On 28 November 2023, the National Assembly of Vietnam passed the amended Law on Real Estate Business No. 29/2023/QH15 (“LREB 2023”) replacing the 2014 law. The LREB 2023 will take effect from 1 January 2025.
- “Foreign-invested economic organisation” definition
The term “foreign-invested enterprise” is no longer used in LREB 2023 and replaced by “foreign-invested economic organisation”, with references to the Investment Law 2020. This change is intended for consistency between the laws, including the draft revised Land Law.
Under LREB 2023, a foreign-invested economic organisations with no more than 50% capital held by a foreign investor (the “Deemed Domestic Organisations”) now can carry out all real estate business activities relating to residential houses, construction works and land use rights with technical infrastructure in real estate projects that previously were only allowed for domestic investors.
For instance, a Deemed Domestic Organisation can now purchase, lease-purchase residential houses, construction works, construction premises in construction works for re-sale, lease, or lease-purchase, and receive the transfer of land use rights with technical infrastructure in real estate projects for transfer or lease. However, it should be noted that this provision only concerns the forms of real estate trading activities and other aspects of the Law on Land and Law on Housing still applies. As an example, Deemed Domestic Organisations are allowed to purchase residential houses for lease. However, under the Law on Housing 2023, they can only purchase houses from project developers or other foreign individuals and organisations.
- Vietnamese citizens and people of Vietnamese origin
LREB 2023 specifies real estate investment options for Vietnamese citizens residing abroad (i.e. who still retain Vietnamese nationality). This group will be able to invest in all real estate activities as same as domestic Vietnamese citizens.
Restrictive policies for Vietnamese residing abroad in LREB 2014 will continue to apply to those persons who no longer have Vietnamese citizenship.
- Information disclosure by real estate developers
A project developer must publish certain prescribed information on their website and the online platform of the Ministry of Construction before selling any off the plan projects. The information that must be published includes the project approvals, status of land allocation and land use rights, any land use restrictions, planning approval, construction permits and certificate of completion of the construction of the building foundation, approved bank guarantee for the project and the sales contract.
- Real estate business contract templates
LREB 2023 stipulates that project developers must use the prescribed contract forms in the real estate business. This ends the debate on whether the contract forms in Decree 02/2022/ND-CP are mandatory or not and the prescribed contract form must be used in all real estate business transactions.
- Capital mobilisation by way of customer deposit
LREB 2014 does not have specific provisions on the deposit transaction between the project developer and customers. Many developers usually utilise this arrangement as a tool for capital mobilisation and may request the customers to deposit an amount of up to 90% value of the off-the-plan properties. Under LREB 2023, the maximum amount of deposit that project developers may collect from the customers is no more than 5% of the selling price/lease-purchase price of the off-the-plan properties. Concurrently, the deposit collection can only be conducted after the off-the-plan properties satisfy the conditions for trading under LREB 2023.
- Project transfer by foreign-invested enterprises
Under the former law, when receiving a transfer of a real estate project, regardless of the form of land use payment, a foreign-invested enterprise must go through a two-step process: (i) the transferor must return the land to the State after receiving the project transfer approval from the competent agency; and (ii) the State then allocates or leases land to the transferee (the foreign-invested enterprise).
LREB 2023 allows a simpler transfer procedure for foreign-invested transferees if the project land is allocated by the State with land use fee, leased by the State with one-off land rental payment for the entire lease term, or the land payment is not associated with the state budget. In this case, foreign-invested transferees only need to conduct procedures of obtaining the land use right certificate to inherit all rights and obligations in relation to the land use right of the transferred projects.
- Conditions for project transfer
One of the conditions for project transfer (partially or wholly) under former law is that the project developer has secured the land use rights certificate for the transferred area. This is no longer required under LREB 2023. Instead, the developer can conduct the project transfer if (i) it has obtained the decision on land allocation, land lease or land conversion, and (ii) it has completed all financial obligations on land use right payments of the project including land use fees, land rent and taxes, and charges related to land use rights (if any) before transferring part or all of such project.