Ultimate Guide to Buying Property in Vietnam: Tips, Process, and Legal Requirements

Buying Property in Vietnam

Buying property in Vietnam. This comprehensive resource covers essential tips, the step-by-step process, and important legal requirements to ensure a smooth and successful property purchase in Vietnam. Whether you're a local or an international buyer, this guide will equip you with the knowledge and insights needed to navigate the real estate market in Vietnam with confidence.

How difficult is the property purchase process in Vietnam?
There is a common misconception that foreign citizens or companies cannot buy property in Vietnam. Technically foreigners are not allowed to own land. In fact, even Vietnamese citizens are not allowed to own land.

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Collective ownership

There is a different form of land ownership in Vietnam than in most countries. In Vietnam, land is theoretically collectively owned by the people, but regulated by the State. The State is simply described as the one managing it.

Because Vietnamese themselves cannot own land in the traditional sense, this alternate concept of public and private land ownership gave rise to a belief that foreign citizens and companies cannot acquire property.

But this is not entirely correct. Foreign investors can obtain the right to use land, which is very similar to having ownership rights, but there are certain conditions that you need to bear in mind in order to make a purchase. Hopefully this posting sheds light on the ways that foreign investors can obtain property in Vietnam.

Foreigners who are residents in Vietnam are permitted to purchase dwelling houses. They can own a house but not the land on which it is built. They do though have the option to lease the land from the State.

One leading foreign estate agent in Vietnam is marketing a 50-year lease scheme, which is almost a sale. Under this scheme, the buyer acquires a right to an apartment for 50 years, and the right to renew the lease at the term ́s expiry without payment of additional rent. If property ownership by foreigners becomes legal within that time, the complex owner will transfer the apartment title to the buyer. If the building for some reason has to be sold, the buyer will get a pro-rata share of the proceeds. And because the contract is only a lease, the buyer can sublet his apartment. In other words, the contract gives the buyer many of the rights of ownership (BTW the maximum lease length under Vietnamese law is 50 years).

A foreign investor may also invest in Vietnamese real property by forming a joint venture company with a local partner, or a wholly foreign-owned company, or by forming a Build, Operate and Transfer (BOT) company or one of its variants.

Foreigners who are residents in Vietnam can also own dwelling houses but cannot sublease these dwellings. Foreign residents can also sell, donate, inherit, or give dwelling houses as gifts. But if they terminate their residence in Vietnam without disposal of their dwelling, 90 days after their departure from Vietnam their dwelling house certificates will automatically cease to be valid, and the Vietnamese State will manage and use their houses.

VN Foreign Property Ownership

One thing that separates real estate transactions in Vietnam from the rest of the world is it’s done in pure gold. The Vietnamese gold is traded in tael. One tael is 1.25 ounces or 37.5 grams of gold. It is very important to keep this in mind when looking for a property. Important- the buyer must be aware of the prices and conversions at all times.

Registering property in Vietnam is not particularly onerous, taking about 43 to 71 days to finish the four procedures needed, and costing considerably less than elsewhere in the region.

Land Rights in Vietnam – What They Are and How You Can Acquire Land

Vietnam’s land use rights can be complicated for first time business investors. In Vietnam, land is collectively owned by the people and administered by the government on their behalf. Therefore, under such a system, property owners cannot have full and legal ownership of land. So their rights are limited to land use rights permitted within the law.

Once a foreign investor has decided on Vietnam as a location to establish operations, the next significant step is identifying where and how to obtain land for their business.

Land users typically receive a land use right certificate (LURC), which shows the land user’s rights on the property. There are different types of land usage rights which we’ll discuss; it is important to note that under current law, foreigners can retain an LURC for 50 years, while locals can have one indefinitely.

The government can choose to grant a one-time extension of another 50 years or take the land back if the party has failed to use the land under the terms and conditions of the LURC.

While this system may seem inconvenient, other countries such as the UK also employ a similar system without significantly constraining investors. In fact, with a proper understanding of current regulations, leasing land in Vietnam can provide all the resources for successful investment within the country.

As per the fairly recent Housing Law No. 65/2014/QH13 in 2014, foreigners in Vietnam have many of the same land rights prescribed to Vietnamese nationals, particularly the right to “own” land.

But despite the liberalization, foreigners are still prohibited from possessing more than 30 percent of the apartments in a given building and more than 205 houses in an area where the population is that of a ward-administrative division.

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Land use rights in Vietnam

The type of actions an investor may take in relation to the rented property largely depends on the payment schedule. An individual can either lease a piece of land and pay annual rent (called the “annual arrangement”) or provide the entire lease amount in one payment (called the “one-off arrangement”).

According to the annual arrangement, an investor is only allowed to use the land for the stated purposes and transfer assets as part of the land. With the one-off arrangement, one can transfer, sublease, or mortgage the land and involved assets. Furthermore, the government allows the opportunity to contribute capital in the form of the LURC and assets to a joint-venture (JV).

Who can lease (“buy”) land in Vietnam?

Citizens of Vietnam, local organizations and foreign-owned companies can purchase the right to use and build on land. The length of a lease agreement and the terms used depend on the type of entity purchasing the property.

For individuals, the maximum length is 50 years, with an option to renew the agreement for another 50 years.

Foreign-owned companies can hold lease agreements in Vietnam until the end of their investment license. The Department of Planning and Investment grants this for ten years. This investment license is also renewable. However, it’s important to keep your company in compliance and report your taxes in Vietnam in a timely manner to ensure that there will be no issues with extension.

How to “buy”
#1 Set up a 100% foreign-owned company
The first purchasing option to buy property in Vietnam is to set up a fully foreign-owned company. By establishing a foreign-invested company (“FIC”), you can purchase either homes or apartments. In this case the purpose should be to provide housing to company founders, members, and employees.

You have the option to construct commercial buildings, factories and warehouses on leased land. You do not have the right to buy and sell property in the sense that a real estate business might. Specifically registered real-estate trading companies can construct residential and commercial property for sale and lease to third parties.

An alternative path is to lease land directly from the government or an industrial park. In these cases, you will be able to build for commercial use. This still requires your commercial activity to adhere to the business line of your company. For example, as a trading company, you will be permitted to build a warehouse. As a manufacturing company, you can build a manufacturing facility.

How to register a foreign-owned company in Vietnam
The process of company registration in Vietnam is generally the same for all foreign investment companies. It takes approximately 4-6 weeks without additional licenses.

The first step is to acquire an Investment Registration License from the Department of Planning and Investment (DPI). This certificate allows you to start doing business in Vietnam.

The second step of incorporation in Vietnam is to obtain a Business Registration Certificate. Once you have received a business registration certificate from the DPI, you have 90 days to make your first capital contribution.

Depending on your business, you may also need additional licenses. For example, if you plan to sublease your property, you need a separate permit for engaging in real estate business. This often adds time to the company registration process.

#2 Form a joint venture in Vietnam
A second option to buy property in Vietnam is to form a joint venture with a Vietnamese shareholder.

Locally-owned companies and Vietnamese citizens can buy:
Households
Buildings for sale, lease, or lease-purchase
All or part of a real estate project to construct buildings for sale, lease, or lease-purchase

The term of the agreement for Vietnamese citizens is indefinite. Local Vietnamese companies can hold ownership of property until the termination of the company.

If forming a joint venture, it’s important to use a trustworthy and capable nominee, as choosing an unreliable one can lead to serious problems later.

#3 Buy as an individual
Foreign citizens in Vietnam can purchase homes for dwelling without forming a legal entity. The term of ownership for a housing sale agreement can not be longer than 50 years for the first contract.

This type of an agreement is a common practice in Vietnam. It is the closest available arrangement to the concept of private ownership.

Such an individual purchase agreement can be renewed for another 50 years by adding an extension clause to the agreement. It is recommended to negotiate terms in the agreement with the seller that protect the precise renewal terms, such as:

  • Renewal of the contract does not come with additional charges
  • Renewal of the contract does not come with advance rent collection for the next lease period
  • Processing of the extension is not subject to additional fees
    If the law on foreign ownership changes, the transfer of ownership to you will not incur additional charges

As an individual, you can also sub-lease your house or an apartment after registering it with the local tax authority.

Ownership Limitations in Vietnam

Neither a foreign individual nor a company can buy, rent, purchase, receive, inherit or own more than 30% of the units in an apartment building, or more than 250 separate housing units in total.

The definition of a unit as a separate house includes villas, as well as row houses in areas where the population is organized by a traditional ward system.

Four methods to lease land in Vietnam

For investors keen on leasing land in Vietnam, there are several ways to obtain land with a LURC, although the government enumerates different methods for locals and foreigners. We highlight four available methods that investors can choose from.

Method 1: The first method is through allocation, where the state allocates a LURC via an administrative decision. Land users are required to pay land use fee to the government and this option is available to investors in residential housing projects and infrastructure project in cemeteries.

Method 2: The government leases the land to the land user where the user pays rent to the government. The rental may be paid in a lump sum or annually. This is in many ways like the customary system of renting.

Method 3: The third option is by a lease or sub-lease agreement with the landlord in an industrial zone, industrial cluster, processing zone, high-tech zone or an economic zone. The landlord is typically a commercial enterprise that has obtained land use rights under the above two mentioned options.

Method 4: The fourth option is by an agreement on the transfer of assets that are attached to the land with an agreement on the transfer of land use rights, a land lease agreement or a capital contribution with an existing land user. In such cases the investor acquiring the land use rights will become the land user of the acquired land area.

Investors can choose any of these options; however, the third method is the most straightforward since the landlord in the specific zone should have completed all necessary paperwork and procedures prior to renting land.

Every year, the People’s Committee, with the support of the Ministry of Natural Resources and Environment (MONRE), establishes the land price based on market value. When leasing land in Vietnam, the price cannot deviate more than 20 percent from this official price.

Land can be leased from Vietnamese companies (such as a state owned enterprise or limited liability corporation), Vietnamese citizens living abroad, or a foreign invested company (FIC) that is leasing land from the government to develop infrastructure on the rented land.

A company can only lease land if it has obtained the land with the allocation method, unless the land was leased before July 1, 2004 and a sufficient amount of the lease has been paid. Furthermore, land can be leased for a maximum of 50 years, and 70 years in special cases.

To renew the lease, the investor has to obtain approval for an extension. Companies also have the option to rent an office in a building or lease from a company in an industrial zone or export-processing zone.

Steps required for leasing land in Vietnam

While leasing land does not necessarily have to be a complicated process, it is important to determine whether or not the proposed investment will gain approval before signing any rent contracts. Potential investors can obtain an “Approval in Principle,” which is a letter given by the provincial people’s committee – similar to a cabinet – commenting on the feasibility of the project.

It does not guarantee approval, and the committee may change their opinion about certain aspects of the project, but it is nonetheless a helpful gauge for potential investors. Subsequently, the company must obtain an investment registration certificate and an enterprise registration certificate, and then complete the land lease agreement with the people’s committee.

Finally, the company will need to submit an application to the local MONRE to get the LURC.

Selling Land in Vietnam

Foreigners in Vietnam have many of the same rights as Vietnamese when it comes to selling. A foreigner who is eligible for home-ownership has the ability to sell their land. The process is straightforward, but it is nonetheless important to ensure compliance with all regulations as outlined by the Ministry of Construction.

There are several special cases to bear in mind:
If a foreign company owns a house for the purpose of housing employees, they are more limited in their rights – they are unable to sell or lease the house or use it as an office and can only continue to house employees.

If selling a house under a lease agreement, the lessee must be given 30 days’ notice and given the option to purchase the house, while the lessee must decide whether to do so within that time period; afterwards, the land may be sold to others.

Vietnam’s emerging real estate landscape

Despite an unequal competitive landscape, foreign developers continue to invest and acquire land rights in hopes that the government will change regulations. Foreign investors face some risk, but investors are positive about the growth of Vietnam’s property market.

Major investors are from China, Japan, Hong Kong, South Korea and Thailand. In fact, in the first five months of the year, real estate was the third largest sector receiving FDI at US$1.1 billion.

Vietnam faces competition from regional competitors and will want to ensure it remains a preferred destination for foreign capital. As such, this bodes well for foreign investors wanting to enter the growing real estate sector.

Setting up a real estate business in Vietnam

It is important to remember that if you haven’t registered your company as a real estate entity, you can only buy property for your company’s use. This includes primarily purposes like accommodating your employees.

If you also plan on subleasing the property you will have to develop and build on the land you leased from the state. To do so, you will need to have a company that is registered as a real estate business.

As a foreign-owned real estate company in Vietnam, the scope of activities is limited to:

  • renting a residential property and subleasing to third parties
  • renting out residential property constructed by the LLC on land leased from the state
  • selling or renting out non-residential property constructed by the LLC on land leased from the State
  • Purchasing all or part of an ongoing real estate development project and listing developed property for sale or rent
  • Selling real estate constructed by the LLC on land leased within industrial parks, industrial complexes, export-processing zones, hi-tech zones, and economic zones

Allowed foreign ownership of real estate companies in Vietnam

There is no limitation on foreign ownership of real estate companies. Foreign investors can own up to 100% of a foreign-owned company in Vietnam.

Minimum capital requirement for real estate businesses in Vietnam

Unlike most business types in Vietnam where you can register a company without an official requirement on minimum capital, the real estate trading classification has minimum capital requirements.

To set up such a real estate business you need to have at least 20 billion VND (approximately USD $880,000). This investment can be non-monetary, meaning that you can also register property and other assets that will count towards this capital.

So I hope that covered most of the intricacies of land “ownership” in Vietnam and is helpful Any questions you might have please leave in the comments and I’ll try to find answers to them.

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