Implementation of new land laws must benefit investors

April 10, 2024 | 09:17

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Foreign investors have expressed their concern about the upcoming implementation of new laws on housing, land, and real estate business, which aim to help expand the right to do business and attain ownership in Vietnam.

During the Vietnam Business Forum Conference held in Hanoi last month, representatives of the European Chamber of Commerce in Vietnam (EuroCham) suggested that clear guidelines on land-use terms, and the granting of land use right certificates must be well implemented through from central to grassroot level.

Implementation of new land laws must benefit investors, photo Le Toan

“A good implementation will encourage the interest of foreign investors to put their money into Vietnamese real estate. These reforms, among others, are essential to boost the real estate market and contribute to Vietnam’s social security, continuous economic growth and increasing sustainability,” a representative said.

A decree guiding the Law on Real Estate Business 2023 and a decree on construction, management, and use of information systems on housing and real estate markets will be issued before mid-September.

Meanwhile, a circular on the framework programme for training and fostering knowledge to practice real estate brokerage and operate real estate trading floors will be issued by the Ministry of Construction, and a circular regulating funds on information systems and databases for housing and real estate markets will be issued by the Ministry of Finance before November.

The draft decree details and guides the implementation of a number of articles of the new Law on Housing, while the decree on renovating and rebuilding apartment buildings, and the decree on social housing development and management are also being built.

EuroCham also proposed that the government carry out legal reforms, which currently discourage investors, to promote investment in hotel apartments, hotel residences, and hotel offices.

“From our understanding of the latest draft regulations, we endorse legal reforms to promote investments in condotels, hometels, and officetels,” said a EuroCham representative.

Additionally, to further the protection of foreign investors’ rights, EuroCham recommends expediting the issuance of land use right certificates in practice. This also pertains to the publication of a foreign ownership prohibited projects list that will increase the transparency of the Vietnamese real estate market for foreign investors.

In the revised Law on Real Estate Business, each developer can only allocate a specific number of its housing products in each project to foreign buyers. This limitation encompasses a maximum of 30 per cent for apartments and a maximum of 250 landed houses within a commune and ward boundary.

It also stipulates clearly that the government will provide detail guidelines of areas that fall within the criteria of national defence.

According to the law, local authorities are responsible for approving lists of projects which are not located in national defence and security areas, according to government regulations, and are allowed to be sold to foreigners. However, local approval is still quite slow, preventing opportunities for many investors.

Meanwhile, Seck Yee Chung, vice chairman of the Singapore Chamber of Commerce Vietnam, said that the foreign community recognised the efforts made to improve the regulatory framework around investments and activities in relation to land and real estate.

“We look forward to the meaningful implementation of these new laws and the issuance of draft decree for further review,” Chung said.

In particular, the foreign community hopes to see more transparency and efficiency around land clearance and compensation, access to sites by way of auction or project bidding, and land pricing mechanisms.

“We hope that the implementation of these new laws will create more legal certainty around mixed used development, condotels, and projects which take on separate floors as opposed to the whole building. It is also important to improve the ability for the public to have access to land related information. For example, the ability to search for the certificates of land use rights,” Chung added.

“With a significant number of projects and industrial parks with 10-15 years of land tenure left, it is important to have plans and/or guidance as to what happens to these projects at the end of the tenure.”

Hai Nguyen, founder and managing partner Finhome.com

We believe that new legislation will create more transparency and meaningful impacts for Vietnam’s real estate market.

Firstly, the revised law will help overseas Vietnamese to own and invest in Vietnam’s real estate market more easily. Approximately six million overseas Vietnamese are residing in more than 130 countries, with over 80 per cent in developed countries, according to the State Committee for Overseas Vietnamese Affairs.

Vietnam has been in the top 10 countries in the world in terms of remittance recipients for several consecutive years. The Vietnamese diaspora is an important force in reshaping Vietnam’s real estate market.

Secondly, the clarity of the new law will help nurture innovation and digital transformation in the real estate and tech ecosystem. Nowadays, there are many sophisticated real estate business models addressing customers’ problems such as rent-to-own, buy-before-sell, crowdfunding, digital mortgage, real estate tokenisation, short-term stays, or long-term co-living.

Finally, the new law will strengthen confidence and offer better protections for foreign investors, especially venture capital firms. Besides innovative products, an experienced founding team, and a comprehensive legal framework is a vital reason for venture capital firms to decide to invest in a new market.

Duong Thuy Dung, executive director CBRE Vietnam

The last few months marked a pivotal moment for the Vietnamese real estate market with the approval of significant laws. These legal frameworks play an important role in many aspects, from politics and socioeconomics, to national security and the environment.

These legal frameworks hold immense importance in various aspects, encompassing politics, socioeconomics, national defence, security, and environmental sustainability.

The new real estate law has narrowed the scope of regulation compared to the law of 2014. These changes address the overlapping scope of regulation with other important laws such as those on land, housing, investment, and management and use of public property, as well as other related laws.

With new regulations, the upcoming real estate business law shows a clear and independent delineation of the specialised real estate field in relation to other fields related to investment and land. For example, the transfer of land use rights and real estate projects as collateral for debt recovery will be carried out according to the Law on Credit Institutions.

The Law on Real Estate Business amends and clarifies the regulations on foreign-invested economic organisations, which are not required to carry out investment procedures applicable for foreign investors under the provisions of the Law on Investment, and are allowed to conduct the real estate business as same as the domestic organisations and individuals.

This amendment helps create better conditions and expand the scope of operations for foreign-invested economic organisations in specific cases while ensuring consistency with the Law on Investment.

David Jackson, principal and CEO Avison Young Vietnam

Vietnam is forecasted to be one of the 20 fastest-growing economies globally in 2024 and is considered the second most attractive market in Southeast Asia.

The demographics of Vietnam linked with opportunities in the real estate market has drawn in foreign investors and will result in active merger and acquisition activities. Both buyers and sellers are actively involved in negotiations, indicating a growing confidence among investors in the potential of the real estate sector. Segments which are appealing to foreign investors include residential, industrial, land and development acquisitions, and the hotel and hospitality.

Investor confidence has increased since ratification of the revised real estate laws. These are believed to pave the way for more diversified market offerings, ensure more transparent and safer transactions for market participants, from investors and owners to developers.

Observing the cycles of development in the Vietnam real estate market, I believe that these legal documents, once in full force, will facilitate a new growth cycle, opening new opportunities for investors. Continuous efforts from the Vietnamese government in improving the legal and financial structures will help expand the investment channels, re-activate the flow of capital in the market, and re-enforce investors’ confidence in the long-term potentials of the country.

Having said that, challenges remain in law enforcement which may wear out the above efforts and expectations. For example, regarding the issuance of land use rights certificate for condotels, existing projects were already granted investment certificates based on the Law on Tourism, not the Law on Real Estate Business. Consequently, local authorities face difficulties in deciding whether these projects complied with the latter law, thereby prolonging the issuance of certificates for such projects.

To solve this problem, more detailed and consistent guidelines, and case studies are needed, as these are crucial for local authorities to take reference for implementation.

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Senior partner Duyen Ha Vo and senior associate Tram Dang of VILAF explore the potential implications of upcoming changes on land acquisitions of developers engaged in real estate, energy, and infrastructure projects.

By Bich Ngoc

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