Housing ownership of alien organizations and individuals under Law on Residential Housing 2014
After various dissimilar debates, finally Law on Residential Housing No. 65/2014/QH13 was adopted by the XIII National Assembly at the 8th session on November 25, 2014 (“Law on Residential Housing 2014”). Accordingly, in comparison with the Resolution No. 19/2008/QH12 on pilot permission for alien organizations and individuals to purchase and own residential housing in Vietnam (“Resolution 19”), the Law on Residential Housing 2014 (takes into effect as from July 1, 2015) has significantly widened housing ownership of alien organizations and individuals.

Restriction as regulated by the Resolution 19

Aimed to encourage alien organizations and individuals to make investment into Vietnam as well as generate motivations for purchasing power in the situation where Vietnam’s real estate market had been experiencing with difficulties. The Resolution 19 was dopted and took into effect for 5 years as from January 1, 2009. However, according to a report of the Government, after 5 years of implementation, there were only 126 purchasers purchasing and owning residential housing in Vietnam of which around 80 percent of individuals and only 20% of foreign invested companes. This showed that the policy has not attractted and encouraged many alien organizations and individuals to purchase and own residential housing in Vietnam.

To explain for this situation, a part from market factors such as supply, demand, price, the major reason is the Resolution 19 provided many restrictions on subjects and conditions namely:

  • There are only five types of subjects permitted to purchase and own residential housing in Vietnam. The eligibilities for purchase and own of residential housing are that individuals must be permitted to reside in Vietnam for at least 1 year and are living in Vietnam, organizations must be licensed to invest into Vietnam for a duration of at least 1 year and are operating in Vietnam. These regulations ostracized many other subjects who had been studying and living in Vietnam and had a demand for owning residential houses in Vietnam
  • At a time, these subjects are permitted to purchase and own only one apartment unit in a housing development project, not permitted to own separate house (villa, terraced house) and only permitted to use house for living, not for any other purpose, not permitted to lease, make capital contribution, permitted to sell after twelve months upon granted ownership certificate. Individual owns house for maximum 50 years and organization owns house for a period based on investment certificate.
Law on Residential Housing 2014

Aimed rasing capital as well as making contribution to the development of the home construction market, from 1st July 2015, subjects and conditions applied to alien organizations and individuals to purchase and own residential housing in Vietnam will be windened significantly, as follows:

  • Alien individuals who are permitted to enter into Vietnam and alien organizations comprising of foreign-owned enterprises; branches, representative offices; alien investment funds; and branches of alien banks which are granted investment certificate or other licenses to operating in Vietnam will be eligible purchasing and owing houses in Vietnam, including apartments and separate houses in commercial housing projects.
  • Alien individuals will be entitled to own houses within a period as agreed in contracts of sale and purchase, lease, donation, inheritance but not exceeding 50 years which may be renewed upon demand. Alien individual who get married with Vietnamese citizen or overseas Vietnamese will be entitled to own houses for stable and long period. Organization may also own houses as agreed in contracts but not exceeding operation duration recognized in its investment certificate including renewal time.
  • Alien organizations and individuals are permitted to own maximun 30% of total apartment units in a building and maximun 250 separate private houses in an area having population equivalent to a ward.
  • Alien individuals will be entitled to rent houses after announcement to level-district authorities and must fulfill all tax liabilities; aliens organizations will be entitled to use houses for their employees’ accommodation only, and not allow to lease, use for office or any other purposes.
Foregoing regulations revoke conditions on minimum resident period of individuals and minimum operating duration of organization; increase ownable house quantity, widen serveral significant rights such as right to lease for individual, broaden organization rank able to own houses not only none-real estate business function company but also real estate business one and other types such as branch, representative office.

However, this legislation also rose concerning that whether it’s too open and creates loopholes for speculation and corner. Let imagine that an alien individual with a Vietnamese visa may purchase and own houses then, it is likely that there are a lot of aliens who do not resided in Vietnam ever but own a large number of houses for lease or resell in Vietnam.

Critical issues

Foregoing regulations of Law on Residential Housing 2014 create unclear issues needed to be greater detail to avoid vague and difficulty for implementation namely:

  • What should ownership duration be understood? There is a possibility to understand that parties are entitled to agree ownership duration in contracts provided that the duration is not exceeding 50 years for individuals and not beyond duration regconized in investment certificate for organizations respectively? If parties fail to make any agreement on the duration, to extent to how long the issued by authorities shall be valid? Whether it is 50 years maximum?
  • How should 30% total apartment units in a building be understood? If a commercial housing project has 10 apartment buildings, will aliens be entitled to own maximum 30% total units of 10 such buildings. How to calculate ownable house quantity in case where the alien owns both apartments and separate houses?
  • One of important rights of the owner is the right to sell and transfer house sale and purchase agreement to others and right to make capital contribution by houses. Accordingly, some of concerns shall be raised as follows:
- Alien organization is allowed to use house for their staff accommodation only. The question is when the demand for the staff’s accommodation is over, are they permitted to sell house? If the answer is yes so how can distinguish execution of ownership and real estate business in the context that the law allows owning a lot of apartments at a time. Anh if it’s a real estate company, whether it is conflict with Law on Real Estate Business (foreign real estate business Is not allow to buy for re-sell. If the answer is no, it’s a backward compared with the Resolution 19 since the Resolution also allows re-selling after 1-year ownership as from the date of issuance of ownership certificate.

- One of crucial rights of the owner is to make capital contribution by his/her house(s). The question is whether alien organizations, individuals are allowed to use their residential house in Vietnam for capital contribution into investment projects in Vietnam or to establish of foreign-owned company in Vietnam?