Foreign Investors Developing Property in Vietnam

Up until very recently Vietnam was possibly one of the most frustrating countries for foreign property investors who were all too well aware of the potential for real estate profits to be made in a country where there is a developing tourism market, a burgeoning FDI climate in business and a developing finance market too. But because foreign investors cannot own land and property directly or outright in Vietnam, their potential to profit was restricted.

However, the new housing law that came into effect in 2006 has clarified the rules and regulations as well as the restrictions that apply to foreign individual investors, foreign organisations and joint ventures between local Vietnamese individuals or organisations and foreign organisations involved in the real estate market, and it has opened up some new opportunities for overseas investors to profit from property in Vietnam – so much so that now foreign investors are developing property in Vietnam and benefiting substantially

The new Vietnam housing law has been heralded as a welcome clarification of the rights and obligations of all parties involved in property transactions in Vietnam. Prior to the law’s enactment in July 2006 there was a lot of confusion and contradiction attributed to the whole property market and property buying and ownership process, especially for foreign individuals wishing to invest in Vietnamese real estate.

Before we discuss how and why foreign investors are developing property in Vietnam, here are the most pertinent points of the law applicable to foreign activity in Vietnam’s housing market for foreigners hoping to understand how they can enter the property market: -

Ownership of Property – foreign investors cannot own property for their own personal use in Vietnam but they can invest in property development projects in Vietnam. They can develop houses for lease or for sale and they will be issued with an investment certificate that stipulates the duration of their permitted investment presence in a given project.

Once the investment certificate runs out any unsold or non-leased properties have to be transferred to the state without compensation.

Leasing of Property – foreign organisations and individuals interested in leasing property in Vietnam can do so as long as they have a valid visa or the right to remain in Vietnam for longer than three months.

Mortgages for Property – property owners can mortgage their property but they can only do so with one credit institution and that credit institution must have permission to operate in Vietnam.

The new law therefore clearly highlights two important facts – foreigners can invest in development projects and profit from the lease or resale of property units constructed, and local Vietnamese can benefit from a clarification of the mortgage law and the right to raise finance to buy in Vietnam. Now add to this the following facts and you will see why overseas interest in property development projects has suddenly peaked…

After twelve long years of waiting Vietnam joined the World Trade Organisation on the 11th of January 2007 – the significance of this event is great. For example WTO membership means Vietnam can participate in the global trading system on an equal footing with other WTO members and enjoy trade expansion and subsequent economic growth – in addition it makes Vietnam a more interesting and stable nation for overseas investment focus.

In 2006 along with a new housing law a new investment law was enacted in Vietnam that saw the government freeing up access to the financial market which will allow cash strapped property development projects in Vietnam access to the money they now need to continue.

Property markets in other nations in the southeast Asia region no longer offer the potential for profit and development that Vietnam’s still does meaning increasing focus is being placed on the Vietnamese property market by investors from the likes of Korea, Japan, Singapore and Malaysia.

Local property developers who were on the verge of bankruptcy following two years of a frozen property market in Vietnam are happy and hungry to enter into joint ventures with overseas investors who have the cash to carry their already started projects through to completion.

Vietnam is a nation in the process of rapid urbanization, and currently local demand for both residential real estate and offices space in the main population centres and areas of employment is outstripping supply.

All of these developments and changes have resulted in strong property speculation activity from overseas investors in Vietnam. Money is being poured into housing, infrastructure and commercial property development projects directly or though joint ventures and local property market opinion is that strong short to medium term profits will be derived.

Source: http://www.amberlamb.com