In 2023, as Vietnam faces numerous challenges in the housing sector, the revision of existing regulations in the Housing Law to meet the increasing demand for housing and ensure sustainability in the real estate market has become an essential process. However, this process requires careful consideration and comprehensive planning to ensure that the changes bring benefits to both the community and the citizens – the primary stakeholders in the Vietnam real estate market.
One crucial aspect is the enhancement of real estate market management and supervision. This helps prevent price manipulation, ensures stable housing prices, and avoids the risk of a real estate bubble affecting the national economic stability. Simultaneously, it promotes sustainable and fair development in the housing sector.
Improving the quality of construction works is another priority. Poor quality not only jeopardizes residents’ safety but also leads to significant maintenance and repair issues in the future. The amended housing law should set high standards for construction quality and tightly control the construction process.
Facilitating low-income individuals’ homeownership is also a set goal. Social housing policies and financial support programs can provide opportunities for low-income individuals to buy homes and improve their living conditions.
Finally, creating flexible regulations to promote sustainable development in the real estate industry is also crucial. Encouraging the use of green technology, reducing construction waste, and protecting biodiversity are important trends that need to be integrated into the amended housing law.
Thus, the amendment of the Housing Law not only contributes to improving the housing market but also contributes to sustainable and balanced development in Vietnamese society.
Fire Safety Conditions and Issuance of Ownership Certificates for Mini-Apartments
The 2023 Housing Law stipulates that individuals wishing to build mini-apartments (two floors or more, each floor having an apartment, or two floors and a scale of 20 apartments or more) for sale or rent must meet the conditions to act as the project developer for residential construction.
Apartments meeting the specified conditions will be granted ownership certificates according to land law (pink books) and can be sold, rented, or leased in accordance with the provisions of the amended Housing Law and real estate business regulations.
Investing in mini-apartments for rent must comply with the construction requirements specified by the Minister of Construction, and the housing area must meet the fire safety requirements as per legal regulations.
In particular, fire safety conditions are especially important. Vietnam has witnessed several tragic accidents due to fires, with the peak being the mini-apartment fire on September 13, 2023, in Hanoi, resulting in heavy casualties. This incident has led to discussions about completely eliminating mini-apartments or legalizing them to ensure the safety of residents. In addition to effective fire safety measures in mini-apartments, developers must also ensure open access to these buildings for firefighting forces in case of emergencies.
Duration of Use for Apartment Buildings
The 2023 Housing Law in Vietnam does not specify the ownership duration of apartment buildings but focuses on the duration of use. The period of use is determined based on the design documents and the actual usage time as concluded by the authorized agency.
The period of use for apartment buildings, as per the design documents, must be clearly stated in the approval documents issued by the competent authority in accordance with construction laws. The period of use is calculated from the time the apartment building is accepted and put into use as per the regulations of construction laws.
When an apartment building reaches the end of its designated usage period or poses a safety risk, meaning it no longer meets the conditions for habitation, the provincial People’s Committee will instruct inspections, assess the quality, and may publicly announce that the apartment building has reached the end of its usage period, as stipulated.
In Vietnam, land use rights are granted by the state to individuals and organizations for a specific period, sometimes of 50 years with the possibility of extension. This means that people do not own the land directly but have the right to use it within the allocated time frame. However, this right to use the land is considered ownership right for an extended period between buyers and sellers.
This regulation has several benefits, including better land use management, prevention of inefficient land holding, and providing incentives for land users to develop and sustainably manage the land. However, there are challenges and concerns regarding the rights of land users, especially when the land use period is nearing expiration, and the extension process is not easily facilitated.
Social Housing Land Planning
The 2023 Housing Law introduces detailed provisions on the allocation of land for social housing in commercial projects, addressing a gap in the 2014 version. It places the responsibility on the provincial People’s Committee to allocate sufficient land funds for social housing, ensuring planned development in accordance with approved plans.
For different urban areas and types of municipalities, the law clearly states that the provincial People’s Committee can decide that the investor of a commercial housing project must allocate land funds to construct social housing projects. This provision aims to ensure the development of social housing and the synchronous construction of technical infrastructure.
In compensation for non-commercialized land, developers of social housing projects will receive corresponding compensation. The developer will be exempt from land use fees and land rent for the entire project area without having to go through complex procedures such as determining land prices or requesting exemptions.
Additionally, developers are entitled to a maximum profit of 10% of the total construction investment costs for the area designated for social housing, are allowed to use 20% of the total land area for commercial projects.
The costs of building social housing are accounted for separately and are not included in the cost of constructing commercial service, trade, and commercial housing. Developers also enjoy the entire profit from the area designated for commercial service, trade, and commercial housing.
This arrangement allows developers to gain additional profit from the development of social housing through the 20% commercial area. While considered reasonable, some argue that the incentives for investing in social housing may not be sufficiently attractive for developers.
However, if the profit margin for social housing is increased from 10% to 12-15%, as proposed by experts before the Housing Law was passed, the additional costs would be reflected in the real estate prices sold to the public. When prices rise significantly, social housing may no longer serve its initial purpose of providing affordable housing for low- to middle-income individuals.
ASL LAW is the top tier Real Estate law firm in Vietnam. If you need any advice, please contact us for further information or collaboration.