The National Assembly of Vietnam has passed the Law on Real Estate Business No. 29/2023/QH15 (“LOREB 2023”) on 28 November 2023, with the law set to come into effect on 1 January 2025. This new legislation replaces the Law on Real Estate Business 2014 and introduces several key amendments designed to address existing challenges and promote a stable, healthy, and transparent real estate market in Vietnam.
Key highlights of LOREB 2023 include:
Clear Definition of and Permissible Business Scope for Foreign-Invested Enterprises
LOREB 2023 now uses terms consistent with the 2020 Investment Law by referring to "foreign-invested enterprises" as "foreign-invested business organizations." This change clarifies the classification and rights of foreign investors, allowing certain foreign-invested entities to enjoy the same rights as, and conduct the full range of real estate business activities similar to, domestic companies. This includes the right to purchase real estate for development or resale and lease land equipped with infrastructure, making it easier for foreign investors to engage in the market.
Enhanced Clarity for Non-Residential Real Estate
The new law provides detailed provisions on non-residential real estate, including properties used for education, healthcare, commerce, tourism, and mixed-use purposes. Investors can now sell portions of these properties, such as individual hotel rooms or commercial floors, provided they meet specific design and regulatory criteria. This clarity facilitates smoother transactions and boosts investor confidence.
Ensuring the Financial Capacity of Developers
LOREB 2023 maintains the requirement for developers to have a minimum equity capital ratio, ensuring financial stability. Projects under 20 hectares require at least 20% equity, while larger projects need 15%. Additionally, developers must manage their credit and bond debt ratios to ensure robust financial health, enabling effective project implementation.
Regulating Off-Plan Transactions
Developers must now declare their intention to sell properties off-plan during the project's licensing phase and settle all land-related financial obligations beforehand. The law caps buyer deposits at 5% of the sale price and restricts advance payments, ensuring better financial management and buyer protection. Moreover, previously mandatory bank guarantees for off-plan sales may now be waived at the buyer’s option, thus reducing costs and offering more flexibility.
Simplified Project Transfer Conditions
The new law eliminates the need for a land use rights certificate for project transfers, provided the transferor has fulfilled all financial obligations. This simplification allows smoother project transfers and reduces administrative hurdles, facilitating more dynamic real estate transactions.
Expanded Information Disclosure Requirements
LOREB 2023 significantly expands the scope of information that developers must publicly disclose. This includes detailed project and transaction information, enhancing transparency and enabling better-informed investment decisions. Compliance with these disclosure requirements is now a condition for obtaining sale permits, ensuring accountability.
Property Ownership for Foreigners
Foreign ownership remains limited to residential units within development projects. However, the streamlined regulations make it easier for foreigners to invest in Vietnam's residential market, boosting international interest and participation.
Regulating Real Estate Brokers
To enhance accountability and service quality, LOREB 2023 abolishes independent brokerage practices, requiring brokers to operate under a licensed real estate service enterprise and have the relevant brokerage practicing certificate (as to individuals). This measure aims to professionalize the brokerage sector, improving overall market standards.
Indeed, LOREB 2023 is designed to streamline real estate operations, enhance investor confidence, and promote sustainable growth within Vietnam's real estate sector. By addressing previous ambiguities and introducing clear guidelines, the new law creates a more stable and efficient market environment. These amendments are expected to attract more foreign investment, encourage domestic development, and support the continued growth of Vietnam's real estate industry.
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