Since 1st July 2015 two new laws are in place, the Law on Real Estate Business and the Law on Residential Housing. Those laws allow foreigners to purchase, own and transfer real estate, houses and condos. On 10 September 2015, the Decree implementing the Law on Real Estate Business was adopted, shedding light on provisions of the related law. The law and its guidance have been in effect for one year and the market has witnessed positive improvement.
In general, there are two different possibilities to become owner of property in Vietnam. The first option is to make investment in construction projects of residential housing in Vietnam. The second option is to purchase the house or condo after its completion of construction.
The Law on Residential Housing provides that foreign individuals who are permitted to enter the country are allowed to own property in Vietnam. It grants even more rights to foreign individuals who are married to a Vietnamese citizen. In particular, once married to a Vietnamese, a foreigner is put in the same category with Vietnamese investors in the market and exercises the right to legally purchase and own property on a long-term basis.
Meanwhile, foreigners not married to a Vietnamese can only own houses for a duration of 50 years. After this period, the owner can require an extension of the ownership and the government will decide whether and for how long it will extend the ownership duration. Beside this 50-year limit, there are also other restrictions on the number of properties that can be owned by a foreigner according to the Law on Residential Housing.
As a result of these changes, Vietnam’s property market is heating up. According to the HCMC Real Estate Association, since the new laws were put into effect, more than 1,000 transactions were made by foreign clients to purchase properties in HCMC, while the were only 250 similar transactions made during the period of four years between 2009 and 2013 in the entire nation. Experts have predicted that 2016 would be another prosperous year for the Vietnamese real estate industry. The country is now considered to be one of the prime real estate investment locations in the world. With this development, there has never been a better time to invest in the property developments in Vietnam.
However, some problems still exist in the field. Until now, it has been announced that the Government will issue a detailed guidance on how foreign individuals become eligible to own property in Vietnam. This document is, however, not in place yet, despite the reputation of the new Housing Law and Law on Residential Housing.
Consequently, although the Vietnamese market is considerably attractive, foreigners are still hesitant to tap the opportunities from new laws as transparent guiding documents have not yet been released. In other words, the opportunities are clear but the Government has been quite delayed in materializing them for foreigners. It is reported that in the first half of the year, there are 25 new projects in real estate sector being licensed with total investment capital of more than USD600 million. In contrast with the busy M&A and new foreign investment in the sector, our own experience in dealing with our foreign client’s request to assist in the application for the red book shows that the licensing authority is still hesitant to grant such certificate. There are many reasons for this reaction, among those are lack of clear legal basis, verification of the nationality of foreigners as well as how to calculate the 50-year ownership.
Foreign investors being still cautious in searching for the market cycle, trying to conduct appropriate procedures as Vietnam is a new market for them, especially when information about the new law is limited, also explains limited transactions made by foreigners and foreign entities.
In conclusion, although the law has provided foreigners with opportunities to purchase house in Vietnam, there are still several obstacles that need to be tackled. The responsibilities lie both in the policy-makers, who are urged to create more transparent and detailed legal guidance, and the Vietnamese who are also required to create a convenient and efficient transaction system.