Vietnam's real estate industry will have a higher demand in property. More investments are expected in the short term as well because foreigners are now allowed to own, for the first time, in the area. This came with the implementation of the new Law on Real Estate Business 2014 ("LREB") and the Law on Residential Housing 2014 ("LRH").
Vietnam foreign lawyer Oliver Massmann has discussed in his article in Duane Morris Vietnam the certain restrictions in the competitiveness of enterprises in the real estate industry, due to some provisions of the LREB and LRH.
1. Legal capital requirement
The third Draft Decree guiding the LREB requires a minimum legal capital of VND50 billion for real estate projects. Yet, it seems to be inconsistent with the general legal capital requirement (i.e., VND20 billion) for enterprises doing business in real estate in the same Draft Decree.
2. Tight deadline for capital contribution
In Articles 48.2 and 74.2 of the 2014 Law on Enterprises, members of the limited liability company must contribute the capital in full within 90 days from the issuance of the enterprise registration certificate.
3. Lack of transitional provisions
The new LREB does not provide a solution on how to deal with agreements signed under the old LREB but are still in effect. While the fourth Draft Decree guiding the LRH provides a transitional clause for contracts signed before July 1st, it does not address all types of contracts but only focuses on the method of calculation and the record of the residential housing area, warranty period of residential housing and parking plot.
4. Foreigners now have right to purchase property in Vietnam
Under Article 161.2(a) of the LRH, foreign individuals and foreign invested enterprises are able to purchase multiple properties in a residential development project, including buildings and separate landed villas/ townhouses. The maximum purchase quantity allowed is 30 percent of the total units in a building and 250 houses in a local area. But, Article 68.4 of the fourth Draft Decree of the LRH limits that foreign organizations/ individuals may only own a maximum of 10 percent of the total number of individual housing in each residential housing project. This could be a restriction not in compliance with the LRH.
