Real Estate Business Opportunities for Foreign Investors in Vietnam

Real Estate Business Opportunities for Foreign Investors in Vietnam

“From January 2019, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership referred to as the CPTPP Agreement takes effect for Vietnam. This agreement opens up opportunities for Vietnam to strengthen mutually beneficial links among member economies and promote trade, investment and economic growth in the Asia-Pacific region.”

In fact, foreign capital registered in real estate business in Vietnam always accounts for a high proportion of the total FDI capital in all economic sectors. Specifically, in 2019, it reached 3.88 billion USD, accounting for 10.2%, ranked second place. Until May 2020, the accumulation of FDI capital in Real estate business activities had reached 58.32 billion USD, accounting for 15.49% of total FDI, second only to the processing and manufacturing industry.

In addition, the new provisions of the new Law on Investment 2020 and the draft of the decree on guiding the new Law on Investment contain some major changes in the conditions for conducting real estate business activities of enterprises in general, and of foreign-invested enterprises in specific. This shows that the path of foreign investors entering the real estate market in Vietnam has been more open than before.

According to the Law on Real Estate Business 2014

The condition for a business to conduct real estate business was to establish a business and have a legal capital of more than 20 billion VND, but now the legal capital issue has been removed by the Investment Law 2020.

For activities belonging to the “business of real estate services” including real estate brokerage services, real estate transaction floors, real estate consulting, real estate management, it is considered as conditional business activities, in which:

  • Real estate brokerage service: must have at least 02 people with a real estate brokerage practice certificate;
  • Real estate trading floor:

(i) Must have at least 02 people with a real estate brokerage practice certificate;

(ii) A real estate trading floor operator must have a real estate brokerage practice certificate;

(iii) A real estate trading floor must have a stable operation regulation, name and address for more than 12 months;

(iv) Real estate trading floor must have a minimum area of ​​50m2 and technical equipment to meet operational requirements;

For foreign investors, real estate business is an industry that has not been committed in Vietnam’s WTO commitments. But please note that:

  • Although the real estate business line has not yet been committed by Vietnam to open to foreign investors. However, specialized legislation – The Law on Real Estate Business, has regulations on the applicable conditions and scope of operations of foreign-invested economic organizations registered in this industry. Pursuant to Point c, Clause 2, Article 10 of Decree 118/2015/ND-CP “for service sectors and sub-sectors that have not yet committed or are not specified in Vietnam’s WTO Schedule of Commitments and other international treaties which the Vietnamese law already has provisions on investment conditions for foreign investors, such provisions of Vietnamese law shall apply”. Pursuant to Clause 2, Article 11 of the Law on Real Estate Business, foreign-invested economic organizations may conduct a number of real estate business activities.
  • Accordingly, foreign investors need to first determine the target they are expected to operate in Vietnam, and compare the intended target to operate with specialized regulations, especially the laws on real estate business, and laws on Lands, to clearly define which activities belong to real estate that foreign investors are allowed to carry out in Vietnam.
  • Based on the business plan in Vietnam, the investor details the business sectors, specific explanations for the investment objectives in Vietnam, financial capacity, experience and other social content in the application for the establishment of an economic organization in Vietnam with registered real estate business lines. According to our experience, the application needs to detail the business sectors and the explanation to suit the conditions of each activity in accordance with the law.
  • Processing time: same as common application.

Notes for current regulations

  • The Law on Investment 2020 has removed the legal capital requirement: foreign-invested companies that do not need to register a charter capital of 20 billion can still conduct real estate business, for example: leasing office, apartment, etc.
  • Include the real estate business in the appendix of industries and occupations with conditional market access for foreign investors.
  • Change of regulations on the authority to transfer all or a portion of real estate project, specifically:

For real estate projects which were approved or granted an investment registration certificate in accordance with the Law on Investment, the authority and procedures for transfer of all or a portion of the project must comply with regulations of the Law on Investment.

For real estate projects other than those mentioned above, the competence to permit the transfer of all or a portion of real estate projects is as follows:

  • Provincial People’s Committee decides to allow the transfer of all or a portion of real estate projects in which the investment is decided by Provincial People’s Committee;
  • The Prime Minister decides to permit the transfer of all or a portion of real estate project for projects in which the investment is decided by the Prime Minister.

The legal information that we provided above will hopefully help foreign investors and foreign-invested enterprises to understand the current regulations on real estate business to build appropriate business plan and ensure the legal compliance.

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