The number of foreigners coming to work, study and live in Vietnam (estimated at around 1,500,000) is incessantly increasing, particularly since Vietnam’s entry to the WTO. Therefore, the issue of housing for foreigners needs to be addressed.

Policy on housing for foreigners is an important element of Vietnam’s legal system on housing. Since the “open door” policy was initiated to attract investment capital from abroad, the State has issued numerous policies and regulations related to foreign organizations and individuals, including policies on land and housing.

Previous Legal Framework

These are backed up by the following legal framework:

-    Provisions of land laws: Since 1993, pursuant to the old Land Law foreign organizations and individuals investing or working in Vietnam were permitted to lease land in the country. In 1994, the Outstanding Committee of the National Assembly promulgated the Ordinance on Rights and Obligations of Foreign Organizations and Individuals Leasing Land in Vietnam. Foreign representative agencies and international organizations permitted to operate in Vietnam, after leasing land from the State, had the right to build and own construction works on the leased land within the term of the lease. Foreign organizations and individuals coming into Vietnam to invest under the Foreign Investment Law had the right to mortgage the value of the rights to use land with attached assets at Vietnamese banks; in case of leasing land for construction of industrial park infrastructure, they were permitted to sublease the land.

In 2001, after the amended Land Law was passed, the State introduced a policy permitting foreign investors to invest in the construction of housing in Vietnam. With Decree 71/2001/ND-CP dated October 5, 2001, the Government allowed foreign investors to invest in the construction of housing for sale or lease in such investment forms as establishment of joint ventures with domestic business entities, business cooperation contracts, or enterprises with 100% foreign capital.

In the 2003 Land Law, the State widened the right of foreign investors to invest in the construction of residential units, allowing them to mortgage, guarantee and contribute capital in the form of assets on leased land at credit institutions licensed to operate in Vietnam, to sell assets attached to leased land, and to transfer the land use rights.

-     Regulations on investment in residential real estate business: As one focus of building a market economy in Vietnam, the development of a real estate market, particularly of a residential market, will facilitate the implementation of social welfare policies and create homes for peoples, and can currently encourage the development of building materials, labour and financial markets. For these reasons, through the 2005 Investment Law, the 2005 Law on Housing (“LHR”) and especially the 2006 Law on Real Estate Transactions (“LORET”), the National Assembly has continued to entitle foreign investors to transfer investment projects, mortgage land use rights and assets attached to land at credit institutions licensed to operate in Vietnam, and to lease land for the construction of residential units for sale or lease. If building housing for lease, foreign investors are issued housing ownership certificates by the State for the term of lease. In addition, foreign investors are entitled to participate in the renovation and repair of existing residential properties, and the provision of such services as brokerage, auction, appraisal, establishment of trading floors, consultancy, advertisement and management of residential real estate.

As a result, foreigners have been entitled since 2007 to participate in most aspects of residential real estate development, except purchasing houses for resale, lease or sublease. However, as residential real estate development must be carried out by legal entities (foreign companies or joint-ventures), individual foreigners are not allowed to direct set up investment projects to build housing and are not entitled to own residential property in Vietnam.

-     Regulations on the foreigners’ right to ownership of housing: For various reasons, there are still differing opinions on the rights of foreigners and on the level of ownership. When the Law on Housing took effect on July 1, 2006, there were new and more open regulations on such rights. The Law permitted foreign investors to own houses built by themselves under the investment law for lease to others, meaning that after the State licensed the investment in housing for lease, the investors would be issued house ownership certificates for the floor area of constructed housing. This regulation sets the mind of investors at rest when investing in residential real estate development in Vietnam. However, the Law does not have provisions for housing ownership by foreign individuals and organizations that do not function in the business of real estate investment in Vietnam. Therefore, foreigners did not feel secure when coming to work and live in Vietnam.

-     Regulations on residential real estate transactions related to foreigners: Residential real estate transactions are provided for in different instruments, such as the 2005 Civil Code, the Law on Housing, the 2005 Commercial Law and the LORET.

Under the Civil Code, the owner is permitted to conduct various kinds of transactions involving housing, including purchase and sale, lease, donation, pledge, mortgage, guarantee, capital contribution, inheritance and authorized management. However, residential real estate transactions are not only civil but economic in nature, since houses are a form of property. Thus, such transactions must comply with the commercial law. The issue drawing the foreigners’ attention, therefore, is whether they are entitled to participate in residential real estate transactions and if so, to what extent.

With Decree No. 61/CP, dated July 5, 1994, on residential real estate sale, purchase and business, the Government permitted foreigners settling in Vietnam to purchase one house from a housing enterprise. However, there were no recorded cases of housing being purchased in Vietnam under this Decree, because there were differing provisions of the law on immigration, residence and travel by foreigners and regulations on housing purchases under Decree No. 61/CP at that time. Foreign investors were entitled to sell and lease houses built by themselves only after the National Assembly passed the Law on Housing and the LORET, which provided that foreigners coming in Vietnam to work and live for three or more consecutive months were permitted to lease homes in Vietnam. Such leases must comply with the Law on Housing and the Civil Code.

New Regulations

On June 3, 2008, the National Assembly passed Resolution No.19/2008/QH12 giving pilot permission for foreign organizations and individuals to purchase and own their residences in Vietnam. That move realized and detailed some relevant provisions of the housing law. The Ministry of Construction is now drafting a decree providing guidelines for implementation of the Resolution. Below are notable provisions in these two documents.

Apartments for sale

The Resolution confirms that only apartments in apartment buildings of commercial housing development projects that are not located in areas in which residence and movement of foreigners is restricted or prohibited may be purchased and owned by foreign organizations and individuals. This provision is aimed at limiting land use by foreigners, and ensuring national defence, security and sovereignty. As specified in the draft Decree, such apartments are in apartment buildings built in new urban zones and new residential zones under approved projects for sale at commercial prices. Foreigners are not allowed to purchase apartments falling within categories to be sold to low-income persons (social housing) or resettlement housing sold to inhabitants for ground clearance.

Qualified foreigners

The purpose of the pilot policy is to encourage economic development and ensure efficient management of the purchase of residential houses in Vietnam by foreigners, while limiting the scale to allow assessment of the policy. Thus, although there are many kinds of foreigners and foreign organizations working in Vietnam, the National Assembly has only permitted the following groups of foreigners to purchase and own residences in Vietnam:

(i)     A foreign individual making direct investment in Vietnam under the investment law, or who is engaged by an enterprise currently operating in Vietnam under the enterprise law (including both domestic enterprises and foreign-invested enterprises) and who holds a managerial position in such enterprise;
(ii)    A foreign individual whose contributions to Vietnam have been rewarded with a decoration or medal from the President of the Socialist Republic of Vietnam, or a foreign individual who has made a special contribution to Vietnam as recognized in a decision of the Prime Minister;
(iii)   A foreign individual currently working in the economic sector with a university or higher qualification, or a person with special knowledge and/or skills for which Vietnam has demand;
(iv)   A foreign individual married to a Vietnamese citizen;
(v)    A foreign-invested enterprise currently operating in Vietnam without the real property business function, which is in need of residential housing for its employees.

The draft decree provides guidelines for certain specific case and exceptions as follows:

-    persons who are engaged to hold a managerial position in an enterprise (group i) but who are not investors, may purchase homes if who have knowledge and/or skills in business management and direction and are engaged by enterprises operating in Vietnam to hold such titles as general director, director, deputy general director or deputy director. Such persons must have an appointment contract or decision.
-    persons who have made special contributions to Vietnam (group ii) but who have not received prizes awarded by the President, are permitted by the National Assembly to purchase homes with the Prime Minister’s written permission.
-    persons who have special knowledge and/or skills but who do not have academic titles or degrees, such as artisans, experts, and athletic coaches, are also allowed to purchase homes in Vietnam subject to certification of Vietnamese authorities or organizations.

As a result, to be eligible, the listed foreigners must have documentation, including a passport or a paper of substitute validity issued by a competent foreign authority, and accompanying documents evidencing their qualification. For example, foreign investors must be named in the investment certificate or equivalent papers; those who have made contributions to Vietnam must possess certificates awarded by the President; and those who are married to a Vietnamese citizen must have a marriage registration certificate issued by Vietnamese or foreign authorities accompanied by the Vietnamese passport or household registration book and ID card of the spouse.

In addition, the following conditions must also be met:

-    Foreign individuals must be currently living in Vietnam, must have permission from the competent state authorities to reside in Vietnam for a period of one or more years, and must not belong to the category of those entitled to diplomatic or consular immunities and privileges as stipulated by Vietnamese law. This condition will be determined through such documents as passports (to verify whether the holder belongs to the category of persons entitled to diplomatic or consular immunities, who are not allowed to purchase homes), temporary resident cards or (issued to persons permitted to reside in Vietnam for a period of one year) or permanent resident cards (issued to persons permitted to reside in Vietnam for a period of three years) or in case of failing to these two cards, residence permission cards for a period of twelve or more months issued by immigration authorities under the Ministry of Public Security;
-    Foreign-invested enterprises must have an investment certificate corresponding to their investment form as stipulated by the investment law and issued by competent authorities in Vietnam. Under the draft Decree, the remaining validity term of such investment certificate must be at least one year. This provision is for the purpose of preventing enterprises that have less than a year remaining to the term of their investment in Vietnam to purchase and own housing.

The provision for a year or more of residence in Vietnam is based on Vietnam’s policies on economic development, to ensure that persons eligible to purchase housing must engage in a certain period and make certain kinds of contribution to Vietnam’s economic development. In addition, this provision ensures stability in housing sale and purchase transactions, and is based on the experience of some neighbour countries (for example, China requires 1 year of residence, and Singapore requires 2 years).

Ownership period

Any eligible foreign individual shall be permitted to own a residential house for a maximum period of 50 years commencing from the issuance date of the residential house ownership certificate (which is stated therein). The foreign individual must sell or donate his or her owned house within 12 months upon the expiry of this ownership period.

Any eligible enterprise with foreign owned capital shall be permitted to own a residential house for a period corresponding to the duration mentioned in its investment certificate including any extension; and the ownership period shall commence from the issuance date of the ownership certificate and shall be stated therein. If the investment certificate is expired or the enterprise is dissolved or declared bankrupt, the house owned by the enterprise shall be dealt with in accordance with the investment laws, the enterprise laws, and other relevant laws of Vietnam.

Rights and obligations of foreign owners

Apart from a number of the same rights as those of Vietnamese owners, foreign owners have some limited rights such as:
•    To bequeath their house in accordance with Vietnamese laws on bequests. However, if the legatee is ineligible to own a house in Vietnam, this legatee will only be entitled to such house’s value;
•    Any eligible foreign individual is permitted to own, at any time, one apartment in an apartment building of a commercial housing development project. If such individual inherits or is donated another residential house, he or she may only select ownership of the apartment in the first category and shall only be entitled to the value of the one in the other category.
•    Any eligible foreign-invested enterprise is permitted to own one or a number of apartments (up to 100 in practice) in an apartment building(s) of a commercial housing development project(s), for its workers. If such enterprise inherits or receives donation of another house, it may only select ownership of the apartment(s) in the first category and will only be entitled to the value of the one(s) in the other category.
•    To sell or donate their house within 12 months from the expiration of the ownership certificate. If the owner being an individual is unable to continue residing in Vietnam, he or she will be permitted to sell or donate the purchased house prior to the said time-limit.

Regarding foreign owners’ obligations, except the restriction requiring them to use the house only for residential purposes, and not to lease it or use it as an office or for any other purposes, the remaining obligations are similar to those of Vietnamese owners.

House ownership and residential land use right certificates

All ownership certificates of foreign owners in Vietnam will be issued by People's Committees of provinces or centrally run cities.

For the issuance of such a certificate, the draft Decree requires that an application file dossier be filed with the department of Construction in the place where the house exists, consisting of:
(i)     A request for issuance (a standard form for this is provided by the draft Decree);
(ii)    Copies of documents proving the eligibility of the applicant;
(iii)   An original purchase and sale contract, or documents related to the donation or inheritance of the house;
(iv)   A document proving ownership of the seller, donor or legator as stipulated by the Law on Housing; and
(v)    Receipts for the payment of taxes, fees and charges.

In cases where an apartment is purchased from a real estate business enterprise, the seller must have documents such as a written agreement from the competent authorities or a decision on the approval of a commercial housing development, drawings of the ground floor of the purchased apartment, land use right certificates or land lease agreements granted to such enterprise, minutes of apartment delivery, etc.

In case of purchasing, inheriting, or receiving donation of an apartment from an individual, the seller/legator/donor must have one of the following documents: A residential ownership certificate and land use right certificate granted in accordance with the Law on Housing, Decree No. 60/CP of July 5, 1994 on the right to residential housing ownership and the right to residential housing use in urban areas or Decree No. 95/2005/ND-CP of July 15, 2005, or a land use right certificate recording a residential house on land, issued in accordance with the Land Law.

After receiving a valid dossier, the Department of Construction must notify in writing the Ministry of Construction of information relating to the purchase of a housing by a foreign individual. Based on this notification, the Ministry of Construction will inform the relevant Department of Construction about the ownership status of the purchaser. If the applicant does not yet own any houses in Vietnam, the Department of Construction will prepare the contents of the certificate according to the form stipulated in Decree 90/2006/ND-CP of September 6, 2006 and submit it to the concerned provincial-level People’s Committee for signature. After being signed, the certificate will be returned to the Department of Construction to be granted to the applicant.

The time-limit for issuance of an ownership certificate by the provincial-level People's Committee is 30 days from the date of receiving a complete and valid application dossier. In case of refusal to issue an ownership certificate, there must be a written explanation for such refusal.

Any foreign purchaser, donee or legatee is permitted to authorize another person to conduct procedures requesting issuance of an ownership certificate in accordance with Vietnamese law.

Dealing with violations

Under the Resolution, foreign organizations and individuals who commit acts in breach of the Resolution such as by purchasing houses in a non-permitted category, attempting purchase despite belonging to an ineligible category of foreigner, or attempting to own housing through false documents, will not be issued a house ownership certificate. If a violation is found after issuance of such certificate, the certificate will be revoked and ownership of the purchased house will not be recognized. In case a foreigner uses or permits another person to use a house under his/her ownership in breach of Vietnamese laws, or the foreigner is expelled from Vietnam, the house will be disposed in accordance with a Vietnamese court’s decision and Vietnamese law.

With respect to violations committed in the course of purchasing and selling, transferring or owning residential houses by foreigners, the Ministry of Construction is drafting a series of regulations forcing violators to bear administrative penalties. In particular, the Ministry of Construction also proposes a sanction of 30% of the house’s value to be paid to the State. As this Ministry has explained, if the maximum penalty were only a fine of VND 100 million as stipulated in the Ordinance on Sanctioning Administrative Violations, it would not be strict enough to prevent the violators from repeating their act in violation.

Resolution No. 19 took effect on January 1, 2009 and is valid for 5 years. When this Resolution ceases to be valid, owners will continue to be entitled to own their houses according to the term recorded in their house ownership certificates and will have rights and obligations under the Vietnamese laws in force at the point of time at which the Resolution ceases to be valid.

The issuance of Resolution No. 19 and its guiding decree follows the common global trend and Vietnam’s international integration by welcoming and facilitating the stable residence of foreign individuals and organizations in Vietnam, a sine qua non for all works as mentioned in a Vietnamese idiom, in order to encourage foreign investment in Vietnam and foreigners’ active contribution to society. Such change is also hoped to help enliven the current gloomy real estate market in Vietnam.