The draft Law on Real Estate trading in Vietnam is now undergoing consultation by the Ministry of Construction, despite the fact that it has been in effect for almost ten years and still displays several "bottlenecks" in the real estate industry.
More types of real estate for commercial use in Vietnam
According to Article 5 of the Law on Real Estate trading, currently, real estate used for business purposes includes:
- Existing buildings of organizations or individuals;
- Off-the-plan buildings of organizations or individuals;
- Buildings that are public properties to be put on the market permitted by competent agencies;
- Types of lands whose land-use rights are permitted to be transferred (hereinafter referred to as land), leased, or sublet as prescribed in law on land.
The categories of real estate that are used for commercial purposes are listed in Article 5 of the draft as follows:
- Home is available and formed in the future.
- Available and future construction works include: Civil works, tourist apartments or tourist villas, also known as condotel apartments/villas, and offices combined with accommodation.
- Land use right in a real estate project must be the right to use land with technical infrastructure before it can be put into the business.
It is clear that the draft, when compared to the existing laws, has added to and detailed present and future construction works, including civil works, apartments or tourist villas, and combined office accommodation.
In order to avoid mentioning generalities, which may result in numerous "loopholes," the objects of construction works that have been "specified" now contain the specific works.
More requirements for individual real estate transactions
Currently, Article 10 of the Law on Real Estate trading is amended and supplemented by Point a, Clause 2, Article 75 of the Law on Investment in 2020, and Article 4 of Decree 02/2022/ND-CP defining real estate business requirements.
- The establishment of enterprises/cooperatives, except for households and individuals that sell, transfer, lease, etc. on a small or irregular scale, are not required to be established but must declare and pay tax.
- Publicize on the electronic information page, the headquarters of the Project Management Board, the real estate trading floor, information about the enterprise (name, head office, phone number, legal representative), information about real estate, information about the condition of real estate (mortgage, etc.); quantity and type of real estate products, etc.
- The real estate business is eligible for business.
- The investor who chooses to be the investor of a real estate project must have equity of not less than 20% of the total investment capital for a project with a size of fewer than 20 hectares, not less than 15% of the total investment capital with a project with a scale of 20 hectares or more.
However, Article 10 of the draft stipulates some more conditions for individuals to do real estate business compared to the current one, such as:
- Having the full legal capacity and full civil act capacity; are not banned, suspended, temporarily suspended from an operation, or are not in the process of carrying out procedures for bankruptcy or dissolution of the organization.
- With the investor selected, recognized, and assigned as the investor of a real estate project (Compared to current regulations in Decree 02/2022, investors are allowed to act as investors in real estate projects, apart from selection, they will also be recognized and assigned).
- In the case of not having to establish an enterprise, having a real estate business, having civil act capacity, etc., the draft does not provide any conditions on the "Sell, transfer, lease, lease purchase real estate on a small scale, infrequently" but only stated as "not required to meet the conditions for real estate business".
- Include the requirement that "investment activities and transactions in the building of social housing and housing for employees of the Vietnam General Confederation of Labor should conform with the provisions of the housing legislation."
More available housing is put into the business
The current Law on Real Estate Business only lists existing houses and constructions as one of the types of real estate put into the business. However, the conditions or characteristics of these types of real estate are not currently specified in the Law.
This has made it difficult to put in the business of housing and available construction works. This draft has supplemented Article 13 with the following provisions:
- Available houses include All kinds of houses, except resettlement houses, official-duty houses, social houses invested with the state capital, and state-owned houses.
- Available construction works include Civil works, tourist apartments, tourist villas, and offices combined with accommodation.
The business of tourist apartments, also known as condotels and tourist villas, is still rampant today without any formal regulatory framework to control it on the Real Estate Trading Law. Due to this, the real estate market has seen "turbulence," which has made things very tough for buyers, sellers, and investors of this kind of property.
Originally published September 18, 2022
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.