Land ownership for foreigners in Vietnam
The policy on allowing foreigners to own houses associated with land in Vietnam has been studied and considered very carefully. In 2003, the author of this article, in the capacity as a leader of the Ministry of Natural Resources and Environment, attended a meeting at the top decision-making level to consider the issue of this policy attached to the 2005 Housing Law. The conclusion of the meeting was that at that time, it was impossible to allow foreign individuals and organizations to own houses associated with land under any form in Vietnam.
In view of national security, many attendees expressed concern, especially over the possibility of the policy to be taken advantage of and foreigners’ acquisition of houses on a large scale, or the capacity of “invasion” with economic means. From the economic angle, there were opinions that this policy may cause an imbalance in the real estate market. From the social viewpoint, some said the Government must take care of housing for the people, and need not care for housing for foreigners.
In 2008, the National Assembly issued Resolution 19/2008/QH12 on pilot permission for foreign individuals and organizations to buy and own houses in Vietnam, allowing them to own apartments. The policy was piloted for only apartments, a housing property with almost no attachment to land ownership. After several years of implementation, reports showed that few foreigners paid attention to this policy.
The author of this article thinks that they have keen interest, but are concerned with asynchronous implementation of policies in Vietnam. First, they fear that whether the legal reform in Vietnam is stable or not while real estate is an asset with high value. Second, they observe that authorities at the high level are “open” but those at the lower level are “close.” It’s risky when the high-level authorities have made a decision but the lower-level authorities are not willing to complete the registration procedure for a property.
In 2013, the issue of this policy attached with the 2014 Housing Law, which took effect on July 1, 2015, was carefully prepared by the Ministry of Construction towards a positive direction: It’s time for Vietnam to issue this policy to create fresh momentum for the development of the real estate market. At that time, in the capacity as an expert, the author strongly supported this new policy. First, it would be a support for on-site real estate export which would bring about big economic gains during the process of global integration. Second, it is an obligatory policy when Vietnam participates in new generation free trade agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Vietnam-EU Free Trade Agreement (EVFTA). These agreements regulate not only trade relations but also other aspects, such as protection of workers’ rights, including the right to housing.
This housing policy is stipulated in detail in the 2014 Housing Law and the 2014 Real Estate Trading Law. As a result, foreigners in Vietnam can buy houses, including apartments and houses attached with land. Their homeownership right is valid for 50 years, and can be extended for another 50 years if needed, that is the maximum term of ownership is 100 years. Upon expiration of the ownership term, foreigners can sell their houses to get back the money spent on the house purchase.
Foreign individuals and organizations can buy only houses from housing development projects which are determined and made public, and may not buy houses directly from Vietnamese households and individuals. They can buy many houses for residence and trading purposes. However, the number of properties sold to foreigners must not exceed 30% of the number of apartments in a condominium or 250 housing units in a population area at the ward equivalent level. These regulations are quite strict to ensure implementation of the new policy and at the same time to protect national defense and security.
After four years of implementation, reports show that the new policy is still not attractive enough to foreigners. In reality, there is not yet sign of the policy being taken advantage of. There are only comments on the media that it still has loopholes or to a further extent is implemented against the law.
According to a report sent by the Ministry of Construction to the supervision group for “the implementation of policies and laws regarding management of foreigners in Vietnam” under the National Assembly’s Foreign Relations Committee, there are some 800 foreign individuals and organizations who own houses in Vietnam, mainly in Hanoi, HCMC, Danang, Ba Ria-Vung Tau, Binh Duong, Khanh Hoa, Dong Thap, Dong Nai, Can Tho, Binh Thuan, Thua Thien-Hue and Vinh Long. These foreign individuals and organizations, who are mainly from South Korea, and a few from China, Taiwan, Japan and Russia, have duly observed local regulations. The house buyers are mainly individuals. They buy mainly apartments for residence, barely for lease. The number of 800 foreign buyers of apartments shows that the reality does not meet the initial expectation of the new policy.
The question is why is the result of implementation of this good policy so “poor?” The main reason is the inconsistency between the 2013 Land Law and the 2014 Housing Law. The housing law is very “open” but the land law is still tightly “close.” The 2013 Land Law does not allow long-term land ownership for local organizations and the ownership of land attached with houses for foreign individuals and organizations. The land law has not yet been revised over the past four and a half years since the 2014 Housing Law took effect. Legally minded foreigners do not want to put themselves at the risks caused by the 2013 Land Law.
Many comments about this issue blame the confusion between the right of foreign individuals and organizations to access housing and the policy to attract foreign investment for real estate development. Land access, and implementation and transfer of investment projects attached with land use rights are regulated by the 2014 Investment Law, the 2014 Construction Law and the 2013 Land Law. Meanwhile, the purchase of houses attached with land for residence and trading is under the scope of the 2015 Civil Code, the 2014 Housing Law, the 2014 Real Estate Trading Law and the 2013 Land Law.
Illegal transactions: The real concern
The media recently reported the transfer of 21 land lots in Danang to joint ventures with the Chinese involvement. The land in the areas for projects owned by local investors, foreign investors and local-foreign joint ventures was regulated quite strictly in the 1993 Land Law, which was later revised carefully and more strictly in the 2003 Land Law and the 2013 Land Law. Therefore, the author thinks that there is nothing for concern about land in those areas.
Anybody, including foreigners, who invest in a project must proceed though a Vietnamese legal entity. They will have different rights depending on whether the capital is local or foreign. According to Article 39 of Decree 43/2014/ND-CP, foreign-invested enterprises cannot receive the transfer of capital which is the land of households and individuals, and can only receive the transfer of land of enterprises, except for land for farming and forestry production. This regulation can be used to judge the transfer of 21 land lots in Danang whereby the land transferees are foreign-invested enterprises.
The author believes that access to land and houses by foreigners in Vietnam does not meet the expectation of the Vietnamese authorities as stated in the 2014 Housing Law. The thing to do is to urgently revise the 2013 Land Law for synchronization so that foreigners could see that Vietnam is earnest in her reform endeavor.
The issue of concern is that foreigners, specifically the Chinese, may employ Vietnamese enterprises and individuals as the front for transactions of high value properties in an unofficial manner with “own” rules. The author has traveled across many localities that are “hot” in real estate and heard much about this phenomenon. The existence of a business practice beyond the official law is a real concern for both the economy and national defense and security.