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Official Gazette

Sunday, February 23, 2020

Owning real estate within reach of foreigners

Updated: 17:27’ - 25/07/2007

Recent years have seen the Government ease policies restricting home ownership by foreigners. Owning real estate is now within reach of overseas Vietnamese, and foreigners living and working in Vietnam.

NGUYEN MANH KHOI
Ministry of Construction

Under Article 174 of the 2005 Civil Code, real estate includes land, houses, construction works attached to the land and assets attached to those houses or works, or to the land, and other assets specified by law. This article highlights legal provisions and state policies on real estate, owned by overseas Vietnamese or foreigners in Vietnam.

Land use rights

Under the 1992 Constitution, land comes under the ownership of all the people, represented by the State. This provision is suitable to Vietnam’s economic and political conditions and differentiates its land ownership system from that of many other countries. The State represents the people in management of land throughout the Vietnamese territory. Organizations and individuals may have the right to use land only when they are leased or allocated land by the State for stable and long-term use or for use during a certain period.

Land use rights of overseas Vietnamese and foreigners in Vietnam are provided for in various legal documents, including the 2003 Land Law, the 2005 Investment Law and the 2005 Housing Law and their guiding documents.

The 1993 Land Law stipulated that overseas Vietnamese and foreigners may only acquire land use rights through the lease of land in Vietnam. This stipulation created initial conditions for foreign investors to do business in Vietnam but was not attractive enough due to its restrictions on their rights to and benefits from the leased land.

The 2001 amendments to the 1993 Land Law expanded overseas Vietnamese’ land use rights, permitting them to buy houses associated with residential land use rights. It meant that overseas Vietnamese, for the first time, had the right to use residential land permanently like their fellow citizens in the country. In detailing this law, Decree No. 81/2001/ND-CP of November 5, 2001, identified four eligible groups of overseas Vietnamese: persons making long-term investment in Vietnam; persons with meritorious contributions to the country; cultural activists and scientists who regularly worked in Vietnam; and persons who wished to live stably in the country. These persons could use a certain residential land area underlying and attached to the house they bought.

Prompted by the requirement of attracting more foreign investment into the country, the Resolution of the IXth Party Congress in 2001 pointed to the need to “create and develop a real estate market, including land use rights, in accordance with law; step-by-step open up the real estate market for overseas Vietnamese and foreign investors.” This guideline was manifested in the 2003 Land Law, which further expands overseas Vietnamese’ and foreigners’ land use rights.

Under the 2003 Land Law, overseas Vietnamese may be allocated or leased land by the State or buy houses associated with residential land use rights, depending on who they are and what forms of investment they apply. For example, if they wish to invest in the construction of houses for lease or in agricultural, forestry or fishery projects, they may be leased land by the State with the lump-sum collection of land use levies. If they wish to invest in infrastructure construction in industrial parks or hi-tech parks, they may be allocated land by the State. Overseas Vietnamese allocated land by the State with the collection of land use levies may assign or lease their land use rights and construction works on that land, and may donate, mortgage or make capital contribution with their land use rights and assets attached to the land. If they pay land use levies annually, they may mortgage or make capital contributions with their land use rights or sell assets attached to the leased land.

The Law also extends greater rights to foreigners in the use of land allocated or leased by the State. Foreign individuals or organizations being leased or subleased land in industrial parks, hi-tech parks or economic zones may sell, mortgage or make capital contributions with assets attached to their land use rights. They may also assign, mortgage or make capital contributions with the rights to use the leased or subleased land and assets attached to that land.

Under the 2005 Investment Law, the State may not nationalize investors’ assets. If the State purchases or requisitions their assets, it must pay compensation to investors in accordance with the law. This provision aims to ensure equality between domestic and foreign investors. The investment law also affirms that investors may mortgage their land use rights associated with assets at credit institutions licensed to operate in Vietnam.

Ownership of homes, buildings

Vietnam’s WTO commitments require it to adopt regulations in line with international law, ensuring equality between investors in economic activities. Many domains have been opened up and changes have been seen in regulations on home and construction work ownership rights, especially those relating to foreigners.

Articles 25 and 28 of the 1992 Constitution state: “Citizens have the right to own houses. The State protects lawful ownership rights and inheritance rights of citizens. The State guarantees lawful ownership rights over capital, assets and other interests of foreign organizations and individuals. Foreign-invested enterprises are not to be nationalized.” The 1995 and 2005 Civil Codes affirm that the ownership and other rights of all entities to their assets are respected and protected by law. In other words, the State protects asset ownership rights of all entities, including foreigners. The question is therefore what kinds of assets foreigners may possess.

According to state regulations issued before the 1992 Constitution and the 1991 Housing Ordinance, foreign organizations and individuals had no house ownership rights. Housing transactions before July 1, 1991, involving foreign elements, were handled in accordance with Resolution No. 1037/2006/NQ-UBTVQH11. This Resolution, despite its late promulgation, helped solve many problems on house ownership. According to the Resolution, the State permits some overseas Vietnamese who acquired houses through transactions before 1991 to own or reclaim those houses. This provision aims to ensure equality between Vietnamese citizens inside and outside the country in the spirit of Politburo Resolution No. 36-NQ/TW of March 26, 2004, on overseas Vietnamese.

After promulgation of the 1992 Constitution, and especially since 2001, the State has incrementally created conditions for overseas Vietnamese to own homes in Vietnam. According to Decree No. 81/2001/ND-CP, overseas Vietnamese may buy and own houses in Vietnam but may not own houses acquired through donation, inheritance or exchange. They will not be granted house ownership certificates when investing in the construction of houses in Vietnam for commercial purposes.

The 2003 Land Law and the 2005 Investment Law and Housing Law have expanded foreigners’ house ownership rights associated with land use rights. Under the 2003 Land Law, diplomatic organizations have the right to own construction works on their leased land while foreign organizations and individuals and overseas Vietnamese may sell their assets attached to the land. The 2005 Investment Law stipulates that the State recognizes and protects capital and assets under the investors’ lawful ownership. Meanwhile, the 2005 Housing Law specifies house ownership rights of overseas Vietnamese and foreigners. It differentiates the following two cases:

First, the State has for the first time permitted overseas Vietnamese to enjoy full house ownership rights like their fellow citizens in the country. Overseas Vietnamese returning to Vietnam for long-term investment, having meritorious contributions to the country, being cultural activists or scientists who wish to conduct regular activities in Vietnam to serve the cause of national construction, persons permitted to reside permanently in Vietnam and other persons identified by the National Assembly Standing Committee may own houses in Vietnam like Vietnamese citizens living in the country. Overseas Vietnamese other than these persons who return to stay in Vietnam for 6 consecutive months or more may each own a house. They may also accept houses donated or bequeathed to them. That also means that while living in Vietnam, an overseas Vietnamese may own more than one house.

Second, foreign organizations and individuals may rent houses if staying in Vietnam for 3 months or more and own houses if they invest in the construction of houses for lease. This provision ensures equality between domestic and foreign investors and contributes to attracting investment in the housing domain to satisfy the people’s housing demands.

Most recent legal documents recognize and protect foreigners’ ownership rights to assets (including construction works). Under the 1992 Constitution, the 2003 Land Law and the 2005 Investment Law, foreigners may sell, mortgage, make capital contribution with, or lease construction works under their ownership. The Real Estate Law, which took effect on January 1, 2007, also stipulates that foreigners may invest in the creation of houses or construction works for sale, lease or mortgage and have their house ownership and land use rights recognized by the State. In other words, foreigners may own construction works in which they have invested in Vietnam. The investors’ right to own their construction works is officially recognized by the State in Government Decree No. 95/2005/ND-CP of July 15, 2005, on the grant of house and construction work ownership certificates. Under this Decree, foreign organizations and individuals investing in construction works according to the investment law or acquiring construction works through transactions have their ownership rights over those works recognized. This is an important legal foundation for investors to exercise their ownership rights, and resolves foreign investors’ difficulties in the mortgage of construction works to secure loans.

Although the current law provides more transparent and flexible regulations on foreigners’ rights to real estate, foreigners should still be given more rights to houses and construction works. Meanwhile, detailed guidance should be issued to facilitate the enforcement of law such as guidance on papers to certify the status of overseas Vietnamese, on financial obligations, registration fees and administrative procedures.-

VNL_KH1 

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