New Decree regulating the implementation of the Law on Real Estate Business

On 6 January 2022, the Government issued Decree No. 02/2022/ND-CP providing the implementation of the Law on Real Estate Business 2014 ("Decree 02") which will take effect from 1 March 2022. The purpose of Decree 02 is to facilitate investment into the real estate sector while simultaneously assuring greater transparency.

We would like to bring to your attention the following crucial changes introduced by Decree 02:

Removal of regulation on legal capital applicable for real estate business

Previously, the companies engaging in real estate business had to surpass the official minimum legal capital requirement of VND 20 billion. Decree 02 abolishes the requirement of affixed minimum legal capital and replaces it with regulations under which the minimum capital requirement depends on the size of the project site as well as on the level of investment. Accordingly, to develop a real estate project, the investor must have equity of (i) not less than 20 percent of the total investment capital for projects using less than 20 hectares of land; or (ii) not less than 15 percent of the total investment capital for projects using 20 hectares or more.

New issuance of standard contractual templates for real estate transactions

Unlike the old regulations under which templates were only a reference or starting point for the negotiation of the parties, Decree 02 now clearly introduces the requirement to draft certain contracts in accordance with the standard contracts provided by the government as attachments to Decree 02, including the form of the contract as well as key terms and conditions therein. The types of contracts which fall under this new requirement include, among others, sale and purchase of real estate, lease and sublease of real estate, lease purchase of real estate and transfer of real estate projects.

New conditions for conducting real estate business and transfer of real estate projects

The Decree 02 further requires that certain information about the real estate company must be publicized, such as corporate information, mortgage information, quantity and types of real estate products to be traded, sold or transferred as well as other products. Any change to the publicized information must be publicly updated without delay.
Furthermore, it has now been clarified that the Law on Investment 2020 only applies on a transfer of a project, if the project has approved investors (as prescribed in the Law on Investment 2020) or the project has been granted an Investment Registration Certificate. The relevant authority would then be the Department for Planning and Investment. Otherwise, the People’s Committee will be responsible and the regulations of Law on Real Estate Business will apply.
Another important improvement is that Decree 02 defines the responsibilities of the relevant authorities in charge of collecting opinions and contents of required appraisal opinions to be collected in more detail. This also includes a timeline for the opinion collection process, which facilitates planning of the process and helps the involved parties to estimate the milestones for the transaction.

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