Housing law ambiguities rankle foreign investors

Kenneth Atkinson, executive chairman of Grant Thornton Vietnam, told VIR that the government’s housing and real estate laws, which came into effect in July 2015, created a lot of excitement and interest among foreign investors, but the buzz is waning.

“This should have been a real driver for sales, especially in resort and coastal areas. It should have been a driver for further growth in the tourism sector, boosting the return visitor market that Vietnam lacks compared to neighbouring countries like Thailand, Indonesia, and Malaysia,” Atkinson said.

He highlighted that there are still a number of grey areas which need clarification if the market buzz is to return to the levels first observed after the introduction of the policy.

One of those grey areas is ownership surrounding military land, as it now seems the government is saying foreign ownership of housing that rests on military land will not be permitted.

“Whilst the government should be free to determine which projects are eligible to sell leases to non-Vietnamese citizens, the rules should be clear,”  Atkinson said.

“If some developments are not going to be eligible to sell long term leases on 30 per cent of units to non-Vietnamese citizens, then this should be made public before the developers begin selling,” he said.

Atkinson also expressed concerns over foreign ownership in developments that are on land which may be reclassified as a military land in the future.

“This really is an issue which should have been addressed when the laws were passed for projects under development and at the time of licensing for projects licensed subsequent to the passing of the new laws,” he added.

Another issue now surfacing is the fact that a local owner cannot sell to non-Vietnamese citizens, only a non-Vietnamese citizen can sell to another non-Vietnamese citizen.

There appears to be no logical reasoning for this with respect to developments where sales to non-Vietnamese citizens have not reached the 30 per cent limit for apartments, or 10 per cent limit for land plots.

Atkinson also stated that there are no clear guidelines on how the remittance of sales proceeds are to be monitored, as funds used for purchasing a property are not required to be invested through a direct investment account.

“As a non-Vietnamese citizen, and I think I speak for the majority, we look for complete clarity in the regulations in terms of ownership rights, how to remit and return purchase monies and sales proceeds, and how taxes on gains are calculated,” Atkinson said..

“We also look for an environment where there cannot be retroactive changes in laws or regulations, and clarity about the procedures for renewing 50 year leases upon expiry,” he said.

Kai Marcus Schröter, general director of HTM Management Consultancy Co. Ltd., highlighted that non-Vietnamese citizens are faced with many difficulties when buying houses.

“I think that it is quite ok for a country to regulate and restrict foreign ownership of land, but this process must be clear and transparent,” he said.

“Vietnam has a right to protect its security and to restrict access to land. But I have never understood why any non-Vietnamese citizens who have just entered the country on a valid visa and stayed for the first time in the country are treated the same way and have the same rights as non-Vietnamese citizens who have lived here for a long time, have invested here, and even have Vietnamese families here,” he added.

Schröter added that the latter has certainly proven their love and commitment to the country, and they are certainly no ‘security threat’.

“The first should be restricted from buying property, the second should be rewarded with easy access, simple procedures, and quick documentation of land purchase (pink books),” he said.

As decreed by the government, local departments of construction are responsible for publishing which properties are restricted from foreign ownership over concerns of ‘security’ and ‘national defence’.

“When the decree was passed, the Ministry of National Defense and the Ministry of Public Security failed to follow through and to submit this information to the local departments of construction, creating loopholes and problems for non-Vietnamese citizens,” Schröter said.

“Non-Vietnamese citizens signed purchase contracts and paid big money, but could not obtain pink books. Without a pink book, the purchase is in fact worthless,” he said.

Schröter suggested the government of Vietnam work harder to enforce the decrees they have passed, and protect the rights of non-Vietnamese residents and citizens alike, to ensure equal and fair treatment.

“The definition of ‘restricted’ or ‘security areas’ should be very narrow (for example military bases), and applied indiscriminately to both Vietnamese citizens and permanent residents,” he concluded.