On 28 November 2023, the National Assembly adopted the Law on Real Estate Business 2023 (the “LREB 2023”), which will be enforceable from 01 January 2025 and replace the Law on Estate Business 2014 (“LREB 2014”). Below are some notable provisions of the LREB 2023.

We note at the outset that our update below is based on a version that was submitted for the National Assembly’s approval at the Sixth session and may subject to finalization. This legal update should be read with this in mind.

1. Scope of real estate business permitted by foreign-invested enterprises

Rather than general regulations for foreign-invested enterprises (“FIEs”), the 2023 Law has separated into 2 cases: (i) FIEs which are subject to the conditions and requirements under Law on Investment 2020; (ii) FIEs which do not fall into the above cases.

For the first case, the FIEs are allowed to perform real estate business under the same forms as Vietnamese people residing abroad but not holding Vietnamese nationality. In addition, LREB 2023 also permits FIEs in this case to build technical infrastructure instead of only allowing investment in housing and construction works. Other than that, the scope remains the same as that under the LREB 2014.

For the second case, the FIE is treated the same as the domestic enterprises when conducting real estate business. This is a new point worth noting for foreign investors when establishing enterprises to conduct real estate business in Vietnam. Such provision can be said to be a step change to help foreign investors access investment in this industry.

2. Condition of owner’s equity

When it comes to the LREB 2023, it retains the condition of the owner’s equity as stipulated in current regulations on real estate business. Accordingly, such equity shall not be less than 20% of the total investment capital for projects with land use scale of less than 20 hectares, not less than 15% of total investment capital for projects with land use scale of 20 hectares or more. In addition to that clause, LREB 2023 also mandates that when an enterprise has many projects, the owner’s equity must ensure enough of the above ratio of each project in order to implement all projects.

3. Publicizing information about the real-estate, real estate projects to be put into the market

Comparing to the LREB 2014, the scope in this regard is widened under the LREB 2023. While the LREB 2014 only sets out the general information about real estate that an enterprise must publicize. However, LREB 2023 has supplemented and amended the information to be publicized, including: (i) Information on real estate projects; (ii) Information on off-the-plan house and construction; (iii) Information on existing house or construction; and (iv) Information on land use rights with technical infrastructure in real estate projects.

Furthermore, the above information must be made public on the Information system on housing and real estate market and enterprise’s website before putting the real estate, real estate projects on the market.

4. Conditions for land with technical infrastructure in real estate projects to transfer land use rights to individuals to build their own houses

One of the notable conditions in this regard under the LREB 2023 is that projects located in wards, districts, and cities of (i) special class, (ii) class I, II, III of urban areas, and (iii) cases subject to auction of land use rights to invest in housing construction projects according to the provisions of the Land Law will not be allowed to transfer land use rights to individuals to build their own houses while the current legislation only prohibited the projects located in the special class and class I areas. This provision has shown the restriction of Vietnam on projects of plot sale.

5. Deposit threshold

The deposit threshold, which was not previously prescribed under the LREB 2014, is now introduced under the LREB 2023. Accordingly, the deposit shall not exceed 5% of the selling price for contracts of purchase and sale, lease purchase houses, or construction works and construction floor area which are qualified to be put on the market. The deposit agreement must clearly state the price of selling, lease-purchase of (i) the house, (ii) the construction work, and (iii) the construction floor area within the construction work.

6. Bank guarantee for the investor’s financial obligations for off-the-plan house

Bank guarantee is mandatory under the LREB 2014 for the investor’s financial obligations for off-the-plan house, which remains under the LREB 2023. However, LREB 2023 now allows the purchaser to choose whether or not to have such guarantee when signing a contract of purchase and sale or lease purchase of an off-the-plan house. Additionally, LREB 2023 supplements a new regulation that the investor must provide a bank guarantee to the purchaser within 10 days or otherwise agreed between the parties from the date of signing such contract. In addition, the investor can only receive payment according to the contract after the receipt of a letter of guarantee by the purchaser.

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