Foreign-Real-Estate-Investors-restrict

Restrictions on Foreign Real Estate Investors in Vietnam

Real estate in Vietnam is one of the fields that many foreign investors are interested in. However, this activity is being restricted by many current laws.

Real estate is still an attractive investment channel to foreign investors despite some restrictions. Image: VIR

There are two business activities that foreign investors are not allowed to do while domestic investors are still able to do so. First, foreign investors are not allowed to assign plots for sale of land plots, to invest in the construction of technical infrastructure of cemeteries and graveyards to transfer the land use rights associated with that infrastructure. Secondly, for houses, construction works, foreign investors are not allowed to buy for sale, lease, or lease-purchase but can only rent these real estates for sublease.

Limits on the number of real estates owned

According to Article 161 of the Law on Housing 2014, the subjects include foreign-invested enterprises, foreign investment funds and foreign bank branches operating in Vietnam, and permitted foreign individuals. If entering Vietnam, you may buy, rent, purchase, receive, inherit and own no more than 30% of the number of apartments in a common building, if it is a separate house including villas, houses Adjacent to an area with a population equivalent to a ward-level administrative unit, only purchase, rent-purchase, receive the donation, inheritance and own no more than 250 houses.

Decree 99, issued on October 20, 2015, provides more details on a number of issues on this problem, according to which:

In case an area has a population equivalent to that of a ward-level administrative unit and has an investment project to build commercial houses, including separate houses for sale, lease, or purchase, organizations or individuals. Foreigners are allowed to own a number of separate houses as follows:

  • In case there is only one project with less than 2,500 individual houses, foreign organizations and individuals are only allowed to own no more than 10% of the total number of houses in that project;
  • In case there is only one project with the number of separate houses equivalent to 2,500 houses, foreign organizations and individuals are only allowed to own no more than 250 houses;
  • In case there are two or more projects and the total number of separate houses in these projects is less than or equal to 2,500, foreign organizations and individuals are only entitled to own no more than 10% of the number of houses of each project.

Limit the amount of income

The payment of contract value related to real estate to be formed in the future is made in many installments and depends on the construction progress. Before handing over houses and constructions to customers, foreign-invested enterprises are only allowed to collect up to 50% of the contract value while this maximum rate applies to domestic investors up to 70%.

Risk of land acquisition

In fact, many real estate project investors were unable to complete projects on time and had land acquired. The cause of this incident is that the investor still faces many difficulties in administrative procedures and the failure to reach an agreement with the people when conducting compensation, site clearance, and site clearance.

At the same time, in order to be approved, real estate investment projects for business must conform to the master plan, land use plan, urban planning, rural construction planning and must follow the implementation plan. authorized state agency for approval.

This causes many difficulties for foreign investors because they do not know the land regulations as well as related administrative procedures at Vietnamese state agencies, affecting their investment activities of foreign investors in Vietnam.

ASL LAW is the top tier Real Estate law firm in Vietnam for. If you need any advice, please contact us for further information or collaboration.

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