Under the Housing Law 2023, a developer of a commercial housing project could raise financing from the following sources:

• equity capital of the developer;

• capital raised from joint venture, business cooperation, and contribution from other organizations or individuals (BCC Capital);

• capital raised from issuance of corporate bonds, shares, and fund units;

• pre-sale proceeds raised from sale and purchase agreements or hire and purchase agreements with regards to future houses signed with customers;

• debt financing raised from credit institutions or finance organizations operating in Vietnam (bank loans).

In comparison with the Housing Law 2014, the Housing Law 2023 clearly includes capital raising from issuance of bonds and fund units but excludes pre-sale proceeds of leasing agreements for future houses. In this post, we will discuss each of the sources of financing for a commercial housing project. The Housing Law 2023 still does not allow a developer of a commercial housing project to raise debt financing from offshore lenders.

Background

Under the business cooperation contract (BCC) structure, the parties do not establish an entity but usually cooperate to use their available resources, including land use rights (LUR) to do business. The party having LUR (Landlord) will “contribute” its LUR to the BCC and allow the other party (Developer) to develop house/construction works on the land while retaining title to the LUR.

Discussion

Under the current land law, implementing a project involving LUR via BCC is arguably possible. However, the relevant regulations seem vague and may give rise to certain legal issues. With new regulations of the Land Law 2024, the BCC structure will have a more concrete legal framework. In particular,

• Article 148 and 149 of the Land Law 2024 now codifies regulation on granting ownership certificates to owners of ready-built house/construction works who are not simultaneously land user under Decree 43/2014 guiding the Land Law 2013. In this regard, the Land Law 2024 now expressly recognizes BCC as valid evidence of the owners’ lawful right to use the other party’s land for building their houses/construction works. In light of this clear regulation, the Developers to the BCCs now may find it confident that its title to the building on land will be protected.

Please download the pdf version here.

In this post, we compare the rights and obligations of land users being domestic economic organizations (Domestic EOs) according to Land Law 2013 and Land Law 2024. Our comparison is provided in the contexts of land allocation/land lease with one-off rental payment and land lease with annual rental payment.

This post is written by Cao Khanh Linh, Nguyen Hoang Duong, and Nguyen Quang Vu.