LEGAL UPDATES ON LAND LAW 2024, REAL ESTATE TRADING LAW 2023 AND LAW ON HOUSING 2023

On 29/06/2024, the XV National Assembly issued Law No. 43/2024/QH15 amending and supplementing some provisions of Land Law No. 31/2024/QH15, Law on Housing No. 27/2023/QH15, Real Estate Trading Law No. 29/2023/QH15, and Law on Credit Institutions No. 32/2024/QH15. These Laws shall take effect from August 1, 2024. DPT provides an overview of the new points in these Laws, impacting the current real estate market, trends, and investment opportunities. This is intended to assist foreign investors and foreign-invested economic organizations in timely capturing information and making effective investment decisions.

Vietnam’s real estate market is currently facing many challenges but also offers attractive investment opportunities for foreign investors and foreign-invested economic organizations. To grasp new trends and select projects with sustainable development potential, investors need to closely follow legal policies and government regulations, as well as find reliable local partners to ensure safe and effective investments.

Here are some of the new and adjusted provisions of the relevant laws affecting real estate trading activities for foreign investors and foreign-invested economic organizations:

I. REGULATIONS ON LAND LAW 2024

1. Unification of the definition of Foreign-invested economic organizations

Provisions in the Investment Law, Land Law, Real Estate Trading Law, and Law on Housing have not been consistent in defining “Foreign-invested Economic Organizations”. However, in order to coordinate legal provisions, the newly adjusted Law has now unified the definition of “Foreign-invested Economic Organizations” with that of Investment Law 2020. Accordingly, foreign-invested economic organizations in cases specified in Clause 1 Article 23 Investment Law 2020^[1] (holding more than 50% of the charter capital), shall be considered to apply the conditions and procedures in real estate trading as foreign investors. In case the foreign-invested economic organizations hold 50% or less than 50% of the charter capital, they shall be applied the conditions and procedures in real estate trading as domestic investors.

This indicates that foreign-invested economic organizations must maintain the ownership ratio to be considered either domestic or foreign investors. This may also pose challenges for organizations in adjusting their capital structure to meet legal requirements, especially in cases of capital mobilization or shareholder changes. However, foreign-invested economic organizations treated as domestic investors may face fewer restrictions and have more opportunities when participating in the real estate market.

2. Expansion of land use rights for overseas Vietnamese

The land use rights of overseas Vietnamese have been expanded in Clauses 3 and 6 Article 4 Land Law 2024^[2]. Specifically, Land Law 2024 states that Vietnamese citizens residing overseas have the same land use rights and obligations as domestic citizens. This expands the rights of overseas Vietnamese in areas such as land use, land transactions, and land management.

This change resolves previous shortcomings, where overseas Vietnamese had to ask their relatives in Vietnam to conduct the land transactions in their name. As a result, this group will find it easier to use their land use rights, engage in land transactions, manage and utilize land, and conduct real estate business when living in Vietnam.

3. New regulations on land use rights transfer

The process of transferring land use rights to overseas Vietnamese and foreign-invested economic organizations being leased land with a one-time rental payment for the entire lease period, or being allocated land with land use fee, has seen significant changes as prescribed in Clause 3 Article 41 Land Law 2024^[3]. Accordingly, the State will directly allocate land (without auction or bidding) to foreign-invested economic organizations instead of revoking land to allocate and the State will not reassess the land rent or allocation fee when transferring.

This helps to limit time-consuming procedures for foreign-invested economic organizations and create more favorable conditions for them to invest and do business in real estate in Vietnam.

4. Supplementing the authority to resolve land disputes

Clause 5 Article 236 Land Law 2024^[4] has supplemented the jurisdiction of the Commercial Arbitration to resolve land disputes. This new recognition and approval, rather than just the courts and the People’s Committees having the authority to resolve land disputes, now includes the Vietnam Commercial Arbitration for resolving disputes between parties arising from commercial activities related to land in accordance with the law on commercial arbitration.

Allowing Commercial Arbitration to resolve land-related commercial disputes may reduce the workload of the courts in adjudicating land disputes.

5. Foreign-invested economic organization are allowed to diversify their investment field

A new legal framework allows foreign - invested economic organizations to lease land on rivers, streams, canals, creeks, and springs to conduct aquaculture or use for non-agricultural purposes as stipulated in Point b Clause 2 Article 215^[5].

This provision unleashes a strong wave covering all fields of investment by foreigners and foreign-invested economic organizations, helping to fully exploit Vietnam's resources and minerals. Investment countries such as India, Thailand, etc. may expand their investments, attracting a variety of investors in the near future.

II. REGULATIONS ON REAL ESTATE TRADING LAW 2023

1. Unification of the definition of Foreign-invested Economic Organizations

Real Estate Trading Law 2023 unifies the definition of foreign-invested economic organizations as prescribed in Investment Law 2020. Foreign-invested economic organizations that are not prescribed in Clause 1 Article 23 Investment Law 2020 shall be treated as domestic investors and shall have the same rights and obligations as domestic investors when conducting real estate trading.

2. Expansion of real estate trading rights for overseas Vietnamese

Article 10 Real Estate Trading Law 2023 has stipulated that overseas Vietnamese who are Vietnamese citizens under the nationality law and are permitted to enter Vietnam are allowed to engage in real estate business under the same forms and conditions as domestic Vietnamese citizens. However, overseas Vietnamese who are not Vietnamese citizens (or overseas Vietnamese origin that once held Vietnamese citizens) under the nationality law and are permitted to enter Vietnam shall be applied the same conditions and procedures for real estate business as foreign-invested economic organizations.

This regulation may diversify the investment resources and real estate development in Vietnam while reasonably managing real estate business entities within controlled limits.

3. Maximum deposit for real estate sales and purchases

Clause 5 Article 23 Real Estate Trading Law 2023^[6] stipulates that real estate project investors are only allowed to collect a maximum deposit of 5% of the sale or lease-purchase price for future real estate from customers. At the same time, the new Law also stipulates that the deposit can only be collected after the real estate meets the conditions for business, and the deposit agreement must clearly state the sale, lease-purchase price, and construction floor area.

This regulation aims to reduce the financial burden on buyers while protecting them from financial risks. As a result, it will facilitate investors to have quality and reputable projects.

4. Fixed advance payment ratio

The pre-payment ratio of customers in lease-purchase transactions of future real estate is reduced, and the amount of money customers can pay in advance to the lessor is limited to no more than 50% of the value of the house.

It can be seen that forms of deposit or advance payment in lease-purchase transactions of future real estate are limited to a certain level to ensure customers' rights against risks related to the case that developers receive their money but fail to hand over the future real estate on time. However, real estate business investors are also restricted in terms of capital turnover in cases where the payment amount is limited by the regulations.

5. Conditions for transferring real estate projects

Regarding land procedures for the transferee in real estate project transfers, Article 40 Real Estate Trading Law 2023 sets stricter conditions for transferring part or all of a real estate project. The conditions for transferring a real estate project include:

• Investment project approval; detailed planning approval;
• Completion of compensation and resettlement support; completion of penalty decisions;
• The project's land use rights are not suspended or terminated;
• The project must be released from mortgage if it is under a mortgage;
• The project is still in the implementation period, and a partially transferred project must ensure the independence of the transferred part.

This new regulation adds conditions on documents and materials when transferring real estate projects, enhancing security and transparency before the project transfer. Clear and detailed regulations create a safe and favorable investment environment, attracting both domestic and foreign investors to participate in the real estate market.

However, due to changes in land use rights transfers for foreign-invested economic organizations under the Land Law 2024, consistency and fairness must be ensured when implementing transfer procedures.

6. Supplementing the guarantee conditions while trading real estate in Vietnam

Points b and c Clause 2 Article 9 Real Estate Trading Law 2023 stipulate that real estate business organizations shall ensure maintaining the ratio of credit debt, corporate bond debt over the owner’s equity. When carrying out real estate investment projects, real estate business enterprises shall have owner’s equity not less than 20% of the total investment capital for projects with land use scale under 20 hectares, not less than 15% of the total investment capital for projects with land use scale from 20 hectares or more, and shall ensure the ability to mobilize capital to implement the investment project.

To ensure the feasibility of real estate activities, foreign-invested economic organizations shall comply with legal requirements to minimize the risk of bankruptcy or insolvency. This means that foreign-invested economic organizations shall ensure sufficient financial resources, maintain stability when developing real estate business in Vietnam.

III. REGULATIONS ON LAW ON HOUSING 2023

1. Overseas Vietnamese owning houses in Vietnam

According to Point b Clause 1 Article 8 Law on Housing 2023, overseas Vietnamese including Vietnamese citizens (those still holding Vietnamese nationality) and Vietnamese origin residing and living abroad for a long period (those who once held Vietnamese nationality) are allowed to own houses in Vietnam.

The adjustment to expand the houses ownership rights for overseas Vietnamese allows them to own and manage assets in their homeland, create favorable conditions for returning to live, rest, or invest in personal projects in Vietnam and thereby attract additional investment capital for the economy.

2. Incentive policies for social housing investors

According to the provisions of Law on Housing 2023, investors are exempted from land rental, land use fees, the procedures for determining land prices, calculating land use fees, and land rental fees and are not required to carry out procedures for requesting exemption from land use fees and land rental fees.

Moreover, investors may gain additional profits from developing social housing through commercial areas. According to Point d Clause 2 Article 85 Law on Housing 2023, social housing investors are permitted to account separately for the investment costs of building service, commercial, and commercial housing facilities, excluding them from the social housing cost price and to enjoy all profits from the service, commercial, and commercial housing facilities.

These regulations bring many benefits to investors including cost reduction, simplified administrative procedures, and increased profit opportunities. At the same time, they also positively impact the development of social housing and the real estate market.

3. Granting ownership certificates for mini apartments

Article 57 Law on Housing 2023 has laid a clear legal basis for recognizing individual ownership rights for each mini apartment by issuing ownership certificates and permitting selling, lease-purchasing, and leasing as prescribed in the regulations. This regulation may solve the housing issues for low-income individuals and ensure the security, safety, fire prevention as well as the social welfare.

The newly updated and supplemented points in the Land Law 2024, Real Estate Trading Law 2023 and Law on Housing 2023 may significantly impact the real estate market and foreign investors. The unification of the definition of foreign-invested economic organizations and the expansion of land use rights for overseas Vietnamese may create more favorable conditions for investment and real estate trading.

As Vietnam’s real estate market becomes increasingly competitive with more foreign investors entering, investors shall have clear, effective business strategies and high competitiveness. Foreign investors and foreign-invested economic organizations need to have a comprehensive and flexible strategy to address these challenges, from mastering legal regulations, effectively managing finances, to building good relationships with the community and local authorities.

Foreign investors shall promptly seize investment opportunities in Vietnam’s real estate market and leverage new regulations to optimize benefits. However, foreign investors and foreign-invested economic organizations shall prepare detailed investment plans to ensure compliance with new regulations, maximize benefits and minimize risks.

This article is intended solely for informational purposes and should not be used as legal advice for specific cases. Should you have any inquiries or feedback regarding the content of this article, please do not hesitate to contact us via email: enquiry@dptlaw.vn or via phone number: +84 336662099. We always welcome comments and suggestions from our esteemed readers.

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