Vietnam’s Law on Real Estate Businesses 2023, enacted by the National Assembly of Vietnam, marks a significant update to the regulatory framework governing the real estate sector. This new law aims to address various challenges within the industry by focusing on transparency, consumer protection, and sustainable development.

Regulation of Real Estate Business Activities

The law introduces a streamlined approach to obtaining business licence for real estate activities. According to Article 5, the licensing process has been refined to include stricter criteria for companies, ensuring that only qualified entities can operate in the sector. This includes requirements for demonstrating financial stability and professional qualifications.

Article 6 outlines the operational standards and compliance requirements that real estate businesses must adhere to. These standards are designed to ensure that companies not only meet regulatory benchmarks but also operate with a high degree of reliability and professionalism. By enforcing these standards, the law seeks to enhance the overall credibility of the real estate market.

Box 1: The current state of Vietnam’s real estate market recovery

At the beginning of 2023, construction work on buildings in Vietnam was slowly winding down as the real estate industry ground to a halt. Hard hats were hung up and cranes ten stories high fell dormant leaving the cement shells of unfinished residential towers standing dark and empty–cold reminders that Vietnam’s real estate market was not in good shape.

This was due to a number of factors but in short, the Evergrande crisis in China in 2022, had led Vietnam to take a long hard look at its own real estate industry, and what it found was not good. The misuse of investor funds, particularly those acquired through the bond market, was rife, and a number of real estate firms were grossly over-leveraged. These revelations then went on to spook investors and consequently, the market took a sizable downturn…

Real Estate Transactions

Transparency in real estate transactions is a cornerstone of the new law. Article 8 mandates detailed disclosure requirements for property transactions. This provision is aimed at preventing fraud and ensuring that all parties involved have access to comprehensive information about the properties and transactions.

In addition, Article 9 provides guidelines for drafting and executing real estate contracts. It standardised contract terms to protect both buyers and sellers, thus fostering fair practices within the market. This standardised approach is intended to minimise disputes and ensure that transactions are conducted in a transparent manner.

Property Development and Management

The law addresses property development and management with a focus on sustainability and quality. Article 12 introduces stricter criteria for project approvals, which now include mandatory environmental impact assessments. This measure ensures that new developments adhere to sustainable practices and contribute positively to the environment.

Article 13 sets forth quality standards for construction and property management. These standards are crucial for ensuring that developments are safe, durable, and compliant with regulatory norms. By implementing these quality controls, the law aims to enhance the long-term viability and safety of real estate projects.

Box 2: Investing in real estate projects in Vietnam

Investing in real estate projects in Vietnam offers significant opportunities for foreign firms, driven by the country’s economic growth, urbanisation, and rising demand for residential, commercial, and industrial spaces. However, navigating the market requires a thorough understanding of local regulations, investment structures, and cultural nuances.

Consumer Protection

Consumer protection is a key feature of Vietnam’s Law on Real Estate Businesses 2023. Article 15 strengthens buyer rights by establishing clear procedures for dispute resolution. It also provides mechanisms for compensation in cases where properties are found to be defective, ensuring that consumers have avenues for recourse.

Article 16 specifies the requirements for warranties and maintenance services provided by developers and property managers. This ensures that consumers receive adequate support and that their investments are protected throughout the lifecycle of the property.

Regulatory Oversight

Article 19 enhances the regulatory framework by introducing improved inspection and enforcement mechanisms. This includes increased penalties and sanctions for violations of real estate regulations. The measures aim to ensure that businesses comply with legal standards and to discourage misconduct within the industry.

Data Management and Reporting

The establishment of a national real estate information system is a significant development under Article 22. This system will track property transactions, ownership, and market trends, creating a centralised database for better monitoring and analysis. The information system will provide valuable insights and support regulatory oversight.

Article 23 requires real estate businesses to submit regular reports on their activities and financial status. This reporting obligation is intended to enhance transparency and allow for more effective regulatory oversight of the sector.

Box 3: Starting a real estate business in Vietnam

Starting a real estate business in Vietnam presents many opportunities, as the country’s economic growth and rising incomes are fueling demand for both commercial and residential properties. However, entering the Vietnamese real estate market requires a deep understanding of the country’s business environment, real estate culture, and the regulatory landscape.

Impact and Implementation

The implementation of Vietnam’s Law on Real Estate Businesses 2023 will significantly impact various stakeholders in the real estate sector. Real estate companies will need to adapt to new licensing requirements, operational standards, and reporting obligations as outlined in Articles 5, 6, and 23. Compliance will be essential to avoid penalties and maintain operational efficiency.

For consumers, the law offers enhanced transparency and stronger protections, as detailed in Articles 8, 9, 15, and 16. The improved contractual terms and dispute resolution processes will benefit buyers and investors, making the market more user-friendly.

Property developers will need to adhere to the new criteria for project approvals and quality standards specified in Articles 12 and 13. These requirements focus on sustainability and regulatory compliance, ensuring that new developments are both environmentally friendly and high quality.

Regulatory bodies will gain improved tools for monitoring and enforcing real estate regulations, supported by the comprehensive information system described in Article 22. This will enhance their ability to oversee the sector and ensure adherence to legal standards.

Conclusion

In summary, Vietnam’s Law on Real Estate Businesses 2023 represents a substantial overhaul of Vietnam’s real estate regulations. It aims to foster a more transparent, efficient, and consumer-friendly real estate market through enhanced regulatory frameworks, improved consumer protections, and a focus on sustainable development.

This law also often functions in concert with the Law on Housing and the Land Law.

Vietnam’s regulatory environment, however, is dynamic and can change quickly. With this in mind, to keep abreast of changes to said regulations, foreign firms operating in Vietnam should make sure to subscribe to the-shiv.

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