In recent years, the government has consistently extended preferential policies to incentivize investments in the industrial zones, establishing them as an optimal launchpad for both domestic and foreign investors eager to expand their ventures in Vietnam. However, selecting the most suitable industrial zone for investment remains a multifaceted endeavor. Investors must not only weigh the cost of factory rentals but also carefully consider various pivotal factors that will profoundly impact the future growth and prosperity of their businesses.

Overview: Vietnam’s Industrial Land for Lease 

According to the Report of the Vietnam Association of Realtors (VARS) in 2022, nationwide, there are about 563 industrial parks (IZs) in 61/63 provinces, 397 IZs have been established, 292 IPs have been put into operation with a total natural land area of more than 87,100 hectares, industrial land area of more than 58,700 hectares. These include industrial parks situated outside economic zones,  industrial parks nestled within coastal economic zones, and industrial parks located in border-gate economic zones.  The occupancy rate of industrial zones across the country tends to increase, reaching over 80%.

Industrial zones and economic zones have attracted more than 10,000 domestic projects and nearly 11,000 projects with foreign direct investment capital effective with the total registered investment capital corresponding to more than 340 billion USD

From a legal standpoint, it is imperative for foreign investors to approach the decision of investing in Vietnam's industrial parks with utmost caution and careful deliberation. The complexity surrounding this choice necessitates a comprehensive understanding of various factors before making any commitments. To assist prospective investors in navigating these intricacies, we present 3 key considerations that demand attention prior to jumping on this transformative journey of renting land within Vietnam's industrial parks.

Key Considerations for Prospective Investors

Determining Optimal Land Use for the Business

Many foreign businesses and investors find themselves at a crossroads, contemplating the decision of whether to opt for a one-time payment or an annual payment when it comes to leasing industrial land. The question remains: Which option holds greater profitability? 

As stipulated in the Land Law (2013), when leasing land with a one-time payment, an infrastructure business enterprise has the liberty to sublease land, along with the associated infrastructure, to other enterprises. This sub-leasing can take the form of either yearly rental payments or a one-off land rental for the entire lease period. However, in the case of annual rental payments, infrastructure businesses are limited to subleasing on an annual land rent basis.

The implications extend to the rights and privileges associated with the subleased land. In the scenario of subleasing land with a one-time payment of land rental, the lessee enjoys the ability to transfer land use rights, mortgage the land use rights, or even contribute capital to another company with the land use rights. Meanwhile, when leasing land with annual payment, the lessee encounters limitations on certain rights, such as the inability to transfer land use rights, and rights confined solely to the assets attached to the land.

It can be seen that e choice between one-time payment or annual payment for land use holds profound implications for their specific needs, business scope, and future plans. It is paramount for investors to meticulously evaluate their requirements and align them with the most suitable type of land use. By doing so, they can ensure they make an informed decision that aligns with their long-term objectives and maximizes their profitability within the dynamic landscape of Vietnam's industrial park sector.

Enhancing Lessee Rights through Infrastructure Business Cooperation

Another crucial aspect to consider when it comes to land lease agreements within Vietnam's industrial parks is the collaborative role of infrastructure businesses in enabling lessees to exercise certain rights tied to the leased land.

As per current legislation, lessees have the opportunity to exercise rights such as transferring or subleasing land use rights and associated properties, contingent upon the specific terms of the land lease. However, it is important to note that land lease contracts often stipulate the requirement for lessees to obtain the approval and support of the infrastructure business in order to execute these transactions. Moreover, in certain instances, lessees may also be subject to paying specific fees in accordance with the regulations set by each infrastructure business.

Hence, before signing land lease contracts, investors must pay close attention to the clauses that necessitate the support or cooperation of the infrastructure business when exercising their rights tied to the land. Additionally, in order to establish a factory that aligns with their specific requirements when renting industrial land, investors should conduct thorough research and engage in pre-agreement discussions with the infrastructure business regarding technical conditions. These conditions encompass vital aspects such as construction planning, construction density, and foundation height prior to commencement.

By doing so, they can proactively mitigate potential challenges that may arise in the future, ensuring a smooth and harmonious business environment.

Gaining an In-Depth Understanding of the Application Process for Investment Approval 

For foreign investors seeking to embark on the construction of industrial parks, a crucial step lies in understanding the process and procedures involved in securing investment policy approval. To qualify, foreign investors must furnish comprehensive documentation that substantiates their capacity, experience, and financial prowess.

However, traversing these procedures can prove arduous for investors unfamiliar with Vietnam's legal regulations, cultural nuances, and working environment. Compounding the challenge are issues linked to the state management of industrial zones, including policy formulation, construction planning, and establishing a robust legal framework for industrial park development. The lack of seamless coordination among ministries, branches, and local authorities further complicates matters, impeding foreign investors in their quest to obtain land leases and embark on industrial park construction.

Given these complexities, it is highly advisable for foreign investors to contemplate collaboration with local investment consulting companies. This strategic partnership ensures meticulous adherence to legal regulations governing industrial park land leases. By enlisting the expertise of investment consultants, foreign investors can navigate the intricacies of the process, effectively sidestepping potential obstacles and streamlining their journey toward successful industrial park development.

Understand the policies and incentives for leasing land to invest in Industrial Parks

The Government has just issued a Decree on Industrial Real Estate (Decree No. 35/ND2022/ND-CP dated May 28, 2022), requiring simpler procedures, investor capacity must be clear. More clearly, there is a housing ecosystem. This is a driving force that creates positive conditions in the development of industrial real estate

Conclusion

Navigating the process of renting land in industrial parks in Vietnam requires careful consideration and strategic decision-making. From understanding the legal regulations and cultural nuances to addressing the challenges associated with infrastructure businesses, investors need reliable guidance to ensure a smooth and successful journey. At Viettonkin, we offer comprehensive legal consulting services tailored specifically to investors seeking to rent land in industrial parks in Vietnam. Our team of experts is well-versed in the intricacies of Vietnam's industrial park landscape and will provide you with strategic advice and practical solutions to help you navigate the complexities of industrial park land rental, ensuring compliance with regulations and maximizing your investment potential. 

Take the next step towards your investment goals by utilizing Viettonkin's legal consulting services. Contact us today to learn more about how we can support your journey and help you achieve success in Vietnam’s dynamic market. 

The real estate sector in Vietnam remains an appealing destination for foreign direct investment (FDI), with FDI flow into this sector ranking second in the first half of 2022.

FDI Continues to Pour into Real Estate

While many sectors are still suffering from the impact of the pandemic, FDI inflows into Vietnam continued to grow in the first half of 2022 thanks to solid post-Covid support policies by the Government. According to the Ministry of Planning and Investment (MPI), as of June 20, foreign investors had invested $15.27 billion in Vietnam, accounting for 97.4% of the total recorded during the same period last year. 

The real estate sector ranked second, bringing in $3.15 billion, or 22.5% of the total registered capital. Cushman and Wakefield, a leading global real estate services firm, stated that Vietnam remains an appealing destination for industrial real estate investors due to its stable currency and an increase in free trade agreements.

According to the Ministry of Construction, the real estate market in the first 6 months of 2022 has shown signs of recovery and good development. Product absorption rates in most segments were high, and almost no new inventory was generated. Until the first 6 months of this year, the market has not seen an improvement in the supply of commercial housing, the supply of commercial housing is very limited with about 12,000 units. Meanwhile, the total number of transactions of apartments, individual houses, especially land plots increased sharply (estimated at 70,000 successful transactions). The market has regained its balance between investment, business activities, and buying and selling for use.

The Vietnamese market has welcomed many new projects from foreign investors right at the beginning of 2022. The highlight is Lotte E&C's $900 million investment in its new smart urban project, "Lotte Eco Smart City Thu Thiem." YSL Group is also developing an industrial land project covering nearly 300 hectares in Nam Binh Xuyen, Vinh Phuc. The project is geared toward green development and high technology, with stringent equipment and advanced science and technology requirements.

On July 14, CapitaLand Development (CLD), CapitaLand Group's real estate development arm, also acquired a potential land fund to build a complex in Thu Duc City, Ho Chi Minh City, with a total revenue of around $720 million. The project will cover approximately 8 hectares and will provide 1,100 high-class apartments and shophouses to meet the growing settlement needs of Thu Duc City, which is being developed to become an economic and technological center.

Emerging Trends in the Market

According to Savills Vietnam, the real estate market will continue to be an attractive destination for foreign businesses. Two-thirds of FDI enterprises in Vietnam's real estate sector are large enterprises, many of which focus on industrial real estate. The industrial real estate segment has many favorable factors, such as a large planned industrial land fund, competitive rental prices compared to other countries in the region, a stable political and economic environment, and FDI inflows continuing to flow strongly into Vietnam. These factors will create a driving force for the development of industrial real estate in the coming years.

It is worth noticing that resort real estate is a segment where smart investors will look for opportunities to enter, especially in markets like Phu Quoc, Nha Trang, and Phan Thiet. On July 20, a signing ceremony was held between Vietnamese realty developer Danh Khoi Group and Japanese conglomerate Tokyu Group for the development of the high-end resort project The Meraki in Ba Ria - Vung Tau. Valued at over $42.7 million, the project is part of the Aria Vung Tau resort complex in the Chi Linh urban area. The Meraki Vung Tau, featuring a 29-floor tower, is expected by Tokyu Group to be the driving force for their investment plan in Vietnam, which is considered to have the most vibrant real estate market in the region.

When it comes to popular market segments, healthcare real estate, which is still relatively new in Vietnam, offers fantastic opportunities to investors with the foresight and ability to seize opportunities. According to Forbes, the global healthcare real estate market has reportedly risen dramatically over the last two years, recording double-digit growth. According to a recent survey by Vhome, more than 10.6% of respondents in Vietnam were considering the project's utility investment rates and ecological and healthcare space quality before making a purchase decision. After the fourth wave of Covid-19, homebuyers began looking for healthy living spaces with green, safe, uncrowded architecture and low construction density as healthcare demand rose. This resulted in the current development of this new market in Vietnam.

The demand for residential real estate in Vietnam will continue to rise as a result of the middle and upper classes' rapid urbanization. Large cities like Hanoi and Ho Chi Minh City continue to attract foreign investors who are investing in residential and commercial real estate. The demand for space leasing from data centers, e-commerce, and other industries will be what drives the office market. Along with an increase in consumption and capital investment, the retail market also experiences many positive signs as the tourism sector begins to recover. Due to their still-competitive prices in comparison to nearby markets like Singapore, Shanghai, and Shenzhen (China), Hanoi and Ho Chi Minh City are enjoying a growing popularity.

However, the price level of apartments in the middle and high-end segments continues to be pushed up, especially in big cities due to new supply being increasingly scarce and the possibility of. apartment projects appearing in the future with a very high primary selling price compared to the regional average. In contrast, the real estate market in the surrounding localities such as Binh Duong, Long An, Dong Nai and Hai Phong has the opportunity to develop more vibrantly when the land fund is still large and there are many new projects. construction investment.

Considerations for Foreign Investors

Aside from opportunities, it is important to point out that FDI inflows  into the real estate market also face many difficulties and challenges. Specifically, because of numerous issues with the legal system surrounding the project development process, which caused delays in implementation, the amount of FDI registered to the market year after year was not distributed as promised.

Additionally, condotels and officetels are two examples of new real estate segments for which comprehensive and prompt legal regulations have not yet been released. This has led to a discouraging reaction from many foreign investors who showed great interest in the time before.

In the foreseeable future, the housing craze and real estate prices will continue to rise due to the scarcity of available land in big cities, where FDI is mostly invested. The fact that high-quality real estate projects are currently becoming scarcer and less well-publicized may also trouble new investors in Vietnam. Therefore, foreign investors can seek the advice of qualified advisors with in-depth knowledge of the industry to understand the market and gain access to potential projects, or even form joint ventures with Vietnamese partners.Understanding the needs and challenges that foreign investors face, Viettonkin is eager to assist and accompany you as you begin developing an investment strategy in the Vietnamese market. Contact us now to receive detailed and in-depth information from our team of investment, business, and legal experts.

Brokers are important in the real estate market. They can provide convenience and professional consulting services for customers. They help customers to quickly make wise and legal investment decisions.

However, with the rising rate of unqualified real estate brokers in recent years, the brokerage service is to blame for negative issues in the market. Unprofessional real estate brokers were the cause of land fever in major cities and provinces because they provided misleading information to customers and colluded with others to push prices up. Therefore, the Government has put continuous effort into standardizing real estate brokerage by issuing several important regulations in recent years.

The expiry of real estate licenses granted before 1/7/2015 

The Government emphasized the importance of real estate licenses in the Vietnam Real Estate Trading Law 2014 which takes effect from July, 2015. To standardize real estate brokerage, they made licenses compulsory and tightened regulations regarding obtaining a broker license. 

According to the Law, all real estate brokerage certificates granted before July, 2015 were effective for 5 years until 1/7/2020. Therefore, when the old certificates expire in 2020, brokers who want to get licenses again must meet all the conditions issued in the Law and register for a license examination. 

However in 2021, because of the Covid-19 pandemic, many people couldn't register for the examination for a new license. They continued to do business with  an invalid license. According to the Vietnam Association of Realtors, only 10 percent of real estate brokers had licenses. This means the majority of brokers were amateurs who were untrained and unregulated. They became brokers temporarily as the real estate market boomed. Therefore, the Government has taken immediate measures to tighten regulations related to real estate licenses.

Strict sanctions for conducting brokerage services without licenses

With the aim to tighten regulations on real estate licenses and strengthen management in construction activities, the Government has issued Decree 16/2022/ND-CP in January, 2022. The new decree stipulates sanctions for administrative violations in construction in general. It also includes strict regulations on sanctions for illegal brokerage activities.

Specifically, individuals or organizations who provide real estate brokerage service without a practicing certificate or with an expired certificate will be fined between VND40-60 million (US 1722-2584 dollar). It can be seen that the fine increased by 4 times, from VND 10-15 million in the previous law to VND40-60 million in 2022.

Importantly, the Decree adds a fine of between VND40-60 million also for three more acts as follows:

- The first one is falsifying the practice certificate’s content. The lawbreaker will have to return this certificate to the competent authority that issued it.

- The second act is lending, leasing, renting or borrowing practice certificates to carry out real estate brokerage services. Besides the fine of VND40-60 million, the lawbreaker can even be deprived from the right to carry out brokerage services in the future, as an additional sanction.

- The third illegal act is that organizations and individuals providing brokerage services are concurrently both a broker and a contract performer in a real estate business transaction. Individual fines for this act are 1/2 of the fine level for organizations.

Since the beginning of 2022, people have been seeking licenses due to the tightening of regulations. Real estate agents are trying to get their employees certified as quickly as possible to avoid sanctions. Getting a license is the basic requirement to ensure that their employees are adequately qualified. Hundreds of brokers in Ho Chi Minh City and the southern provinces have enrolled in training courses since the regulation took effect. The number is ten times greater than that of only a few months ago.

Requirements for individuals and organizations to conduct real estate brokerage

The Government understands how important real estate brokers are to market transparency. Therefore, they have established several conditions for individuals and organizations to carry out real estate brokerage services and obtain a brokerage license.

Firstly, the Vietnam Real Estate Trading Law 2014 stipulates comprehensive requirements for real estate brokerage service providers. According to the Law, providers must set up the enterprise where there are at least 2 employees obtaining real estate broker licenses. Moreover, providers can not be both a broker and a contracting party in a real estate transaction. Notably, individuals can provide real estate brokerage services independently providing that he or she obtains a broker license and pays taxes.

In addition, the Law also thoroughly stipulates regulations on issuance of real estate broker licenses. In terms of candidates’ eligibility, Vietnamese citizens, overseas Vietnamese and foreigners can all register for the license examination. The duration of the broker's license is 5 years. In this way, the Government aims to push up the standards of real estate brokers.

In conclusion

The Vietnam Government is well aware that unprofessional real estate brokers can significantly affect investors, customers and even other professional real estate brokers. Therefore, they find it crucial to come up with solutions and propose appropriate sanctions to push up the standards of real estate service providers and brokers. It can also be seen that the Government has provided comprehensive and favorable, yet strict, policies for individuals, domestic and foreign organizations to do business in the Vietnam real estate market.

Thanks to the fast growing economy, increasingly high urbanization rate and the growing middle class, Vietnam’s real estate is predicted to thrive in the near future. It has become a lucrative investment opportunity. However, Vietnam’s numerous regulations can pose a big challenge to investors. Viettonkin can provide our partners with comprehensive and updated information and knowledge about the legal framework of the real estate market. We are confident to be your resourceful partner!

Why is industrial real estate industry trending?

Although international trade is still disrupted by geopolitical uncertainties and disease control policies in some major countries, Vietnam is seen as a bright spot for global investment flows due to its stable political and business environment, as well as the effective implementation of drastic measures to achieve the Government's dual goals of safely adapting to the epidemic and recovering production. 

According to Mr. David Jackson, General Director of Colliers Vietnam, industrial real estate rental costs in Vietnam are still 20-33 percent lower than in neighboring Thailand and Indonesia. Because Vietnam's industrial real estate is still in its early phases, the typical benefits of this period, such as land rent or labor prices, will also endure at least 5-7 years.

The "unstoppable" rise of e-commerce will be a significant driver of industrial real estate in the following years. According to the Vietnam E-commerce Association, the compound annual growth rate of this industry's revenue is more than 40% between 2020 and 2025 and is expected to reach 52 billion USD in 2025. When sales reach 25-27 billion USD, it is predicted that 350,000m2 of new warehouse space would be required to suit the demands of this business. 

Overview of the industrial real estate market

The industrial real estate sector was the primary leverage of foreign capital inflows in the first quarter. The fact that a Singaporean investor boosted capital for the VSIP Bac Ninh urban infrastructure and service investment project by roughly 941 million USD has helped the overall registered capital of foreign investment in real estate "rise." Singapore maintained its lead in foreign investment flows into Vietnam in the first quarter, accounting for 25.7 percent of overall investment capital in Vietnam with a total registered capital of 2.29 billion USD. 

After Vietnam opens to visitors, investment in hotels and resort real estate is expected to return quickly in the final months of 2022, owing to leverage from local resources and international money. As a result, investors such as real estate investment trusts, private enterprises, and numerous individual investment funds are increasing their acquisition of hotel properties in order to catch up with the trend. a rise in tourism Simultaneously, these units boosted the conversion of several hotel buildings into workplaces and shared housing types.

Industrial real estate trends

Encourage public infrastructure investment

The Ministry of Transport estimates that the government will possess 3,000 kilometers of highway by the end of 2025. As a result, the future public investment packages will prioritize the construction of a network of motorways, with a particular emphasis on the North-South expressway.

Both FDI and homegrown enterprises are driving production growth

Vietnam intends to link international commercial flights beginning in early 2022, creating advantageous conditions for investors and professionals to return to Vietnam and encourage investment in the future year. Vietnam has also inked extremely advanced free trade agreements (FTAs) with significant global partners such as the CPTPP, EVFTA, and RCEP. 

E-commerce growth, increased inventory demand, and supply chain diversity

According to the Ministry of Industry and Trade, Vietnam's e-commerce income is exploding, with a compound growth rate of 44.9 percent between 2020 and 2025 reaching $52 billion. According to CBRE Asia, revenue from e-commerce of around 25-27 billion USD is anticipated to necessitate an extra 350,000m2 of new warehouse space, amounting to more than 700,000m2 of warehouse space in Vietnam in 2025.

Accelerating new supply expansion in the Red River Delta, North Central, and Central Coast

The land supply for industrial parks in Vietnam is predicted to rise by 44,760ha between 2022 and 2025 to fulfill the increasing demand for industrial park land in Vietnam, which would encourage the expansion of new supply in the Red River and the North Central and Central Coast. 

Cold chain real estate

The Cold Chain has gained increasing interest in Vietnam in the past few years. The majority of cold storage services are in operation at over 90% of their capacity. New-generation free trade agreements will stimulate export demand for agricultural and aquatic products to European markets along with increasing demand for cold storage systems. Vietnam seafood stands third in export volume in the world, accounting for the largest area of cold storage. Cold chain supply currently provides 48 facilities, divided into 2 main branches: cold storage with about 600,000 shelves and cold transport with more than 700 refrigerated trucks.

Most of the cold storage is mainly located in the Southern region of Vietnam. 60% of the market share is in the hands of foreign investors, yet, chances remain open to domestic potential firms. The cold chain industry is nascent and still considered as a niche market, but will soon become a key sector. In July 2021, Vietnam's highest cold storage will be in Long Hau, containing 31,000 pallets.

Viettonkin is one of the leading consulting firms that can help you navigate through the legal process of doing business in Vietnam. Viettonkin assessed that it is the right time for both foreign and domestic investors to seize the chances and capture a large market share.

Development trend in neighboring provinces of Hanoi and Ho Chi Minh City

The asking price of industrial land in Ho Chi Minh City and Hanoi is twice as expensive as in certain adjacent locations, according to CBRE Vietnam's industrial park real estate market study for the third quarter of 2021. As a result, the industrial real estate rental price in Ho Chi Minh City was the highest in the third quarter, at $300 USD/m2 while the highest rental price in the North is in Hanoi at $250 USD/m2.The trend of industrial parks and tenants relocating to the adjacent provinces of Ho Chi Minh City and Hanoi is becoming increasingly apparent as land rent in these industrial hubs exceeds that of neighboring provinces while the industrial land fund is insufficient. At the same time, infrastructural projects under development such as Trung Luong - My Thuan expressway, Dau Giay - Phan Thiet highway in the south, and Expressway Van Don - Mong Cai, Ninh Binh - Hai Phong in the north have greatly enhanced communication between surrounding provinces.

The industrial urban development

The industrial urban park plan will be an exact solution to the problem of worker housing scarcity, indirectly lowering employees' cramped living conditions and lack of facilities. As a result of a new wave of investment in industry in Vietnam, the industrial urban park model will be an unavoidable trend, assisting in the resolution of many difficulties in the conventional master plan, because the majority of the space is covered.

The Vietnam-Korea Economic Cooperation Industrial Park in Hung Yen will be formally created by the end of November 2021. This is a project with a total investment capital of more than 1,780 billion VND, conducted by LH Group, TDH Ecoland Urban Development and Investment Joint Stock Company, and a number of Korean investors. Bac Ninh province, in the northern region, also has the VSIP Bac Ninh industrial park, a classic example of an urban industrial complex with a total area of 700 hectares.

"The Russia-Ukraine tension, Covid-19, inflation, and challenges facing business are urging investors to look for assets that are less risky." said real estate expert Phan Cong Chanh. And real estate is one of those assets, he added.

Despite drawing massive attention from both domestic and foreign investors, the real estate market still faces certain risks. Over the recent decade, the Vietnam Government has employed several drastic measures to curb real estate speculation. They have been strengthening those measures recently to create favorable conditions for businesses in the “new normal” situation.

National Housing Development Strategy to control real estate speculation

In December 2021, the Vietnam Government approved the National Housing Development strategy in 2021-2030 with a vision towards 2045 by issuing Decision No.2161/QD-TTg.

“Land fever” has arised multiple times in the real estate market since 2017. During these times, speculators and brokers push land prices and then induce investors to enter the market. Even when the land fever disappeared, land prices could not decrease much. Many investors suffered from significant losses. Land fever has also deprived people of the opportunities to own accommodations, especially residents in metropolitan areas. 

Therefore, one of the strategy's most significant aims is to offer affordable housing products to residents with low to medium incomes. The strategy also aims to make the real estate market more sustainable and transparent, while also ensuring that it is consistent with land-use programming. Another goal is to reduce land speculation, which wastes land resources.

In addition, along with approving the strategy, Prime Minister Pham Minh Chinh suggested that the Ministry of Finance should propose such additional real estate taxes as a property tax on housing, in order to stabilize the market, curb speculation, and effectively utilize residential real estate.

In fact, currently people are still exempt from paying a residential property tax. They just have to pay a 0.03 percent tax for the use of non-agricultural land, which includes residential land. However, according to the ministry, imposing a high tax on those who own a large number of properties but don’t actually utilize these real estate would be necessary. It would discourage the hoarding of land. 

In fact this idea is not  new because the property tax was proposed several times in the past. However, the proposed tax was withdrawn due to public opposition. This law can have profound influence on the economy as a whole and on individuals' incomes. Therefore, the Government understands that many aspects need to be considered before launching the law.

Property Tax proposed in the Tax Reform Strategy for 2030

Recently, as a result of land fevers in many cities and provinces, the property tax has been revived.

According to the tax reform strategy for 2030 which was approved on April 23, the Vietnam Government will look into imposing a tax on homeowners and raising land taxes to combat speculation and improve property-use efficiency.

According to the strategy, to stimulate agricultural and rural development, tax on agricultural land will continue to be exempt until 2025. However, the Government would consider an increase in the tax on non-agricultural land. Notably, to prevent speculation, the Government will also put a tax on property assets into consideration.

Many economists are in favor of the Ministry's idea to tax houses because prices have still skyrocketed and the speculation rate is still high. Meanwhile, others argue that currently taxing is not feasible and might be counter-productive.

According to Le Hoang Chau, Chair of the HCM City Real Estate Association (HOREA), if Vietnam imposed a property tax on real estate while still collecting land use fees, it would be  a real problem. The owners of land still have to pay land use fees as a kind of property tax. Therefore, the new tax would overlap the existing ones.

Some economists stressed that this type of tax would increase house prices, putting a strain on those who have demand for accomodations.  If so, the ministry couldn't achieve the initial goal of cooling down the real estate market and facilitating the low-income residents.

Some also believe that taxing second, third, and subsequent houses will be difficult in the current situation. First, there has been no precise definition and practice about tax subjects such as ‘property’, ‘house’, ‘second house’ or ‘third house’. Second, the Vietnam real estate market is highly appealing, and many foreign investors are buying two or more properties. This property tax may lower the attractiveness of this sector. 

However, it can be seen that proposing new taxes, monitoring bonds issued to the market and tightening credit sources for real estate are all measures that the Government takes with a view to purifying the real estate market. 

In conclusion, the potential of Vietnam real estate stems from the country’s fast growing economy and the Government's dedication to create a healthy market. Besides, there is still room for further prosperity as the demand for urban construction land is about 400,000 ha in 2020. This number is projected to increase to 450,000 ha by 2025.

Therefore, investors would yield great benefits if entering the Vietnam real estate market now and investing in large-scale projects that aim to foster socio-economic growth . By regularly updating the real estate market trends and regulations, Viettonkin is confident to provide you with insightful advice on real estate investment opportunities in Vietnam. Our experts with years of experience in this industry will help you make a wise investment decision. Let Viettonkin be your companion along the way!

Proptech is still considered a new concept in Vietnam but has shown significant signs of potential to attract more and more investments into the growing number of ambitious proptech start-ups.

Proptech and Proptech Companies

Proptech, short for property technology, is an innovative approach to real estate in which technology optimizes the way people research, rent, buy, sell, and manage properties. Although it has been around since the introduction and optimization of software such as Excel, proptech has only recently gained popularity due to the Covid-19 pandemic and the global demand for online solutions for the purchase and management of properties.

Now, PropTech is helping modernize the real estate sector, with Virtual and Augmented Reality (VR and AR) leading the way. The use of these two technologies within real estate, property management, and living sectors has been increasing for some time. However, their benefits go beyond cost efficiency and time-saving. While AR can improve communication, ensure precise progress reports in construction and identify potential errors in the build, VR can help enhance the customer experience by providing virtual tours of properties to potential buyers from around the world.

Artificial Intelligence (AI) applications for proptech continue to gain traction, as they can improve the outcomes of a variety of fields, including building operations and performance, tenant experience, robotics and drones, real estate investment, and more. Other emerging market trends include the potential uses of blockchain systems and the appearance of cryptocurrency transactions.

Proptech startups and tech companies around the world have cashed in on this capital-rich sector over the last decade, conquering challenges at the residential, commercial, and industrial levels. While proptech encompasses many aspects of the real estate industry, many housing innovators concentrate on home buying, selling, and financing. They aim to make the housing sector easier to navigate and, ultimately, more financially rewarding. 

According to a recent Forbes article covering upcoming technology trends for the commercial real estate market, the proptech industry has grown by 1072% from 2015 to 2019. In 2018 alone, venture capital (VC) firms invested $8.3 billion in proptech companies around the world. This number rose to a record high of $11.7 billion in 2021, according to the report by the investment bank Keefe, Bruyette & Woods. As VC investment hit $4 billion only in the first quarter of 2022, investors have high hopes for another fruitful year.

The Rise of Proptech in Vietnam

Proptech in Vietnam has come a long way in the last 18 years. In the years 2003-2004, a slew of online advertising sites emerged, including diaoconline.vn, metvuong.com, nhaban.com, muabannhadat.com.vn, batdongsan.com.vn, and others, ushering in the first wave of proptech in Vietnam. However, these sites were not sustainable, focusing only on property listings while the real estate market had gradually evolved and required more professional and innovative solutions.

It was not until the Covid-19 pandemic that the Vietnamese real estate market saw a surge in proptech popularity and massive investments in proptech startups. In order to stimulate real estate demand, proptech companies had to come up with game-changing solutions to gain a competitive advantage. New trends in the global proptech market were taking hold in Vietnam, as evident through partnerships with fintech companies or VR/AR applications.

Houze, for example, has launched Houze Invest, which allows customers to invest in real estate with as little as 1 million VND. Investors can choose between a fixed interest rate package, which is ideal for customers who want to invest safely, and a profit-based investment package, which is based on investment performance and does not require a fixed interest rate commitment.

Another trend involves attempting to reduce loan interest rates through the use of technology.  Dat Xanh Real Estate Services Joint Stock Company (DXS), a subsidiary of Dat Xanh Group, has had some success through a strategic investment in FINA, a financial brokerage platform. Specifically, FINA uses technology in steps such as setting up a profile, providing simple advice or checking the status of the attached mortgaged real estate and operates primarily online to reduce the cost of the premises while continuing to approach the masses in order to gain economies of scale. Despite the fact that there are only four consultants/salespeople on staff, the total disbursement of real estate loans through the FINA platform in 2021 was VND 1,700 billion. This means that each employee can disburse an average of 50 billion VND per month.

While blockchain is a proptech technology that has the potential to transform the global real estate market, there are still several issues that prevent it from reaching its full potential in the Vietnamese market, namely the transparency of smart contracts and customer satisfaction level. 

Propzy, a real estate investing platform founded in 2015, is proving to the entire industry why it is a "giant" among Vietnam's real estate transaction applications. Propzy's technology covers every stage of the real estate transaction to adapt to the current situation, and is fully focused on bringing transparency and comfort to clients through standardized listing data, making the comparison experience easier for all participants with real estate transaction needs. Moreover, Propzy has a strong physical presence, with over 30 transaction centers in Ho Chi Minh City and over 400 highly trained employees. The effort made by this startup has contributed to changing the way real estate transactions become easier and safer, helping create a transparent real estate business environment based on modern technology and professional services.

As Vietnam slowly recovers from Covid-19 and many sources of capital have begun to return to real estate due to low bank interest rates, proptech now faces a question about its future development plans. Should the sector continue on its current path, focusing on improving customer experience, or will another trend emerge to reshape its roadmap?

What to Expect for the Future of Proptech in Vietnam?

According to Savills Vietnam, the real estate market in Vietnam will continue to grow, particularly in major cities such as Hanoi, Ho Chi Minh City, and a number of tourist destinations. Savills also predicted that more money would flow into proptech in order to take advantage of the opportunities and promote the market's growth.

The strong economy, accelerating urbanization, and rising incomes, according to Hoang Duc Trung, a partner at VinaCapital Ventures, are all factors driving demand in the real estate market. Trung also believed that at the same time, proptech has gained ground in Vietnam in recent years, mostly thanks to the country’s young and tech-savvy population.

According to the PropTech Vietnam Network, there are more than 140 startups operating in Vietnam, focusing on the areas of real estate marketing, office management, and smart homes, shopping malls, real estate logistics, and hotels.

The segment appeared in the country through websites introducing residential real estate, consulting transactions, buying, selling, leasing, and project management in the housing segment.

The increasing heat in the field can be seen in investment deals, contributing capital to proptech startups. For example, startup Rever has successfully raised more than 10 million USD from Mekong Enterprise Fund IV. Rever also received a $2.3 million investment from the GEC-KIP Technology and Innovation Fund. VinaCapital Ventures also announced an investment of 4 million USD in the company. Short-term booking startup Go2Joy received $1.3 million from SV Investment in May, bringing its total Series A funding round to $6.1 million. Citics also raised $1 million in a Series A round from Vulpes Investment Management, Nextrans, and The Ventures.

Proptech in Vietnam will continue to be pursued by investors in the coming years as a result of the booming growth potential and the currently developing proptech platforms. For foreign investors, the time is right to become an aspiring pioneer in the Vietnamese real estate market. If you still have doubts about the market as well as how to invest in proptech, reach out to Viettonkin immediately for the latest and most accurate information. With over 12 years of experience in the fields of investment and business consulting, Viettonkin and our team of experts are here to provide you with insights and the most effective solutions.  Contact us now.

As Vietnam is getting closer to a new normal, the country’s mergers and acquisitions (M&A) outlook in 2022 is bright with increasing investments from foreign businesses. However, in order for these investments to bear fruits, investors must equip themselves with correct information about the current situation of the real estate market.

Vietnam has long been an attractive investment destination for foreign investors, thanks to its strategic location, socio-political stability and low-cost yet skilful labour force. Specifically, Vietnam’s real estate industry has developed along with the recovery of the economy after the COVID-19 pandemic and is forecast to see brighter and more positive colours compared to 2021. As it gradually returns to the pre-pandemic trajectory, foreign investors with plans to enter the market must equip themselves with correct and up-to-date information to avoid unnecessary obstacles and stay ahead. 

Upcoming trends

The results of a recent survey of real estate enterprises performed by the Vietnam Report have shown several major trends for the real estate sector in the future years.

The disruption produced by the COVID-19 epidemic has expedited the digitalization revolution in several industries, including the real estate business. As a result, the real estate industry will have to adapt to the influence of digitalization in practically every activity, including transactions, capital deployment, property management, virtual tours, and even consumption trends.

Future project planners must also think about smart infrastructure requirements. Nowadays, customers tend to prefer newer buildings with better ventilation systems and more flexible layouts with modern amenities such as touch systems.

In the near future, new, multi-purpose industrial park concepts with synchronous utility systems will also become popular. In fact, businesses have been showing more interest in offices and eco-industrial parks that are green and clean, decrease resource exploitation, limit environmental effects, and do not hinder company performance in their sustainable growth strategies. The year 2022 is also expected to see more environmentally friendly construction processes.

Potential sectors

The real estate market will increase in most segments, with the industrial real estate segment, particularly the data centre and logistics segment, land plot, and housing segment, expected to grow the most. Additionally, 2022 will also see the recovery of the resort and commercial real estate, although most resort real estate products so far have not been granted ownership certificates for secondary investors, preventing these products from being traded, bought or sold.

Industrial real-estate

According to Mr Matthew Powell, director of Savills Hanoi, the industrial real estate market in Vietnam is appealing to FDI enterprises because land prices are still relatively low, there are many reputable developers, and legal policies are reasonable, in addition to other factors such as labour, traffic, and convenient import-export connections. Savills Vietnam also stated that a lot of significant US and European companies are seeking possibilities to enter the Vietnamese market, particularly the industrial real estate market, which is now flooded with high-quality investments.

Office and Retail commercial market

Particularly for the office and retail commercial segment, after being heavily impacted by the COVID-19 pandemic during the past two years, entering 2022, this segment begins to have many positive prospects, especially in the context of a new normal.

The office real estate market is driven by rental growth in areas such as information technology, e-commerce or data centres.

The retail real estate market also has many positive signs when the tourism industry is reopened, along with an increase in consumption and capital use.

The basic legal framework applicable to real estate, tourism, and other associated regulations govern tourism real estate investment and business activities (at least 5 relevant laws such as Land Law, Construction Law, Law on Real Estate Business, Housing Law and Law on Tourism). This complicates not only licensing ownership - the pink book for secondary investors - but also related transactions. According to Vietnam National Real Estate Association (VNREA) figures, as of September 2021, there were approximately 100,000 tourist apartments (condotels) that have not been approved in accordance with the provisions of the land law.

The Vietnamese government is making adjustments to create a more convenient legal corridor in the real estate sector.

How can a foreign investor jump into a real estate project in Vietnam?

Generally, domestic investors enjoy a simpler investment/ incorporation process than foreign investors. Offshore companies are not permitted to build or run real estate projects directly. Investments can only be made if they: 

• Establish a solely owned subsidiary in Vietnam or a joint venture with a local partner (a type of foreign-invested enterprise), or 
• Purchase equity interest or shares in an existing company operating the real-estate projects. Foreign investors investing in Vietnam for the first time by setting up a foreign-invested enterprise (FIE) must apply for an  Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC). Industrial sub-licenses will be applicable to certain business sectors. By law, FIEs are those companies that have any foreign investor as a shareholder and, when making investments in other companies, certain FIEs (those with more than 50 per cent foreign ownership) will also be treated as foreign investors in terms of foreign investment restrictions and investment procedure

Typical structure 

Structure 1 (combination of asset and equity deal)

Where the public company directly engages in the real-estate business, the public company sets up a new company and then transfers real-estate assets to the new company and the potential buyer will acquire secondary shares in the new company from the public company. If the potential buyer is a foreign investor, the new company will become an FIE and have the restricted scope of real-estate business activities as noted above. 

This structure allows a foreign potential buyer to buy a majority stake in that new company because the new company is a private company (not subject to the 50 per cent foreign ownership limitation like a public company). In addition, this structure is preferred by potential buyers as it can help avoid historical risks and liabilities and the PTO procedure.

Structure 2 (equity deal)

Where the public company engages indirectly in real-estate business through several subsidiaries and it acts as the parent company of a corporate group, the potential buyer can directly acquire a majority stake in the public company. In the case of a foreign potential buyer, prior to the combination, the public company’s registered business lines should be reviewed and if any of them is included in the list of business lines with restricted market access, these restricted business lines should be removed to avoid foreign ownership limitation. 

This structure allows a public company to keep the organizational structure of its corporate group, its licenses and its permits. In addition, in this structure, to avoid complexity, the public company will try to seek the shareholders’ waiver of the PTO and the SSC’s approval for waiver of the trading band.

Structure 3 (asset deal)

The local potential buyer can directly acquire the real-estate assets from the public company as the assets will be directly owned and operated by the local potential buyer

This structure cannot be used in the case of a foreign potential buyer because a subsidiary needs to be set up that is an FIE, which is not allowed to purchase existing real estate for sale or sublease. 

Conclusion

Vietnam’s real estate industry has developed along with the recovery of the economy after the COVID-19 pandemic and is forecast to see brighter and more positive colours in 2022 and beyond. However, in order to avoid risks, increase company efficiency, satisfy client expectations and maximize the benefits, foreign investors must equip themselves with the up-to-date information and trends and develop suitable strategies. With more than 10 years of experience in consulting, Viettonkin is confident in our abilities to provide guidance and assist you in your future endeavours in the Vietnam real estate M&A market. Let your successful adventure begin right now, with us by your side!

Since the Real-Estate Business Law was in effect in July 2015, the Vietnam Government has issued several legal documents to support the implementation of this Law. Notably, Decree 76/2015/ND-CP promulgated the detailed implementation of multiple provisions inside the Law. For example, Decree 76 specified the conditions of real-estate businesses, the real-estate contract templates and the process of partial or complete real-estate project transfer. Yet, as the Law on Investment and the Law on Real-Estate Business were amended last year, continuing the application of Decree 76 will lead to the stark mismatch between the two Laws. Because of this, the Government has issued Decree 02/2022/ND-CP to replace Decree 76 and bridge the legal framework gap between the aforementioned laws. Hence, several newly-stipulated provisions may affect the domestic and foreign enterprises in the Real-Estate market.  

Updated conditions for real estate business of individuals and organizations in Decree 02/2022/ND-CP

The amended Real-Estate Business Law has abolished the regulation on minimum charter capital of 20 billion VND for real estate enterprises. Thus following the Law, Decree 02 has also abrogated any related provisions in the old Decree 76. Additionally, the new regulations have clearly defined the equity level of the real estate investor based on the land use scale and the method of determining the equity level. 

Suppose a person is chosen as an investor in a real-estate project under the rules of the Land Law. In that case, he or she must own equal to or more than 20% of the total investment capital with a land usage size of fewer than 20 hectares. Yet, with more than 20 hectares of land use, the investors must own 15% of the total investment capital. This updated provision is different from Article 3 of Decree 76, which required the conditions of real-estate businesses. Meanwhile, Decree 02 reiterated the similar new regulations in Article 4.2. In this way, the Land Law and the Law on Real-Estate Business have several convergent points yet cause no impact on the current situation. 

In addition, the most notable difference between the regulations is the information update requirement. Specifically, real estate corporations must regularly post and update statutory information on their website and trading platform. The information has to include

• The company's basic information (name, address, legal representative and phone number);
• Real-estate transaction data;
• Information on the mortgage of houses, construction works, real estate projects in transactions (if any); and
• Information on the amount and type of property in transactions articulates the quantity and type of property that has been sold, transferred/leased, and traded.

In short, Decree 02 has stipulated new disclosure requirements, making the real estate market more transparent while reducing the risk of fraudulent transactions. Existing businesses, except for SMEs, must meet all of the aforementioned regulations within six months of March 1, 2022. Otherwise, they will be obliged to abandon their real-estate venture.

Specified contract forms in Decree 02

Previously, Decree 76 gave real estate business contract templates as a guideline. Therefore, in any real estate transaction, the parties are optional to follow those templates. Yet, Decree 02 has specified eight compulsory contract templates applied to diverse types of real estate transactions. 

• Contract of apartment sale/lease-purchase;
• Contract of sale/lease-purchase of tourist apartments (also known as "condotel") or office apartments with accommodation facilities (also known as "officetel");
• Contract of housing sale/lease-purchase;
• Contracts for sale/lease-purchase of other construction works that are not covered by items (1), (2) and (3) above;
• Lease contracts for houses and other construction works;
• Land use right transfer contract;
• Land use right lease/sublease contract; and
• Contract to transfer all or part of real estate project.

These contract templates contain certain spaces for "other arrangements". Thus, the parties can have the flexibility to add terms and conditions that do not violate the legislation and social codes of conduct. 

Despite this flexibility, the parties' freedom to agree can be challenged, as any additional terms and conditions are subject to interpretation by the state. During the drafting phase of Decree 02, the planned licensing agencies had the right to refuse the project transfer application on the grounds that the project transfer contract "does not conform" to the statutory contract form. Though such a right of refusal is not explicitly stated in Decree 02, licensing authorities may seek to challenge new terms and conditions in practice while examining relevant contracts. 

Overall, these statutory contract templates will apply to contracts executed on or after March 1, 2022. This requirement may even apply to transfer contracts of pending projects for approval. 

Time Frame modification for resolving objections to project transfer in Decree 02

Decree 02 still retains the Transferor's Obligations of appeal settlement from customers and other related parties. Yet, the Transferor must now settle all such appeals after the project transfer contract is completed and before the transferred project is handed over to the Receivers.

In this way, the new regulation has loosened the obligation for each party as it allows them to conduct project transfer contracts before resolving an appeal (If any). Yet, Decree 02 has not clarified the form and extent of claims and the composition of their resolution. As a result, any appeal can disrupt and delay the handover process. Besides, Decree 02 or the Real-Estate Business Law vaguely regulated the definition and criteria of the completion and handover of transferred projects, causing difficulties for the project implementation. 

A new regulation on transferring all or part of a real estate project

Decree 02 clearly stipulates the principle of transferring all or part of a real estate project. For real estate projects whose investors are approved according to the Law on Investment 2020 and projects that are granted an Investment Registration Certificate in accordance with the provisions of the Law on Investment 2020, when transferring, the law on investment will be applied. Projects not falling into the above categories will be transferred according to the provisions of the Law on Real Estate Business and Decree 02.

However, in all of the above cases, the conditions to be transferred shall apply in accordance with the provisions of the Law on Real Estate Business.

New conditions for buying and selling housing projects formed in the future

Decree 02 has regulated in detail the conditions for the transfer of contracts for purchase, sale and lease-purchase of houses to be formed in the future, as well as the transfer of lease-purchase for existing houses and construction works (except for contracts for purchase and sale of social housing). Such transfers must satisfy the following conditions:

• Having a contract of sale, purchase, and lease purchase according to regulations. If the parties sign before March 1, 2022, there must be a signed contract;
• The application for a certificate of land use right must not be submitted.
• The contract is not subject to any disputes, lawsuits;
• Houses and works under the contract are not subject to distraint or mortgage, unless agreed by the mortgagee
• If buying, selling, or renting-purchase more than one house in the same contract and the parties want to transfer each house, the seller must agree with the investor to amend the purchase and sale contract, hire-purchase or sign an addendum to the contract before signing the contract.

Enterprises should also pay attention to the transitional provisions related to real estate transactions made before the effective date of this Decree, i.e., before 01/03/2022. Specifically, in cases where a real estate business contract has been signed before the effective date of this Decree, the contract is not required to be re-signed in accordance with this Decree, unless the parties agree to re-sign the contract. If the contract signing for purchase/sale/lease of houses or the transfer of real estate projects is still in progress, but by the effective date of this Decree, the contracts have not been signed yet, then the parties must sign a new contract under the provisions of this new Decree 02.

In conclusion…

For newcomers to Vietnam's real estate market, the legal framework of the real estate business might be quite a challenge. With a lack of information and knowledge on the legislation, foreign investors can encounter undesirable sanctions that can be avoided with the assistance of a leading expert. As prestigious and trusted by well-known MNCs, Fortune Global 500 companies, and international non-governmental organizations (INGOs), Viettonkin is proud to help our dearest clients with in-depth legal and market knowledge in multiple industries. Let us walk side by side with you on the journey of establishing a new business! 

Real estate M&A deals are getting increasingly popular in Vietnam, yet there is still more work to be done from the Government and Vietnamese businesses for the M&A market to reach its full potential in 2022.

Post-COVID real estate M&A boom

The Vietnamese M&A market has grown in lockstep with the economy's rapid expansion over the last decade with real estate being the second-largest beneficiary of foreign direct investment in Vietnam, trailing only the manufacturing and processing industry. The real estate M&A is resuming as the economy picks up, with total transaction values exceeding every first quarter over the past five years. In 2021, despite COVID-19 related risks, real estate businesses received more than $31 billion of registered foreign direct investment (FDI). Millions of dollars have been invested in Vietnam by real estate developers from Singapore, South Korea, and Hong Kong.

According to analysts, the M&A race will continue to heat up since it is one of the fastest and most potent strategies for enterprises to delve deeper into their value chains, grow market share, develop their goods, and continue to enter the market, bringing shared values to the community. The most essential reason for businesses to pick M&A is that many enterprises with enormous potential want to decrease the time it takes to reach the market with each unique project in the context of increasingly restricted land funds.

Contrary to some experts' predictions of a real estate "bubble," the real estate M&A market in 2021 is still active with a series of huge deals, and real estate businesses continue to acquire more substantial land funds. 

Following the favourable momentum of 2021, the real estate M&A market remained active in the first quarter of 2022. The total amount of M&A transactions in the first quarter exceeded the total value of each year from 2019 to 2021. Real estate M&A activities in Vietnam are projected to expand in terms of both quality and quantity in 2022 with Hanoi and Ho Chi Minh City as the two investment hotspots. 

The market witnessed a number of notable deals in Ho Chi Minh City last quarter, including the collaboration between Novaland and Tai Nguyen JSC to revive the Grand Sentosa project (previously known as Kenton Node) in Nha Be. Similarly, Saigon One Tower in District 1 has been renamed IFC One Tower and will be managed by VivaLand Investment and Development JSC. Phu Long Real Estate JSC will develop the Swan Bay project in Dong Nai, which will cover approximately 200 hectares. However, it was Hanoi that registered the majority (58%) of total transaction volume in the country with the US$550-million transfer deal of Grade-A office building Capital Place in Ba Dinh District from CapitaLand Development to Viva Land.

Reports from Cushman & Wakefield show that investors' appetite remained mostly focused on conventional asset classes from 2017 to Q1/2022, including the housing market, development land, industrial, office, and hotel markets. Ho Chi Minh City accounts for 76 percent of housing transactions, while Bac Ninh, Dong Nai, and Binh Duong account for more than 50 percent of industrial real estate investment, and Hanoi accounts for 65 percent of hotel sales. Healthy demands from both local and international investors in the office segment along with industrial services, hotels, and retail will strengthen confidence in the market for the rest of the year. 

Trang Bui, General Manager of Cushman & Wakefield Vietnam, stated that total stock in Ho Chi Minh City and Hanoi combined is just around half of Bangkok's total, with a dearth of availability in Grade A products sought after by FDI businesses. As a result, following a prolonged period of lockdown and the work-from-home wave, Vietnam's office sector re-emerges at the top.

Key drivers for M&A in 2022

To begin, the country provides investors with favourable macroeconomic variables such as consistent economic development, political stability, improved infrastructural linkages, growing urbanization, and a sizable and young workforce. 

Vietnam's sophisticated infrastructure and transportation networks for regional and international purposes are backed by an expanding road network and a number of international seaports, airports, and land borders. Over VND 100 trillion would be committed to infrastructure development under the Ministry of Planning and Investment's recently announced socio-economic development recovery plan. This would result in the significant development of satellite provinces and encourage FDI enterprises to expand outside existing hubs such as Ha Noi and Ho Chi Minh City. 

Secondly, the Vietnamese government has provided substantial assistance to foreign investors to establish mutual trust and a sense of security to continue carrying out investment, production and business activities in accordance with the law. A significant shift in policies was made to control the openness of the real estate market, ensuring the handling of violations in the capital market of real estate businesses and tightening of real estate management regulations. According to Cushman & Wakefield, the Government has agreed to revise the Housing and Real Estate Business Law, which would be presented to the National Assembly during its Plenary Session in October 2022. Simultaneously, there is a proposal to submit the Land Law (revised) to the National Assembly for opinions and approval in order to create a legal basis for the business of land use rights. Furthermore, by signing Decision No. 508/QD-TTg dated April 23, 2022 approving the strategy for taxation system reform through 2030, the Government aimed at promoting the effective use of houses and land, contributing to limiting speculation on houses and land and ensuring a reasonable and stable source of revenue for the state budget that is suitable to Vietnam's socio-economic conditions and international practices.

Barriers 

Despite the aforementioned “pull” factors, foreign investors should also be aware of various limitations in the real estate M&A market, such as legal barriers, lack of transparency, uncertainty with M&A procedures, and limited land funds.

In Vietnam, the legal system on land is still somewhat intricate, resulting in bottlenecks and waste that have yet to be addressed. Many provisions of laws, such as the Housing Law, the Land Law, and the Real Estate Business Law, are still inconsistent. Despite the government's institutional reforms throughout the years, these shortcomings have and will continue to impede the development of many M&A deals.

Lack of transparency and standards in transactions also pose great challenges to foreign investors. Because the real estate brokerage profession is inextricably tied to market transparency, it has come to the notice of the Government and related agencies that tougher regulations should be established to tighten control over real estate brokers. According to the Vietnam Association of Realtors (VARS), just 10% to 12% of Vietnam's roughly 300,000 real estate agents are qualified to perform the occupation, despite the fact that the number of professionals in this area is increasing. While the quantity of brokers is continuously expanding, the quality has been neglected. Although regulations on real estate agents and practice standards were once established by the Ministry of Construction, quality control of the brokers has been lacking for a long time.

Most notably, foreign businesses are discouraged from investing in Vietnam real estate M&A because the market is still being dominated by domestic enterprises. After two years of struggling with the Covid-19 pandemic, land funds are becoming increasingly scarce due to acquisitions for development by domestic real estate enterprises and land prices for development have increased sharply across the country, erecting massive impediments to foreign investment in the Vietnamese market.

Conclusion

Despite existing barriers that can hinder the efforts of foreign investors, Vietnam real estate M&A is predicted to be more active than ever in 2022, with limited land funds and government legislative backing. As M&A transactions are a complicated commodity, the parties involved must conduct extensive research and make specific strategies to assure long-term value. With an experience of more than 10 years in consulting, Viettonkin is one of the leading firms in the industry. In order to not miss out on the golden time for real estate M&A, do not hesitate to contact Viettonkin for amazing insights and guidance on this expanding market. Learn more about us and how we can help you minimize investment risk in the Vietnamese market here.