrupled compared to the same period in 2023, ranked second in attraction of FDI, with over USD 1.6 billion (the manufacturing and processing industry ranked first with nearly USD 5 billion of registered capital).
Unlike Vietnamese-Invested Companies, which are free to engage in a wide range of real estate business activities, Foreign-Invested Companies are only allowed to operate within a limited scope. According to Article 15 and Appendix I of Decree No. 31/2021/ND-CP guiding the Law on Investment, real estate business is a sector with restricted market access for Foreign Investors. Accordingly, Foreign Investors must meet the market access conditions prescribed in Clause 3, Article 9 of the Law on Investment, including: (i) Equity ownership ratio of foreign investors in economic organizations; (ii) Investment form; (iii) Scope of investment activities; (iv) Investor capacity; and partners participating in investment activities.
According to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Vietnam commits to opening its market to Foreign Investors from member countries, allowing them to engage in real estate business activities (including real estate services), with no restrictions on equity ownership ratio or investor capacity, but with limitations on the scope of activities. Besides, the Law on Real Estate Business also prescribes no restrictions except for the scope of real estate business activities of Foreign-Invested Companies.
(*) Scope of real estate business of Foreign-Invested Companies (excluding real estate services):
Article 10 of the 2023 Law on Real Estate Business prescribes as follows:
a. For Foreign-Invested Companies subject to conditions and investment procedures applicable to Foreign Investors as prescribed by the Law on Investment, they are allowed to conduct real estate business in the following forms:
- Investing in the construction of houses and construction works attached to land use rights for sale, lease, or lease-purchase through real estate projects, in accordance with the form, purpose, and duration of land use as prescribed by the law on land;
- Investing in the construction of technical infrastructure within real estate projects for the purpose of transferring, leasing, or subleasing land use rights to land already developed with technical infrastructure, carried out in strict compliance with the land use forms, purposes, and durations as prescribed by the laws on land;
- Leasing houses, construction works, or floor areas in construction works for sublease;
- Receiving the transfer of all or part of a real estate project to continue investment in construction and business.
f. For Foreign-Invested Companies not falling under Case 1 above, they are allowed to conduct real estate business like domestic organizations and individuals without any restrictions. These Foreign-Invested Companies are public companies or companies listed on the stock exchange according to the Law on Securities.
(*) Scope of real estate services of Foreign-Invested Companies:
Both Foreign-Invested Companies and Vietnamese-Invested Companies must meet the conditions prescribed in the Law on Real Estate Business before engaging in real estate services, as follows:
1. Conditions for real estate brokerage services
- Have regulations on real estate brokerage service operations;
- Have facilities and technical infrastructure that meet operational requirements as prescribed by the Government;
- Have at least 01 individual with a real estate brokerage certificate;
- Before operating real estate brokerage services, the company providing real estate brokerage services shall send information about the company to the provincial-level state management agency for real estate business in the locality where the company is established for publication on the information system on housing and real estate market as prescribed by the Law on Real Estate Business.
2. Conditions for real estate exchanges
a. The manager or operator of the real estate exchange must meet the following conditions:
(i) Have the right to manage the company in Vietnam according to the Law on Enterprises;
(ii) Have completed a training course on management and operation of a real estate exchange and have been granted a certificate of completion by a training institution.
b. The name of a company providing real estate exchange services, chosen by the establishing organization or individual in accordance with the Law on Enterprises, must include the phrase “real estate exchange” and must not be identical or confusingly similar to the name of another registered real estate exchange service provider.
c. Before operating, the real estate exchange must submit an application to the provincial-level state management agency for real estate business in the locality where the real estate exchange’s head office is located to be granted an operating license.
d. The real estate exchange must issue and publicize the procedures for real estate transactions through the real estate exchange.
e. The real estate exchange must register a fixed place of operation, with facilities and technical infrastructure to ensure the operation of the real estate exchange.
3. Conditions for real estate consulting services and real estate management services
- Organizations and individuals providing real estate consulting services or real estate management services must establish a company providing real estate services. In case of providing management services for apartment buildings or mixed-use buildings with residential areas, they must meet the conditions prescribed by the law on housing.
- Before operating, the company providing real estate consulting services or real estate management services must send information about the company to the provincial-level state management agency for real estate business in the locality where the company is established for publication on the information system on housing and real estate market as prescribed by the Law on Real Estate Business.
Disclaimers:
This article is for general information purposes only and is not intended to provide any legal advice for any particular case. The legal provisions referenced in the content are in effect at the time of publication but may have expired at the time you read the content. We therefore advise that you always consult a professional consultant before applying any content.
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Apolat Legal is a law firm in Vietnam with experience and capacity to provide consulting services related to Real Estate and contact our team of lawyers in Vietnam via email info@apolatlegal.com.
