Legal Update - Real Estate - 2015 - Thien Kim Real

Real Estate Danang
NEW LAW ON REAL ESTATE BUSINESS
  REFORMS TO LAW ON RESIDENTIAL HOUSING AND
LAW ON REAL ESTATE BUSINESS
In the last 10 years, the passing of two laws, in particular, marked a significant milestone in the
development of real estate legislation in Vietnam. Law No. 56/2005/QH11 on Residential Housing
was passed by the National Assembly on 29 November 2005 (Current Housing Law) and Law No.
63/2006/QH11 on Real Estate Business was passed by the National Assembly on 29 June 2006
(Current Law on Real Estate Business), and jointly, these two laws have contributed to a more
transparent regulatory framework for real estate transactions in Vietnam. However, with increasing
demand in the market for further development of real estate business, the Current Law on Real
Estate and the Current Housing Law were in need of an update.
Accordingly, on 25 November 2014, the National Assembly passed Law No. 66/2014/QH13 on Real
Estate Business (New Law on Real Estate Business) and Law No. 65/2014/QH13 on Residential
Housing (New Housing Law), which will come into effect as from 1 July 2015, replacing the Current
Law on Real Estate and the Current Housing Law.
We set out below certain significant changes provided in these new two laws.

A. NEW LAW ON REAL ESTATE BUSINESS
REAL ESTATE BUSINESS AND REAL ESTATE SERVICES BUSINESS
Notwithstanding the revision of the definition “real estate services business” to a more general
definition of “real estate business”, the New Law on Real Estate Business maintains the scope of
these businesses. In particular:
(i) real estate business means spending investment capital in order to conduct any of the
following real estate activities for profit-making purposes:
to implement construction, purchase or receipt of a transfer of real estate to sell or
transfer such real estate; and
to lease, sub-lease or grant a hire-purchase1 of real estate;

(ii) real estate business also includes real estate business services which comprises any of the
following services2:
real estate brokerage;
real estate trading floor;
real estate consultancy; and
real estate management.

CONDITIONS APPLICABLE TO ENTITIES CONDUCTING REAL ESTATE BUSINESS
Conditions for an entity conducting real estate business under the New Law on Real Estate Business
comprise3:
(i) establishment of an enterprise or cooperation; and
(ii) having legal capital of at least VND20 billion (approximately equivalent to
US$1 million), which is much greater than the current threshold of VND6 billion.
It should be noted that the two conditions above do not apply to organisations, households and
individuals who sell, transfer, lease or grant a hire purchase of real estate irregularly on a small
scale. Such exceptions will be clarified by the Government. This means that, the New Law on Real
Estate Business distinguishes between the activities of an entity simply engaging in the selling,
transferring and leasing of real estate on a small scale and the activities of a property developer.
The New Law on Real Estate Business is, however, silent on the required ratio of charter capital (or
equity) over the investment capital (equity and debt) applicable to the developers of residential
housing, new urban and infrastructure projects. Under the current legislation, it is required that such
developers must have charter capital of not less than 15% or 20% of the total investment capital,
depending upon each type of property project.

Detail: Legal Update Real Estate 2015