The Law on Real Estate Business 2014 which will take effect from 1 July 2015 includes certain important changes as follows:
A foreign invested enterprise (FIE) is now expressly entitled to lease an existing property for sub-leasing to others. Under the old Law on Real Estate Business, there is a confusion as to whether an FIE can lease or purchase an existing property for sub-leasing or secondary selling. Now it seems that at least leasing for sub-leasing is permitted.
- It remains unclear if an FIE can purchase an existing property for selling or sub-leasing. However, subject to approval by the local people’s committee or Prime Minister depending on the size of the project, an FIE is now also permitted to purchase an existing property development project from local developers for selling or leasing.
- A company involved in “real estate business” must have a minimum paid in capital of about US$ 900,000 instead of US$ 280,000 under the old law. It is understandable to require a real estate developer to have certain minimum paid-in capital. However, for many real estate services such as real estate broker or real estate trading exchange, the new minimum paid in capital is simply too high.
- It is not clear whether the term FIE used in the Law on Real Estate Business 2014 is equivalent to the term “economic organization with foreign capital”. It is also not clear whether an FIE which has less than 51% foreign ownership is still subject to the restrictions on FIEs under the Law on Real Estate Business 2014. It is unfortunate that the Law on Real Estate Business 2014 and the Law on Investment 2014 are issued at the same time but do not use the same concepts.
It remains unclear whether an offshore entity must establish an enterprise in Vietnam in order to provide real estate service (e.g. real estate management service) in Vietnam.
Many protections for real estate buyers are introduced. All these measures if properly implemented could substantially strengthen the position of real estate buyers in Vietnam especially the requirement for refund guarantees. However, some measures seem to more intrusive than other such as using standard form contracts or approval from local authority for selling houses.