Update on the new Law on Real Estate Business

As of 28 November 2023, the National Assembly of the Socialist Republic of Vietnam has ratified the Law on Real Estate Business (the “LREB 2023”), which will be enforceable from 1 January 2025.

Accordingly, the LREB 2023 features the below key changes:

Scope of real estate business appertaining to foreign-invested enterprises:

In accordance with the definition of "foreign-invested enterprises" in the Investment Law, the LREB 2023 stipulates that enterprises that meet the investment conditions set out in the Investment Law shall be treated as foreign-invested investors. Accordingly, foreign-invested enterprises may only invest in the construction of apartments or buildings in conjunction with land use rights, invest in infrastructure facilities for real estate projects, rent out apartments, buildings or their areas for subletting, and receive the transfer of all or part of real estate projects to continue construction and trading.

In addition, the new regulations add a type of real estate, namely land areas used for educational, health, sports, cultural, office, commercial, service, tourism, accommodation or industrial purposes, as well as multi-purpose buildings and rights to use land that already has infrastructure within real estate projects.

Real estate eligibility put into the market:

Before real estate is circulated in the market, information and other specified relevant documents must be provided in accordance with LREB 2023 to verify the ownership, detailed position, ability to meet the planned execution of the project and fulfillment of financial obligations for each type of real estate, including off-plan, existing apartments, buildings and infrastructure construction in a real estate project.

To ensure the ability to carry out real estate business, foreign-invested enterprises must not be involved in bankruptcy or insolvency risks, or even maintain a safe ratio of outstanding loans and outstanding bonds to equity; or meet the ability to contribute investment not less than a certain proportion of the total investment of each project. As a rule, a share of 20 percent per project is set as the basic threshold for each area.

Conditional transaction of off-plan housing and building business:

As set out in the LREB 2023, investors may only receive a deposit of a maximum of 5 percent of the sale price or installment plan price set out in the deposit agreement. In relation to the investor's financial obligations for off-plan apartments and buildings, buyers can choose whether or not they want a guarantee when signing a purchase and sale or lease-purchase agreement for an off-plan apartment or building.

The bank guarantees must be handed over to the buyers within 10 days or within a period agreed by both parties from the date of signing the contract. At the same time, the investors can only receive payment in accordance with the contract once the buyers have received a letter of guarantee.

Transfer of real estate projects

In the LREB 2023, the term "real estate project" is understood as an investment project in connection with construction activities. Without the construction of real estate, the transfer of real estate projects is not required to carry out the real estate project transfer procedure described in the LREB 2023.

In addition, the new regulations strengthen the essential documents for the transfer of real estate projects as follows:

Approval of investment projects;
Approval of detailed plan;
Completion of compensation and support for resettlement;
Land use rights;
No decision to suspend or terminate the operation of the project;
Completion of implementation of the decision to impose administrative sanctions.

If part of the real estate project is transferred, the work items or their use or the business purposes of that part must be independent of those of the remaining part of the project.