As summer holidays 2015 are ending, whereas large-scale housing projects are blossoming in Ho Chi Minh City, the whole expatriate community is talking about the new Law on housing. Authorities, which are seeking to revamp a badly damaged sector, make many efforts in order to attract foreign investments, whether developer or individual buyer.
Which innovations are contained in the law on housing approved the 25th of October 2014 and entered into force the 1st of July 2015? Which changes have to be noticed in comparison with the last experimental program set up in 2008 regarding the acquisition of real estate property by foreigners in Vietnam?
The two mains innovations to be underlined are the following:
· The requirements related to the minimum duration of stay in Vietnam for acquisition of real estate property in Vietnam, formerly one year, are lowered, and now a 1-Month touristic visa is enough to enter into a sale contract (article 159.1.c, but please note that internationals civil servants and diplomatic personnel are expressly excluded from the regulation)
· A significant opening of the right of use on the land to foreigners, as villas are henceforth include in real estates that foreigners can inhabit and purchase, including the ground then, although this point has to be detailed further yet.
What are foreign individuals allowed to buy?
Foreigners must be aware that they can’t buy any real estate in Vietnam. For its Land Use Right document (the ‘pink paper’) to be titled under the name of a foreigner, the concerned real estate should compulsorily be part of a “commercial housing program”. Consequently, it could be either a house located in a development area or an apartment within a building in co-ownership (generally called “condominiums”). These property development projects are managed by promoters legally registered in Vietnam, which have registered a ‘global’ Land Use Right for the whole project on the ground.
As a result, buying a buildable land or a colonial house from the French era is totally and expressly ruled out for a foreigner.
For how long do you own property?
The duration of ownership is different depending on whether you are only a foreigner, or a foreigner with Vietnamese origin or a foreigner married with a spouse having Vietnamese nationality.
In the first case, the duration of primary use will be 50 years, theoretically renewable once for 50 additional years. In the hypothesis of an acquirer owning Vietnamese origins (Viet-Kieu) or a foreigner married with a person from Vietnamese nationality, the right of use is unlimited over time (freehold), as for national Vietnamese persons.
How is it possible to resale? How is it possible to bequeath?
The resale of the real estate property doesn’t come out with any particular issue. Of course, the resale has to be concluded during the legal duration registered within the Land Use Right. By default, the State will recover the real estate that has lost its legal owner.
As regard the transmission by donation or inheritance, it is also possible and rendered easy by the current regulation. Like for resale, the heir or the beneficiary should be deemed eligible (having ordinary passport and Vietnamese visa) at the day of entrance in property of the Land Use Right, in order to be recognized and recorded as a legal owner by authorities.
Territorials limits to the acquisition
Unwilling to see districts which could become “foreign towns”, authorities set down a limit for the presence of non-Vietnamese acquirers per area: this limitation is either 30% of units from a residential building or 250 houses in a whole of equivalent population of a district (phường).
In conclusion, the new law on housing greatly improves foreigners’ legal status wanting to acquire a real estate in Vietnam. The implementing decree of the law is still unpublished but drafts which had circulated among the actors of the sector are in accordance with the content of the law: the authorities show great willingness to attract foreign financing in the real estate field and shall make many efforts to ensure the cash flow attached to it.
It remains to be seen how this directives will be applied by developers, real estate agents, notaries and locals authorities in charge of the issuance of a certification of Land Use Rights, that is to say the department of natural resources and environment. A reform to follow!
This article is the translation of an article published in French language on the website lepetitjournal.com/hochiminhville, dated 9th September 2015 and shall be not be considered as legal advice but mere general information on the new law on Housing. For personal legal advice, please contact our firm by clicking on this link.