Foreigners buying residences in Vietnam: shortcomings in implementation guidance

09:00 | 07/05/2021
Authorities are making efforts to issue guidance in removing problems for non-nationals when buying property. Lawyer Dinh Tien Hoang from Vietthink Law Firm explains why the number of foreigners who have successfully bought homes in Vietnam remains modest compared to expectations.
1542 p22 foreigners buying residences in vietnam shortcomings in implementation guidance
Lawyer Dinh Tien Hoang from Vietthink Law Firm

Article 159 of the Law on Housing allows foreign individuals to purchase and own houses if they meet the regulations on entry into Vietnam, or meet the condition of applying for an investment license for housing projects in Vietnam.

According to Decree No.51/2009/ND-CP guiding implementation of some articles of Resolution No.19/2008/NQ-QH12 on piloting permit foreign organisations and individuals to buy and own houses in Vietnam and the 2003 Law on Land, this new regulation is appropriate.

However, when the government issued the Law on Land 2013 and Decree No.99/2015/ND-CP, the guidance for this regulation was skipped, causing confused implementation at grassroots levels when carrying out procedures in handing over house ownership to non-Vietnamese people. Under the provisions of Clause 7, Article 9 of the 2003 Law on Land, foreign individuals investing in Vietnam under the Law on Investment are leased land by the State of Vietnam as land users.

Decree 51 also stipulates that foreign individuals who own an apartment in Vietnam have the right to use the public space of that apartment building in the form of leased land with one-time rental payment for the entire lease term.

Thus, according to the 2003 land law and Decree 51, foreign individuals can still own houses and have the right to use the leased land in the form of a one-time rental payment for the entire lease term.

However, at present, the 2013 iteration of the law does not include a regulation noting that foreign individuals are the land users. Meanwhile, the Law on Housing 2014 does allow non-nationals to buy and own homes.

That means Decree 99 has replaced Decree 51, but it has no regulations on land use rights of foreign individuals in the case of buying and owning houses. In reality, up to now, there are no documents from government authorities to guide this issue. This is a significant shortcoming that requires specific guidance soon. Decree 99 does not specify in which areas foreign individuals are not allowed to buy homes. The Ministry of Defense and the Ministry of Public Security have the responsibilities of specifying prohibited areas or areas restricting foreign citizens, and the two ministries will provide written notice to provincial people’s committees to direct the Department of Construction to specify each commercial housing project in the province that can be sold to overseas individuals and organisations.

However, so far, only some provinces can issue this notice and it will likely take much more time for other provinces to do the same.

This means project developers are unable to know if their commercial housing projects are eligible to be sold to foreign buyers. Furthermore, there is a risk of being forced to compensate buyers in projects sold to non-nationals but defined as not belonging to the allowed areas.

Decree 99 stipulated that foreign organisation and individual ownership of units in an apartment building may not exceed 30 per cent of total units in one apartment building. In the event of an area with geographical boundary equivalent to ward level with many apartment buildings for sale or lease purchase, those organisations and individuals may own no more than 30 per cent of the total units of each apartment building, and not more than 30 per cent of the total units of all apartments.

For housing projects which have separate houses for sale or lease-purchase, the overseas organisations’ and individuals’ ownership must not exceed 10 per cent of the total number of separate houses for each project. In an area with a geographical boundary equivalent to ward level with several projects where the number of individual houses are more than 2,500 units, then the ownership must not exceed 250.

However, the above current calculation of the number of houses has caused many difficulties for both government authorities and developers – for example, in determining “an area with geographical boundary equivalent to ward level” and assessing population fluctuations in a specific area.

Besides that, in big cities like Hanoi and Ho Chi Minh City, many new urban areas have a large number of foreigners living there, such as Thao Dien in District 2 and Phu My Hung in District 7 of Ho Chi Minh City; and The Manor in South Tu Liem or the area surrounding West Lake in Hanoi. There would be a very high possibility that these areas will exceed the maximum number of houses foreigners are entitled to own.

In general, the removal of restrictions on house ownership for non-nationals in Vietnam is a positive action. However, to attract foreign currency flowing into the real estate market of Vietnam, government authorities need to take measures to overcome the aforementioned shortcomings completely.

By Dinh Tien Hoang

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