Revised Laws Could Help Foreigners Build Vietnam’s Real Estate Sector
HANOI – Foreign real estate investors are optimistic about the future of Vietnam’s investment environment, provided that the draft on the revised Law on Real Estate Business and the draft on the revised Law on Residential Housing are approved by the National Assembly later this year.
The main changes to the Laws will make it much easier for foreigners to purchase and use residential property. Many hope that the influx of foreign money will also help to invigorate Vietnam’s property market and help it to further mature. For many years, the country’s real estate sector was lackluster at best.
David Lim, head of the Land Sub Group under the Vietnam Business Forum, believes that “the amendment of the laws to allow greater rights for foreigners would be very beneficial for a foreign developer when they can sell a large number of apartments in a specific building for a foreign investor, then this investor can re-sell or re-lease those properties.”
Foreigners have for some time struggled to break their way into Vietnam’s property market. The government has been somewhat loathe to let foreign money affect the nation’s real estate sector. Even with the proposed changes to the real estate laws, the sector still remains quite closed to foreign investment. Many foreign analysts question what the long term feasibility of such a policy can be. The proposed revisions to the laws could well be the Vietnamese government’s dawning realization that serious changes have to be made to ensure that the country remains on its positive growth track.
While some areas have been open to foreign investment in the past, notably the Phu My Hung project in Ho Chi Minh City and Ciputra in Hanoi, there seemed little chance for foreign investors to invest in the country at large. But now, there seems to be real change in the air.
According to Dang Hung Vo, a leading real estate expert in Vietnam, “if the rights for foreigners are improved in the current revised land laws, the real estate market could revive more quickly.”
There will be certain hurdles in place in order to ensure that foreigners qualify for the right to invest in the country’s market. Speaking of the two draft laws, Nguyen Manh Khoi, vice director, Housing and Real Estate Market Administration under the Ministry of Construction, stated that “Supplements will be made to the draft[s] to allow foreign investors coming to Vietnam for the first time to deal in property. For example, instead of requiring registered real estate trading as an eligible line of business, first time foreign developers may be required to provide proof of capital competency or track records and real estate trading capacity in another country.”
While the revised Laws represent a big step forward for foreign investment in the country’s real estate sector, there are still a number of restrictions on foreigners who will not be permitted to:
- Lease their property;
- Own residential houses other than in prescribed commercial residential housing projects;
- Use property as collateral to access loans from the bank;
- To be allocated land by the state;
- Receive and transfer land use rights; or
- Invest in infrastructure for transfer or for leasing land with infrastructure.
It remains to be seen whether or not the country will continue on its path to allowing greater amounts of foreign investment into its real estate sector, but with property prices predicted to rise throughout the country in the coming years, it is a sure bet that foreign investors will be lining up for their chance to get in on the ground floor of investment in Vietnam.
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