Vietnam, emerging as one of the fastest-growing economies in the region, is attracting significant interest from Foreign Direct Investors (FDI), particularly in the real estate sector. However, ensuring smooth investment operations and legal compliance requires a thorough understanding of the regulations governing land use and real estate.
Land Lease Rights and Property Acquisition for FDI Enterprises: Details and Updates
Under Vietnamese law, FDI enterprises can acquire land-use rights through leases from the State or from organizations and individuals with land-leasing rights. Common lease arrangements include:
Annual Land Lease Payments:
- This option is suitable for long-term projects, such as industrial parks, export processing zones, or large-scale real estate developments.
- The advantage is that it reduces the initial financial burden on enterprises, but it requires managing annual lease payments.
One-Time Land Lease Payments:
- This option is suitable for short-term projects or specialized projects, such as tourism, services, or temporary projects.
- The advantage is that it allows enterprises to fix land lease costs, but it requires a large initial capital outlay.
In addition, FDI enterprises can purchase real estate in Vietnam, but this right is limited. For example:
Residential Property:
- FDI enterprises can only purchase residential property to serve their business operations, such as offices or employee housing, and cannot purchase property for resale or leasing.
- The number of residential properties that can be purchased is also limited, depending on the size and operational needs of the enterprise.
Commercial Real Estate:
- FDI enterprises can purchase commercial real estate to serve their business operations, such as shopping centers or office rentals, but must comply with planning and land-use regulations.
Restrictions on Foreign Ownership and Use in the Real Estate Sector: Reasons and Impacts
Although Vietnam encourages FDI, certain restrictions are in place to protect national interests and maintain the stability of the real estate market:
Land Ownership Limitations:
- Land is owned by the people and managed by the State. Therefore, FDI enterprises cannot own land, but only acquire land-use rights through leases.
- This is to ensure strict State control over land resources and to prevent speculation and market manipulation.
Restricted Property Types:
- Certain types of real estate may be restricted for FDI, particularly those related to national defense and security, border areas, and islands.
- This is to protect sensitive areas and ensure national security.
Land Use Duration Limits:
- The duration of land-use rights granted to FDI enterprises depends on the duration of the investment project, usually not exceeding 50 years, and may be extended but not exceeding 70 years.
- This is to ensure flexibility in land use, in line with socio-economic development planning.
Essential Legal Procedures: Concrete Steps
To carry out land and real estate transactions, FDI enterprises must complete the following procedures:
Obtain an Investment Registration Certificate:
- This is the first step to confirm the FDI enterprise’s investment project, including information on the project’s objectives, scale, location, and timeline.
Obtain a Certificate of Land Use Rights, Ownership of Housing, and Other Assets Attached to Land:
- This is the most important legal document, confirming the FDI enterprise’s land-use rights and property ownership.
Complete transaction registration procedures:
- When FDI enterprises carry out secured transactions, such as mortgages or pledges of land-use rights, they must register with the competent state authority.
Recent Legal Updates: Land Law 2024
The revised Land Law 2024 introduces several important changes that affect FDI enterprises:
Easing the transfer of real estate projects:
- The new law makes it easier for FDI enterprises to receive real estate project transfers, reducing administrative procedures.
- This helps increase the liquidity of the real estate market and attract more foreign investment.
Clarifying regulations on multi-purpose land use:
- The new law provides clearer regulations on multi-purpose land use, allowing FDI enterprises to be more flexible in their land use.
- This helps optimize the use of land resources.
Practical Advice for FDI Investors: For Effective Investment
- Thoroughly research land and real estate laws and regulations.
- Choose reputable and experienced real estate partners.
- Complete all legal procedures as required.
- Stay up-to-date on the latest land law information.
La Défense Law Firm provides expert guidance on Vietnam’s real estate laws, ensuring FDI investors navigate land leases, property acquisitions, and legal compliance with confidence.
Read more:
- Real Estate Disputes in Vietnam
- Notes When Carrying Out Real Estate Transaction Procedures
- Establishing a Legal Entity: Options and Requirements for FDI in Vietnam