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A Look into Investing in Vietnam’s Real Estate.

Following a period of inactivity in Vietnam’s real estate market, Vietnam is beginning to attract foreign investment once again. On November 25, 2014, Vietnam’s National Assembly passed the long-awaited amended Housing Law that serves to address a number of issues regarding regulations on foreign ownership of properties in Vietnam. So what has changed? Our team at Prelauch.sg takes a deeper look into the Vietnamese Real estate.

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  • Why Invest in Vietnam?

Being a rapidly developing nation, Vietnam provides a dynamic backdrop for real estate investment. There is a lot of potential for Vietnam – growing population, rising GDP as well as extensive infrastructural improvements – makes for increased real estate appreciation in the next few years to come. If you are considering overseas property investment, Vietnam is offering this first mover advantage for foreigners and sales will be launched in Singapore.

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  • So what’s this new Housing Law?

The amended Vietnam New Foreign Ownership Property Law, taking effect from July 01, 2015, allows foreigners to buy and own residential properties within a housing project in the country. Besides this, there are also a few other changes under this law:

Housing Law On:Description
EntitiesLegal entities (Banks / Foreign Investment Funds est. in Vietnam) are eligible to purchase
Types of HousingForeign Entities / Individuals are now allowed to buy and own all residential sectors (apartments, landed properties etc)
Volume of PurchaseTotal number of dwelling units must not exceed 30% of the total units in one apartment complex / not exceed 250 landed property units in one administrative ward ( prior to amendment, eligible foreigner can only purchase one apartment in Vietnam)
Purpose of PurchasePreviously only allowed for owner-occupied purposes, the amendment allows properties owned by foreigners to be sold, sub-leased, inherited and collateralized.
TenureTenure remains at 50 years – however it can be extended subject to applicable laws ( E.g. Foreign individuals married to Vietnamese citizens are entitled to freehold tenure)

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  • How do I go about in investing in Vietnam?

Before we go into the payment scheme, there’s a few terminologies to note as they help in understanding the legal aspect of the purchase of properties in Vietnam.

Sales & Purchase Agreement (SPA)Legally binding contract between buyer and developer to prove that the property is sold to the buyer – also used as evidence of ownership.
House Ownership Certificate ( Pink Book)Certificate granted by the State Authority to recognise the ownership of an eligible individual / entity. The SPA is used to apply for this certification
Red Invoice / Value Added Tax (VAT) InvoiceIssued by the seller to state that information on goods/services sold are in accordance with stipulated laws. The VAT is 10% of the property price.
Maintenance Fee (sinking fund)Fund contributed by buyers of a development to maintain commonly owned areas of the development – 2% of property price (before VAT)
Management FeeFee contributed by residents to managing operations of the development e.g Security services, Pest Control etc. Fees are calculated based on NSA.
Net Salable Area (NSA) / Carpet AreaArea for private use of the apartment, measured by a clearance method and stipulated in the Pink Book granted to the buyer.
Construction Floor Area (CFA)Area which is measure from center line of external walls and apartment dividing walls, inclusive of area of columns and service ducts built inside the apartment.

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Payment Scheme for Projects under Construction:

Deposit (Booking Fee)VND 100 million
Execution of Deposit ContractAfter 10% of purchase price (after offsetting Booking Fee)
2nd -7th Payment40% of purchase price spread out in 5 progressive payments
8th Payment50% of purchase price

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  • The Handover Process

Upon completion of the project, the developer serves a Handover Notice to the buyer to indicate the date of handover as well as the ooutstanding amount to be paid before taking over the units.

  • Other Taxes Applicable to Property Sales Transactions:
VAT10%
Administration FeeMinimal fee For ownership certificate purposes
Registration Tax for Owership0.5%
Personal Income TaxIf personal income is earned through assignment / resale of apartments, a 2% income tax is to be paid on transacted value.

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All in all, the new law is expected to play a major role creating a more balanced, transparent and sustainable residential property market in Vietnam. The removal of many of the conditions on the foreign ownership of property will boost potential demand and help improve market liquidity, especially for mid-to-high end residential housing. As such, foreign investors will definitely be keen in investing in a place as vibrant and dynamic as Vietnam.

With the new law changed to open Vietnam’s market to foreigner, a new condo launch named Vista Verde by Capitaland is now made available (only 30% units allocated) for sales in Singapore. Call our developer’s hotline 66510720 now for booking.