SOME NEW POINTS OF RELATED LAWS AFFECTING THE REAL ESTATE MARKET IN VIETNAM

SOME NEW POINTS OF RELATED LAWS AFFECTING THE REAL ESTATE MARKET IN VIETNAM

SOME NEW POINTS OF RELATED LAWS AFFECTING THE REAL ESTATE MARKET IN VIETNAM

Assoc. Prof. Dr. Ngo Thi Phuong Thao

Dr. Nguyen Thanh Lan

National Economics University

Introduction

Real estate is one of the important and rapidly developing business sectors in Vietnam over the past two decades. Conducting transactions in real estate business (buying, selling, leasing, and owning real estate) requires strictness and transparency in legal regulations. This is why real estate business laws play a crucial role in ensuring fairness, safety, and stability in the market, attracting the interest of market participants.

In Vietnam, the legal framework related to the real estate market is being adjusted and gradually improved to meet development needs. Recently, laws directly related to business activities in the real estate market have been enacted and are being prepared for implementation.

Notably, there are three laws that have a direct and significant impact on the Vietnamese real estate market: the 2024 Law on Land No. 31/2024/QH15; the 2023 Law on Housing No. 27/2023/QH15; the 2023 Law on Real Estate Business No. 29/2023/QH15. This article focuses on reviewing, analyzing, and evaluating the significant changes of these three laws on real estate business activities and their impact on the Vietnamese real estate market in the near future.

I. Some New Points of the 2024 Law on Land and Its Impacts on Vietnam’s Real Estate Market

The Law on Land is a crucial law, affecting most entities in the economy and influencing various aspects of social life. It holds a central role in the legal system regarding land and real estate (RE), and is interconnected with many other legal regulations.

On January 18, 2024, the National Assembly passed the 2024 Law on Land (Law No. 31/2024/QH15), which consists of 16 chapters and 260 articles. The law revises and supplements 180 out of 212 articles of the 2013 Law on Land and introduces 78 new articles.

This is an important event marking new changes in land policy and law following the spirit of Resolution No. 18-NQ/TW dated June 16, 2022, of the Central Committee of the 13th Party Congress. It aligns with the Constitution, ensures consistency and unity with the legal system, and resolves difficulties and obstacles identified during the practical review of the 2013 Law on Land.

The 2024 revised Law on Land aims to improve institutions and policies on land in accordance with the socialist-oriented market economy development framework. It addresses overlapping and conflicting issues in policies and laws related to land.

Accordingly, the provisions of the 2024 Law on Land, along with the revised Law on Housing and the revised Law on Real Estate Business, represent a significant step towards completing the institutional framework, promoting a healthy, transparent, and sustainable development of the land, construction, and real estate markets in Vietnam. Some key points of the 2024 Law on Land aimed at commercializing land use rights and developing the real estate market include:

Firstly: Expanding land use subjects, increasing opportunities to access and use land, and extending the limit on agricultural land use rights transfer for individuals. This serves as a basis to increase land supply and the participation of land supply entities in the market.

– Overseas Vietnamese officially become land use subjects and enjoy almost all land use rights like Vietnamese citizens (except for mortgage rights, which are limited to mortgages at credit institutions authorized to operate in Vietnam) (provisions in Article 41, the 2024 Law on Land);

– The regulations supplement some benefits for economic organizations with foreign investment capital and overseas Vietnamese, such as the right to receive the transfer or sublease of land use rights in industrial zones and high-tech zones; they are also encouraged to invest in infrastructure in high-tech zones and for the purpose of developing science and technology, etc. (provisions in Article 41, the 2024 Law on Land);

– Article 176 of the 2024 Law on Land stipulates that the limit on agricultural land use rights transfer is expanded to up to 15 times the land allocation limit for individuals for each type of land; it allows the accumulation and concentration of agricultural land through transfer, conversion, capital contribution, lease, and business cooperation of land use rights, creating conditions for organizations and individuals with financial capacity and technical knowledge to access land, invest in commercial agricultural production, and reduce the state of abandoned or inefficiently used agricultural land;

In addition, the 2024 Law on Land permits individuals who are not directly engaged in agricultural production to receive transfers of paddy land. This regulation is different from the 2013 Law on Land. 

Specifically, according to Clause 3, Article 191 of the 2013 Law on Land, households and individuals not directly engaged in agricultural production were not allowed to receive transfers or gifts of paddy land use rights. However, in Section 5, Chapter III of the 2024 Law on Land regarding the conditions for exercising land use rights, this provision has been removed.

Clause 7, Article 45 of the 2024 Law on Land stipulates: “Individuals not directly engaged in agricultural production who receive transfers or gifts of paddy land use rights exceeding the limit specified in Article 176 of this Law must establish an economic organization and have a land use plan for paddy land, including the contents specified in Clause 6 of this Article, and be approved by the district-level People’s Committee, except in cases where the recipient is an heir.”

Additionally, the law supplements provisions allowing paddy land users to change the structure of crops and livestock on paddy land, to use part of the land area for constructing facilities directly serving agricultural production, and to use it for combined purposes such as commerce, services, livestock, and medicinal plant cultivation without changing the land type as determined under the Law on Land.

These provisions help land users enhance their autonomy in choosing effective agricultural land use options within the framework of the law.

Secondly: The 2024 Law on Land allows land users the flexibility to choose the form of land lease payment, either annual payment or one-time payment for the entire lease period. This regulation encourages land users to choose the State’s land lease method that suits their financial capacity and capital mobilization abilities in land and real estate development projects.

Article 30 of the 2024 Law on Land stipulates that individuals and enterprises allocated or leased land by the State can flexibly choose to pay land rent either once or annually. This provision facilitates flexibility in balancing and allocating capital for individuals and enterprises when implementing investment projects.

For real estate projects (mixed urban areas, rural residential areas, urban renovation and embellishment projects; industrial zone real estate, tourism real estate, office real estate, social housing, worker accommodation in industrial zones, housing for the armed forces, etc.), annual land rent payments can be expected to reduce initial investment costs, thereby contributing to lower housing prices and positively impacting the demand in the real estate market.

The 2024 Law on Land also adds a provision that annual land rent is applied stably for a 5-year cycle from the time the State decides to lease the land, allowing for the conversion of land use purposes associated with changing to the form of the State leasing land with annual rent payments.

The land rent for the next cycle is calculated based on the land price table of the year in which the next land rent is determined. This regulation serves as a basis for land users to develop investment plans and estimate financial plans in fulfilling their financial obligations when using land.

The flexible conditions in allocating land-related costs combined with financial incentives (land rent), and funding for projects with low commercial value such as social housing, worker accommodation in industrial zones, housing for the armed forces, etc., are crucial and urgent conditions to address housing issues for low-income groups and ensure social welfare.

Thirdly: Determining land prices based on market mechanisms.

The 2024 Law on Land provides for the abolition of land price frames and the issuance of land price tables. Accordingly, land price tables are to be constructed annually, with the first land price table to be published and applied from January 1, 2026, and adjusted from January 1 of the following year, helping the land price table to approach market land prices.

In addition, the 2024 Law on Land stipulates four methods for land valuation: the comparison method, the income method, the residual method, and the land price adjustment coefficient method to determine specific land prices.

In cases where it is necessary to prescribe other land valuation methods not yet regulated, the Government proposes and obtains the approval of the National Assembly Standing Committee to ensure smooth operation of land valuation for socio-economic development.

The law also clearly identifies the national land database and the national price database as prioritized sources of input information when using them for land valuation. It stipulates the construction of land price tables according to value zones and standard parcels for areas with digital cadastral maps and land price databases.

This is an important new point, facilitating the valuation of land closer to market prices, addressing longstanding issues in land price determination (especially the phenomenon of having two prices – state-determined land prices being much lower than market prices), and serving as a basis for various purposes such as compensation, site clearance, financial obligations to the State, real estate valuation, project cost-effectiveness calculations, and clearly defining the responsibilities of related parties.

However, for enterprises and investors, the application of land price tables closer to market prices may increase land use costs. Additionally, constructing annual land price tables, while helping prices to approach the market, will also increase pressure on human resources, technology, and responsibility for local authorities.

The 2024 Law on Land also expands the composition of the specific land valuation council. In addition to specialized agencies under the People’s Committee, representatives of land valuation consulting organizations and land price experts can be invited to participate as council members, along with representatives of the Vietnam Fatherland Front at the same level and other socio-political organizations, to ensure independence and objectivity in the valuation process.

Fourthly: Clearly defining cases of land recovery with specific provisions on ensuring compensation, support, and resettlement when recovering land.

The 2024 Law on Land stipulates that land is only recovered in truly necessary cases for national and public interests (31 cases, along with a “sweeping” clause to be decided by the National Assembly according to a streamlined procedure). The law also clearly defines the responsibility to complete the approval and arrangement of resettlement before making a decision on land recovery, ensuring that those whose land is recovered have living conditions at least as good as or better than before (housing, employment, income, etc.).

These provisions aim to ensure transparency, prevent widespread land recovery, and reduce negative and illegal practices in reality. They also promote a mechanism for voluntary agreements on land use rights between investors and land users (with land prices expected to be closer to market prices), meeting the actual needs of people and businesses for housing and business development.

Additionally, the 2024 Law on Land supplements Chapter VIII on the development, management, and exploitation of land funds. It stipulates the principles of developing, managing, and exploiting land funds, requiring that the development, management, and exploitation of land funds must adhere to land use planning, land use plans, proper land use purposes, transparency, reasonableness, and efficiency according to legal regulations. It ensures the requirements of socio-economic development and supports resettlement.

Furthermore, the State’s land fund development organization model (at local levels) will become the largest land fund supplier in the primary land market, serving socio-economic development investment through the implementation of land use rights auctions and project bidding involving land use. This will contribute to the adjustment of land rent differentials in investment projects involving land use to the state budget for public interests.

Fifthly: Supplementing business conditions and sanctions to enhance the enforcement of the 2024 Law on Land.

Strict conditions when mortgaging land use rights (must have a land use rights certificate, no disputes, not subject to enforcement measures, no overdue financial obligations, within the land use period, not subject to urgent measures or blockade as required by the management agency, other credit institutions) and transferring land use rights (must repay exempted or reduced amounts; individuals not directly engaged in agricultural production receiving paddy land transfers beyond the limit must establish enterprises, etc.).

Additionally, supplementary sanctions include additional land use fees, land rents for projects not put into use or delayed, and land recovery if financial obligations are not fulfilled. Prohibited acts include violations of land support policies for ethnic minorities; unregistered transactions on land use rights with competent authorities; failure to provide accurate, timely information.

Stricter conditions in the land sector will help limit violations, prevent abuse of state incentives, create transparency, healthiness, and sustainability for the land and real estate markets, and enhance credit quality and reduce risks for the banking system when developing real estate credit.

Regarding new regulations on agreements to acquire land use rights for commercial housing projects, the 2024 Law on Land (Article 119) stipulates that investors must acquire 100% of residential land to implement commercial housing projects.

Thus, if an investor already has land use rights, there must be residential land within the plot to implement commercial housing projects. When purchasing new land for a project, the investor can only purchase 100% residential land.

This tightens project implementation for investors, as previously, enterprises could acquire land other than residential land for projects if it conformed to the land use plan. The new regulation directs housing project development into two main approaches: the State recovers land for auction or earmarks project areas and then tenders to select investors.

The form of agreement to acquire residential land for commercial housing projects will have higher requirements. This regulation will compel investors to have sufficient strength to accumulate enough land for projects, possess substantial resources, or form joint ventures and alliances to implement projects, thereby helping the market filter residential real estate investors with strong financial resources, project development experience, and capabilities.

Sixthly: Revised regulations related to land classification; public disclosure of land use planning and plans; decentralization and delegation in land management for localities; administrative procedure reform regarding land; clearer regulations on determining land taxes.

– Regarding land classification regulations:

The 2024 Law on Land and the 2013 Law on Land both classify land into agricultural land, non-agricultural land, and unused land based on usage purposes. However, the 2024 Law on Land revises some regulations as follows:

1. i) Does not list other types of agricultural land.
2. ii) Does not list other types of non-agricultural land.

  iii) Revises the definition of unused land as follows: Unused land is land without an identified usage purpose and not yet allocated or leased.

Additionally, the 2024 Law on Land includes a provision (Clause 1, Article 218 of the 2024 Law on Land) on multi-purpose land use.

The 2024 Law on Land’s land classification is consistent with the practical development of land and real estate in Vietnam in recent times. This is a legal basis for registering, issuing land use rights certificates, and assets attached to the land (Red Book) for real estate created from mixed land use purposes.

– Regarding the disclosure of information related to land use planning and plans:

Article 75 of the 2024 Law on Land stipulates that all types of land use planning and plans must be publicly disclosed as follows:

i) The public disclosure of national land use planning is carried out according to the provisions of the law on planning.

ii) National land use plans; provincial land use planning and plans; district land use planning and annual district land use plans, after being decided and approved by competent state agencies, must be publicly disclosed.

This regulation aims for transparent disclosure of information regarding land use planning and plans and is compatible with the related provisions of the Law on Planning.

– Regarding decentralization, delegation, and administrative procedure reform in land management:

The 2024 Law on Land continues to promote decentralization, delegation, and the reform of administrative procedures in land management at local levels. These regulations help localities be more proactive in administration and implementing state management of land, benefiting the people. Specifically, the 2024 Law on Land delegates:

i) The Prime Minister approves provincial land use planning, integrating provincial land use plans into provincial land use planning content, and assigns localities the task of determining land use indicators in land use planning so that they can proactively develop their local socio-economic development;

ii) The district-level People’s Committee decides on land recovery for national defense, security, and socio-economic development for national and public interests, without distinguishing between land users as in the 2013 Law on Land;

  iii) The authority to approve national land use plans is delegated to the Government, while the authority to decide on provincial land use plans is delegated to the provincial People’s Council, creating flexibility in administration for both the Government and localities;

iv) Specific conditions and authority for allowing the conversion of land use purposes are stipulated, including the delegation of the entire authority to approve the conversion of paddy land, protection forest land, special-use forest land, and natural production forest land to the provincial People’s Council;

v) The authority to decide on specific land prices is delegated to the Chairperson of the district-level People’s Committee for cases of land allocation, land lease, land use conversion, land use rights recognition, land use term extension, land use term adjustment, starting price determination for land use rights auctions, detailed construction planning adjustment, and land recovery within the authority of the district-level People’s Committee.

Thus, the 2024 Law on Land has specific regulations and decentralizes to local levels while establishing tools to control the authority of agencies and competent individuals in land management.

Many related contents have been reduced compared to before, such as the absence of project lists in land use planning, facilitating localities in organizing and implementing to suit their conditions.

– Regarding regulations on determining land taxes:

When determining non-agricultural land use tax, the taxable land price has been adjusted according to the provisions of Article 249 of the 2024 Law on Land, which amends Clause 3, Article 6 of the 2010 Law on Non-Agricultural Land Use Tax.

Accordingly, the price of 1m² of land is the land price according to the land price table corresponding to the usage purpose and is stabilized in a 5-year cycle.

Additionally, the 2024 Law on Land revises the way taxable income from real estate transfers is determined. Specifically, Article 247 of the 2024 Law on Land stipulates, “Taxable income from real estate transfers is determined as the transfer price each time; in case of transferring land use rights, taxable income is calculated according to the land price in the land price table.”

This is different from the current regulation (Clause 1, Article 14 of the 2007 Personal Income Tax Law (amended in 2014)) – which stipulates that taxable income from real estate transfers is determined as the transfer price each time.

II. Some New Points of the 2023 Law on Housing and Its Impacts on Vietnam’s Real Estate Market

The 2023 Law on Housing No. 27/2023/QH15 (hereinafter referred to as the 2023 Law on Housing) was passed by the XV National Assembly on November 27, 2023. It comprises 13 chapters and 198 articles (retaining the same number of chapters but reducing 17 articles compared to the 2014 Law on Housing). It includes many important new points, institutionalizing the guidelines and orientations of Resolution No. 18/NQ-TW dated June 16, 2022.

The 2023 Law on Housing stipulates ownership, development, operational management, use of housing, housing transactions, and state management of housing in Vietnam, except for transactions involving the purchase, lease-purchase, and rental of commercial housing by enterprises, cooperatives, and cooperative unions with real estate business functions, and the transfer of housing purchase contracts in accordance with the law on real estate business. The law has several key new points that impact the people, businesses, and the economy as follows:

Firstly: The 2023 Law on Housing clearly stipulates the construction of a National Housing Development Strategy, provincial housing development programs, and plans to create a legal basis for localities to implement state management of housing.

Building on the 2014 Law on Housing, the amended Law on Housing dedicates two chapters (Chapters III and IV) to the methods and foundations for developing housing planning, strategies from the national to provincial levels, as well as regulations on housing development planning and investment project procedures.

The amended law also clarifies planning by requiring housing development and prohibiting subdivision and land sales in special urban areas, Grade I, Grade II, and Grade III cities (Article 5).

This regulation will contribute to improving the quality of planning, ensuring unified orientation nationwide, while housing development strategies must suit each urban type. It will also enhance the effectiveness and efficiency of planning in practice, addressing issues in project implementation by enterprises.

Additionally, the rampant subdivision and land sales will be controlled, reducing the impact on planning, social welfare in the area, and decreasing instances of fraud where people and individual investors in housing have been victims, as seen recently.

Secondly: The 2023 Law on Housing continues to inherit and adjust some provisions from the 2014 Law on Housing related to housing ownership by foreign organizations and individuals.

The 2023 Law on Housing inherits the provisions of the 2014 Law on Housing and introduces some noteworthy new content. It stipulates the rights and obligations of housing ownership for foreign individuals in two cases:

(i) In the case of foreign individuals married to Vietnamese citizens residing in Vietnam, they are allowed to own housing and have the rights and obligations of housing owners like Vietnamese citizens.

(ii) In the case of foreign individuals married to overseas Vietnamese who are allowed to enter Vietnam, they are allowed to own housing and have the rights of housing owners like overseas Vietnamese (Articles 20 and 21).

This difference mainly lies in housing ownership rights associated with land use rights, as regulated by the 2024 Law on Land. Accordingly, overseas Vietnamese are also considered land users and enjoy nearly all the rights of Vietnamese citizens (mortgage rights are limited to mortgages at credit institutions authorized to operate in Vietnam).

This regulation helps align with the 2024 Law on Land and the 2023 Law on Real Estate Business, facilitating overseas Vietnamese and foreigners’ connection to Vietnam. It contributes to attracting remittances, foreign investment, and improving real estate product consumption while ensuring state management requirements for land and national security.

However, the conditions for housing ownership by foreigners remain somewhat general, as it only states “Foreign individuals are allowed to enter Vietnam” (Article 17). Therefore, there needs to be detailed guidance and regulations on certain conditions for housing ownership in Vietnam for foreigners (visa duration, employment in Vietnam, etc.).

Regarding the housing ownership rights of foreign organizations: The 2023 Law on Housing stipulates that foreign-invested enterprises can own housing in housing development investment projects. The regulations regarding (i) foreign-invested enterprises owning housing and (ii) ownership conditions are specified in Articles 17 and 18 of the 2023 Law on Housing. Specifically:

– Foreign-invested economic organizations can own housing in housing development investment projects of their enterprises in Vietnam, provided that the organization is the investor of the housing construction project;

– Foreign-invested economic organizations, branches, and representative offices of foreign enterprises can own housing through the purchase or lease-purchase of commercial housing from the project investor, provided they have a valid investment certificate at the time of signing housing transactions;

– Foreign-invested economic organizations, branches, and representative offices of foreign enterprises can own housing through the purchase or lease-purchase of housing from foreign organizations or individuals who have legally owned housing in Vietnam.

Thirdly: The 2023 Law on Housing does not stipulate the ownership duration of condominiums and includes provisions on incentives for implementing housing renovation projects.

The 2023 Law on Housing continues to inherit the old regulations on applying the usage period of condominiums (based on the quality of the building and the inspection conclusions of competent authorities).

Accordingly, this law dedicates one chapter to stipulate the renovation and reconstruction of condominiums (Chapter V) to address the difficulties in relocating old condominiums for renovation as seen currently. Notably, it adds provisions exempting the procedures for determining land prices, land use fees, and land rents, and there is no need to perform procedures for requesting exemption of land use fees and land rents for investors implementing housing renovation projects (Article 63).

This content helps resolve disputes over condominium ownership duration and enhances the efficiency of housing renovation, reducing procedures and costs to increase the attractiveness for investors renovating old condominiums. It also shortens project implementation time, increases market supply, and benefits the public.

However, attention must be paid to inspecting the quality of condominiums and ensuring suitable conditions for renovating old condominiums during implementation.

Fourthly: The 2023 Law on Housing supplements regulations on housing development, tightens the rules, and allows the issuance of land use rights certificates (Red Book) for multi-storey, multi-apartment housing developments by individuals (mini-apartments) that meet legal conditions.

The 2023 Law on Housing No. 27/2023/QH15 has revised and supplemented regulations on the development of commercial housing, official-duty housing, resettlement housing, and private housing to facilitate organizations, businesses, and individuals in housing development. Specifically:

– New regulations have been added regarding the stages of housing construction investment projects, and the Government is assigned to detail the stages of housing construction investment projects to create a clear legal corridor and facilitate businesses participating in housing construction investment.

– Revised and supplemented regulations on investors in commercial housing construction projects transferring land use rights to implement commercial housing construction projects according to the Law on Land. It stipulates that investors have land use rights or agree to receive (amend) transfers, which fall under the cases of approved investment policies, and simultaneously approve the investor as the commercial housing construction project investor (without auction or bidding).

– Revised and supplemented regulations on subjects and conditions for renting official-duty housing, aiming to expand the subjects eligible to rent official-duty housing to ensure stable living conditions for work.

– Revised and supplemented some regulations on developing resettlement housing to ensure consistency and synchronization with the revised Law on Land.

– Supplementing regulations on the development of multi-storey, multi-apartment housing by individuals for sale, lease-purchase, and rental, with stricter conditions for construction investment to ensure the safety of people’s lives and property, as specified in Article 57:

  + Individuals with residential land use rights investing in the construction of multi-storey, multi-apartment housing must meet the conditions to be the investor of a housing construction investment project. The construction must comply with the laws on construction and other relevant legal regulations for housing construction investment projects in the following cases: (1) Housing with 02 or more storeys where each storey has designed and constructed apartments for sale, lease-purchase, or a combination of sale, lease-purchase, and rental; (2) Housing with 02 or more storeys and a scale of 20 or more apartments for rental.

  + Individuals with residential land use rights constructing housing with 02 or more storeys and a scale of less than 20 apartments where each storey has designed and constructed apartments for rental must:

    (1) Meet the requirements for constructing multi-storey, multi-apartment housing by individuals as stipulated by the Minister of Construction;

    (2) Meet fire safety requirements according to the laws on fire prevention and fighting for multi-storey, multi-apartment housing by individuals;

    (3) Meet the conditions stipulated by the provincial People’s Committee regarding traffic routes to ensure fire-fighting vehicles can perform fire-fighting tasks at locations with multi-storey, multi-apartment housing by individuals.

The 2023 Law on Housing permits the issuance of land use rights certificates (Red Book) according to the laws on land, and the sale, lease-purchase, and rental according to this Law and the laws on real estate business for mini-apartments if they meet legal conditions, with the Government providing detailed guidance.

Thus, this new regulation in the 2023 Law on Housing aims to promote both social welfare and safety (for the public) and business aspects (for enterprises) by legalizing the mini-apartment model (allowing for the issuance of certificates) based on compliance with legal regulations.

However, the investment in constructing mini-apartments is also more strictly controlled by requiring individuals to meet the conditions to be investors in housing construction projects, contributing to limiting unfortunate consequences as seen recently. Additionally, attention should be paid to the transitional provisions regarding this issue.

Fifthly: The 2023 Law on Housing supplements and adjusts policy regulations related to social housing development.

– Regarding land funds for social housing development:

The 2023 Law on Housing No. 27/2023/QH15 clearly defines the responsibility for allocating land funds for social housing development as a responsibility of local governments.

Accordingly, it assigns the responsibility to provincial People’s Committees to allocate sufficient land funds for social housing development according to the approved Housing Development Program and Plan during the process of planning and approving construction and urban planning. This delegation of authority, coupled with responsibility, aims to create a flexible mechanism for local implementation.

– Regarding forms of social housing development:

The 2023 Law on Housing has added two new forms: worker accommodation development and housing development for the people’s armed forces.

Accordingly, in addition to being able to buy, rent, and lease-purchase social housing, workers and laborers in industrial zones can also rent worker accommodations. The people’s armed forces can buy, rent, and lease-purchase housing for the armed forces. Moreover, it proposes that enterprises be allowed to rent social housing to arrange accommodation for their workers and laborers.

It also includes provisions allowing the Vietnam General Confederation of Labor to be the managing body of social housing investment projects financed by union funds for workers and laborers eligible for social housing policies to rent.

– Regarding the conditions for benefiting from social housing policies:

The 2023 Law on Housing specifies the conditions for benefiting from social housing policies with a focus on simplifying administrative procedures to facilitate low-income people’s application for buying, renting, or lease-purchasing social housing.

Accordingly, the law abolishes the residency condition for buying or lease-purchasing social housing, leaving only housing and income conditions; for renting social housing, it does not require compliance with housing and income conditions, only that the applicant is eligible.

– Regarding incentives for investors in social housing construction projects:

The 2023 Law on Housing revises and supplements several incentives for investors in social housing projects, encouraging businesses to participate in investment, thereby increasing the supply of social housing. These include:

  – Exemption from land use fees and land rent for the entire project land area, without having to perform procedures for determining land prices, calculating exempted land use fees, or land rents according to land law provisions. Investors are allowed a maximum profit margin of 10% for the area of social housing construction. They are also granted up to 20% of the total residential land area (or 20% of the total construction floor area of the project) for building commercial, service, trade, and commercial housing facilities according to the approved investment project.

  – Additionally, the 2023 Law on Housing adjusts some regulations related to:

    – The selection of investors for social housing projects must comply uniformly with laws on investment, land, and bidding to ensure a consistent legal system.

    – The determination of sales prices, lease-purchase prices, and rental prices is specifically prescribed with methods and timing for determining these prices, ensuring clarity and ease of implementation.

Thus, it can be affirmed that the 2023 Law on Housing has supplemented and amended many important contents related to social housing policy in the following directions:

(i) Expanding the subjects eligible to invest in social housing (including the Vietnam General Confederation of Labor, foreign-invested economic organizations, with certain limitations);

(ii) Expanding the beneficiaries of social housing policies (including enterprises in industrial zones);

(iii) Supplementing incentive policies (exempting the procedures for land use fee and land rent exemption; legalizing the allocation of 20% of social housing land area for constructing commercial, service, trade, and commercial housing facilities, and allowing investors to fully profit from this area, separately accounting for social housing construction costs; social housing project investors are not required to allocate a minimum of 20% of social housing area in the project for rental);

(iv) Amending some provisions that do not fit the actual situation (such as land funds: allowing payment instead of allocating land funds in commercial housing projects as currently; abolishing the criteria for permanent and temporary residence registration; not specifying income conditions in the Law).

Therefore, the new contents related to social housing are expected to positively impact the social housing market on both the supply and demand sides, thanks to the diversification of investment resources, the expansion of reasonable policy beneficiaries, and the addition of practical incentive policies.

III. Some New Points of the 2023 Law on Real Estate Business and Its Impacts on Vietnam’s Real Estate Market

The 2023 Law on Real Estate Business, passed by the 15th National Assembly in the 6th session on November 28, 2023, consists of 10 chapters and 83 articles (an increase of 4 chapters and 1 article compared to the 2014 Law on Real Estate Business). It introduces many important new points, institutionalizing the directives and orientations of Resolution No. 18/NQ-TW dated June 16, 2022, while ensuring consistency with the amended Law on Housing (2023), the amended Law on Land (2024), and other related laws.

There are several adjustments and additions in the policies and regulations of the 2023 Law on Real Estate Business, which include:

Firstly: The 2023 Law on Real Estate Business has clarified the scope and subjects of the Law; it has added more legal definitions and regulations on building and managing the information system, housing, and real estate market databases, and real estate market regulation policies.

The 2023 Law on Real Estate Business regulates real estate business; the rights and obligations of organizations and individuals in real estate business, and state management of real estate business.

The Law has standardized and clarified the scope of application with many specific cases, such as: foreign-invested economic organizations doing real estate business must comply with the conditions of the Law on Investment; for housing construction investment projects, they must meet the requirements of the law on housing; the issuance of certificates of land use rights, ownership of assets attached to land is carried out according to the laws on land, etc.

The Law also specifies cases where it does not apply, such as the sale of houses, construction works, and the transfer of land use rights by organizations undergoing dissolution, bankruptcy, division, etc.

These are important new points that help reduce overlapping regulations, inconsistencies in interpretation, and implementation difficulties currently impacting legal enforcement. This will help reduce the time and costs for real estate businesses in project implementation.

In addition, the 2023 Law on Real Estate Business has codified certain provisions of Government Decree No. 44/2022/ND-CP dated June 29, 2022, on the construction, management, and use of information systems on housing and the real estate market. This aims to ensure clear, stringent, and feasible legal regulations for building and managing information systems and databases on housing and the real estate market. It also ensures connectivity and data sharing with the national land database and the databases of ministries, sectors, localities, and relevant agencies.

The law also strictly regulates the obligation to disclose information before putting real estate and real estate projects into business.

The 2023 Law on Real Estate Business further supplements new regulations on regulating the real estate market, such as:

– Principles of real estate market regulation;

– Measures to implement real estate market regulation;

– Authority to implement real estate market regulation.

Secondly: The 2023 Law on Real Estate Business supplements and clarifies the regulations related to each type of real estate business.

The regulations are found in Chapter II (Business of Available Housing and Construction Works), Chapter III (Business of Housing and Construction Works Formed in the Future), and Chapter IV (Business of Land Use Rights with Technical Infrastructure in Real Estate Projects), with notable new points as follows:

– Regarding the business of available housing and construction works:

The law stipulates that ownership rights are established when the buyer or lease-purchaser has received the handover of housing or construction works (whereas the current regulation is when the seller hands over the house or construction work to the buyer).

Thus, compared to the 2014 Law on Real Estate Business, the 2023 revised Law on Real Estate Business clearly states that ownership rights are only established when the buyer has accepted the handover of housing, thereby helping to limit arising disputes and protect the rights of real estate buyers.

– Regarding the business of housing and construction works formed in the future:

The 2023 Law on Real Estate Business introduces several new or clarified provisions, such as:

(i) Detailed and more specific conditions for putting housing and construction works formed in the future into business (Article 24);

(ii) Legalizing the practice of collecting deposits, allowing real estate project investors to collect deposits of no more than 5% of the sale or lease-purchase price (Article 23);

(iii) Reducing the payment percentage when purchasing housing formed in the future, with the first payment not exceeding 30% of the contract value, including the deposit. Subsequent payments must align with construction progress, with the total not exceeding 70% of the contract value before housing handover and not exceeding 95% before the buyer or lease-purchaser is granted a land use rights certificate, ownership of assets attached to land. For lease-purchase transactions, the upfront payment to the lessor-purchaser should not exceed 50% of the housing value (instead of 70% as currently);

(iv) Allowing buyers the option to choose whether or not to have financial guarantees from the investor for their financial obligations (Article 26).

These innovative provisions aim to diversify funding methods for real estate project investors to reduce cash flow pressure during project implementation. They also offer customers more choices regarding guarantees, contributing to reduced costs (as investors might include guarantee costs in real estate prices).

However, with the provision that buyers can choose whether or not to have financial guarantees from the investor, buyers must accept certain risks (when opting out of guarantees). Therefore, buyers of real estate formed in the future need to be very cautious in making investment decisions, carefully considering the investor, the project’s legality, and feasibility.

– Regarding the business of land use rights with technical infrastructure in real estate projects:

The 2023 Law on Real Estate Business introduces stricter regulations on the business of land use rights, specifically:

(i) Adding regulations requiring the completion of technical infrastructure before putting land use rights into business (Article 29);

(ii) Prohibiting subdivision and land sales in wards, districts, and cities of special urban areas, Grade I, Grade II, and Grade III urban areas. Additionally, in the case of land use rights auctions to invest in housing construction projects according to the 2024 Law on Land, transferring land use rights to individuals for self-construction of housing is not allowed (Article 31).

These new regulations are essential for controlling the situation of land subdivision and sales without meeting technical infrastructure conditions. They also help limit the phenomenon of selling land on paper, which has caused land price surges in localities with real estate development projects.

Thirdly: The 2023 Law on Real Estate Business sets conditions for organizations and individuals in real estate business and contracts in real estate business.

The 2023 Law on Real Estate Business has codified several provisions regarding conditions for organizations and individuals in real estate business. It supplements regulations on conditions for real estate businesses through real estate projects, requiring them to have minimum equity capital and ensuring the ratio of credit debt, corporate bond debt to equity capital.

Additionally, the Law supplements regulations on organizations and individuals selling housing, construction works, and floor areas in construction works not for business purposes or selling, leasing, or lease-purchasing housing, construction works, and floor areas in construction works below a small scale.

Specifically, the 2023 Law on Real Estate Business clearly and stringently regulates conditions for real estate business development. Accordingly, it stipulates that when simultaneously implementing multiple real estate investment projects (Article 9), real estate businesses must have equity capital of no less than 20% of the total investment for projects with land use areas under 20 hectares, and no less than 15% for projects with land use areas of 20 hectares or more.

They must also ensure the ability to mobilize capital to implement investment projects. If a real estate business is concurrently implementing multiple projects, it must have sufficient equity capital allocated to ensure the above ratio for each project to implement all projects.

At the same time, the revised Law on Real Estate Business also stipulates conditions such as establishing enterprises or cooperatives (except for small-scale or non-business purposes), credit debt limits, and corporate bond debt limits, and assigns the Government to detail the determination of small-scale real estate business. 

These are important points that help mitigate the risk of companies engaging in multiple projects without sufficient financial capacity, which has caused many issues for the real estate market and buyers in the past.

The 2023 Law on Real Estate Business provides more detailed regulations on types of real estate business contracts and the use of these contracts. It requires real estate project investors and real estate businesses to publicly disclose their real estate business contracts before applying them, as specified by the Law.

The law also includes regulations on payments in real estate business contracts through banks. It stipulates that non-cash payments are mandatory in certain cases. Specifically, when a transaction involves a real estate project investor, a real estate business, or a real estate service business, payments must be made through an account opened at a legally operating credit institution in Vietnam (Article 48).

Additionally, organizations and individuals involved in real estate business must accurately record the actual transaction price in the contract and are responsible for recording a transaction price in the contract that does not match the actual transaction price (Article 47).

This regulation is an important basis for limiting the phenomenon of dual pricing in real estate transactions, preventing tax losses, and easing the construction of real estate databases and future real estate valuations.

Fourthly: The 2023 Law on Real Estate Business includes stricter and clearer regulations regarding the transfer of real estate projects (whole or partial) compared to the 2014 Law on Real Estate Business.

The 2023 revised Law on Real Estate Business clearly stipulates the conditions for transferring an entire or partial real estate project, the conditions for the transferee of the real estate project, etc., to increase enforceability in project transfers. Specifically, there are three notable points:

(i) The law specifies and clarifies the principles of transferring an entire or partial real estate project (Article 39), according to which the investor can only transfer the real estate project when the project is within the execution period approved by the competent authority. The project transfer does not change the project’s planning, and the transferee must inherit the rights and obligations of the transferring investor.

(ii) The law clarifies the conditions of the transferred project (Article 40), such as: the project is not suspended, any existing mortgages must be cleared, the project is still within the execution period, and the partial transfer of the project must ensure the independence of the transferred part. It adds that the transferee is responsible for committing to continue implementing the project according to the approved content, seeking permission if changes are needed, and fully completing financial obligations before the transfer. The project transfer must meet the conditions of relevant laws such as investment and land.

(iii) It eliminates the requirement for a land use rights certificate for the project or part of the real estate project being transferred and adds conditions for the transferring investor when:

  – A decision on land allocation, land lease, or land use conversion for the project has been issued by the competent state agency;

  – The financial obligations related to land use for the project, including land use fees, land rent, and other taxes, fees, and charges related to land use, have been fully completed (if any) by the project.

(iv) It revises and supplements the regulations for cases where the transferee of the entire or partial project is a foreign-invested economic organization. After the competent state agency approves the transfer and the parties sign the transfer contract, land procedures must be carried out according to the land law.

(v) The law includes additional detailed regulations on the authority to transfer real estate projects (Article 41). Specifically, it adds that the Prime Minister may authorize the provincial People’s Committee to decide on the transfer of part of a real estate project in cases where the Prime Minister has approved the investment policy.

Fifthly: The 2023 Law on Real Estate Business expands the real estate business rights of overseas Vietnamese who are Vietnamese citizens.

The 2023 Law on Real Estate Business adds provisions allowing overseas Vietnamese who are Vietnamese citizens according to nationality law and permitted to enter Vietnam to engage in real estate business in similar forms as domestic Vietnamese citizens (as stipulated in Article 10).

For overseas Vietnamese who are not Vietnamese citizens according to nationality law but are permitted to enter Vietnam, they continue to follow the 2014 Law on Real Estate Business (mainly “investing, leasing, lease-purchasing” housing, technical infrastructure; not allowed to “buy” housing).

This provision will help diversify investment resources, reasonably develop real estate in Vietnam, and clarify the conditions for “buying” housing.

Sixthly: The 2023 Law on Real Estate Business supplements and adjusts the legal framework for real estate service activities (real estate exchanges, real estate brokerage, consulting, and management).

Accordingly, the 2023 Law on Real Estate Business encourages real estate transactions to be conducted through real estate exchanges and supplements and clarifies many regulations related to the principles, conditions for establishment, and operations of real estate exchanges (including electronic transactions) and real estate brokerage activities. However, detailed regulations and guidelines for this content are yet to be specified in sub-law documents (decrees and circulars).

Some specific provisions include:

(i) Real estate brokerage activities must have adequate facilities, personnel meeting professional criteria, and operational regulations.

(ii) Individuals practicing real estate brokerage and consulting must complete annual training courses and possess practicing certificates.

(iii) Individuals are not allowed to independently engage in real estate brokerage services (instead, individuals must practice within a real estate service exchange business or a real estate brokerage service business).

(iv) Brokers are not allowed to receive brokerage commissions directly from clients.

(v) Clear conditions for training institutions providing real estate brokerage and exchange management knowledge.

(vi) Training programs must follow the framework program issued by the Ministry of Construction.

These new regulations in the 2023 Law on Real Estate Business are expected to gradually enhance professionalism and transparency in training and certifying real estate service practitioners (real estate brokers, real estate exchanges). They aim to ensure that real estate exchanges and brokers play their proper roles in the real estate market.

As a result, home buyers will also benefit, with better-protected rights as intermediaries in the real estate market move towards greater transparency and professionalism.

References

1. National Assembly (2023), Law on Housing No. 27/2023/QH15, Hanoi.
2. National Assembly (2023), Law on Real Estate Business No. 29/2023/QH15, Hanoi.
3. National Assembly (2024), Law on Land No. 31/2024/QH15, Hanoi.
4. Ministry of Natural Resources and Environment (2024), Introduction to the Basic Contents of the Law on Land No. 31/2024/QH15, Materials for the Conference on the Implementation of the Land Law, March 6, 2024, in Hanoi.
5. Ministry of Natural Resources and Environment (2024), Some Prominent New Points of the 2024 Land Law, Hanoi.
6. Ministry of Natural Resources and Environment (2024), Land Law and New Points, Vietnam Natural Resources-Environment and Map Publishing House, Hanoi.
7. Ministry of Justice (2024), Materials for the Conference on Popularizing and Thoroughly Understanding the 2024 Land Law of the Justice Sector, Hanoi.
8. Department of Legal Education and Dissemination (2024), Introduction Materials to the Land Law No. 31/2024/QH15, Hanoi.
9. Department of Legal Education and Dissemination (Ministry of Justice) and Land Department (Ministry of Natural Resources and Environment) (2024), Introduction Materials to the Land Law No. 31/2024/QH15, Hanoi.
10. Department of Legal Education and Dissemination (Ministry of Justice) and Department of Housing and Real Estate Market Management (Ministry of Construction) (2024), Introduction Materials to the Law on Real Estate Business No. 29/2023/QH15, Hanoi.
11. Department of Legal Education and Dissemination (Ministry of Justice) and Department of Housing and Real Estate Market Management (Ministry of Construction) (2024), Introduction Materials to the Law on Housing No. 27/2023/QH15, Hanoi.
12. BIDV Training and Research Institute (2024), Quick Impact Assessment Report on the Amended Land Law (2024) and Some Recommendations, Hanoi.
13. BIDV Training and Research Institute (2024), Quick Impact Assessment Report on the Amended Housing Law (2023) and Some Recommendations, Hanoi.
14. BIDV Training and Research Institute (2024), Impact Assessment Report on the Amended Real Estate Business Law (2023) and Recommendations, Hanoi.
15. Bui Hong Nhung and Nguyen Manh Toan (2024), Some New Legal Issues of the 2023 Law on Real Estate Business, Democracy and Law Journal Issue 2 (No. 399), February 2024.

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“The article’s content refers to the regulations that were applicable at the time of its creation and is intended solely for reference purposes. To obtain accurate information, it is advisable to seek the guidance of a consulting lawyer.”

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