Faye B
SENIOR MARKETING MANAGER for a global real estate brand at Institute For International Research – Dubai, UAE
Is the Vietnamese real estate market a viable market for foreign investment at this point in time?
Answers (1)
Joe M
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No. The Vietnamese real estate market is still too undeveloped for all but the most sophisticated foreign investors and for investors with strong local connections.
Foreign investors do not have the right to own land in Vietnam; this applies even to Vietnamese individuals and organizations pursuant to the 1992 Constitution of Vietnam which stipulates that all land belongs to the State.
Pursuant to Decree 60/CP issued in 1994, amended by Circular 13 dated 2009 a foreigner permanently resident in Vietnam may own a long lease to his or her own home (as distinguished from title to the land underneath that home which remains vested in the State) for a period of up to 50 years, but only in approved developments.
Decree 153/2007/ND-CP regulates the funding of off-plan residential projects. Previously, developers could take payment before commencing work and did not have to adhere to timelines and completion dates. Decree 153 states the first payments for residential property is not required until work on the foundations is complete, amongst other things.
The mortgage market in Vietnam is immature. Loan-to-value ratios rarely exceed 50% so investors generally use international mortgages to fund property purchases (i.e. a mortgage borrowed in foreign currency from a non-Vietnamese bank and secured by charge on a property located outside Vietnam).
Notwithstanding the absence of specific provisions of Vietnamese law, foreign investors are entitled to joint ownership of commercial property (factories, warehouses, offices, hotels, etc.) they contribute to the capital of a joint venture. The ownership of foreign investors in these cases is proportionate to the capital they contribute to the joint venture. Where foreign investors invest 100% of the capital necessary to build commercial property, the property is absolutely in their ownership. Ownership of commercial property is time-limited to the duration of the investment license. Upon the expiration of the investment license, if no extension is granted or the foreign investors do not apply for an extension, the foreign investors are not permitted to maintain their ownership of the property. They must transfer the property to a Vietnamese party.
The simplest way for a foreign investor to access Vietnamese real estate appears to be through one of the U.K.-listed funds focused on this sector such as VinaLand.
