Vietnam is increasingly consolidating its position as one of the most dynamic economic hubs in the region. This breakthrough growth not only attracts foreign direct investment (FDI) inflows but also draws a wave of international experts, investors, and workers to reside, work, and conduct long-term business. To create favorable conditions for the international community, Vietnam's legal framework—specifically the Law on Housing 2023 and the Law on Real Estate Business 2023 (effective from 2024)—has opened up more accessible mechanisms regarding housing rights and commercial real estate.

However, the legal framework governing land and real estate in Vietnam possesses unique characteristics compared to the legal systems of many other countries. A lack of understanding of these regulations can lead to financial disputes, contract invalidation risks, or business disruptions. The article below, prepared by our specialized team of attorneys, aims to help foreign individuals and organizations identify common legal risks early when engaging in real estate transactions in Vietnam.

1. Clearly Distinguish Between "Land Ownership" and "Land Use Rights"

Unlike many countries where private individuals can hold full ownership over land (Freehold), under the Constitution and Land Law of Vietnam, land belongs to the entire people, represented and uniformly managed by the State. Citizens as well as foreign organizations and individuals do not hold land ownership rights; instead, they are allocated land, leased land, or recognized with Land Use Rights (LURs) by the State.

When purchasing real estate attached to land (such as condominium apartments or commercial houses), foreigners own the property built on the land (the housing) and hold the right to use the attached space for a term specified by law, rather than possessing permanent ownership of the land beneath.

2. Conditions and Eligible Foreign Entities for Housing Ownership

Not all foreigners entering Vietnam automatically qualify to purchase property. Under the Law on Housing 2023, foreign individuals permitted to own housing in Vietnam must satisfy two conditions:

1. Be legally permitted to enter Vietnam and not enjoy diplomatic or consular privileges and immunities.

2. Housing ownership types are restricted to condominium apartments and individual houses (attached houses, villas) within commercial housing construction investment projects, excluding areas designated for defense and security.

Note: Foreigners are not permitted to acquire Land Use Rights directly from households or local individuals (e.g., residential land/houses outside approved commercial projects).

3. Ownership Cap/Quota Limits for Foreigners

Vietnamese law strictly specifies ownership caps to ensure housing security and urban planning control. Specifically:

- For Condominium Apartments: A foreign individual/organization, or the collective total of foreigners, may own a maximum of 30% of the total number of apartments in a single condominium building.

- For Individual Houses: Within an administrative unit equivalent to a ward (phường), foreigners may own no more than 250 houses (including villas and attached houses).

If a project has reached this foreign "quota," sales contracts signed with foreigners will not be legally recognized, and Ownership Certificates (Red/Pink Book) cannot be issued. Therefore, buyers/investors should request confirmation of the quota status from the developer or management authority before placing a deposit.

4. Housing Ownership Term and Extension Mechanism

The housing ownership term in Vietnam for foreign individuals is regulated as follows:

- The maximum ownership term is 50 years from the date of issuance of the Ownership Certificate (Pink Book).

- Upon the expiration of the 50-year term, if the owner wishes to continue using the property, the State may consider extending it once for a maximum additional term of up to 50 years, or in accordance with the duration recorded on the certificate.

- In cases where a foreign individual marries a Vietnamese citizen or an overseas Vietnamese residing abroad, they are entitled to stable, long-term housing ownership identical to Vietnamese citizens.

5. Caution Regarding Temporary Residence Registration When Renting

For foreigners living in Vietnam or leasing premises for office/commercial purposes, temporary residence registration is mandatory. When signing a lease agreement:

- The lessor (landlord) is obligated to declare the temporary residence of the foreign tenant with the local ward/commune police within 12 to 24 hours from the time of arrival.

- The tenant must provide a copy of their valid Passport and Visa/Temporary Residence Card (TRC) to the landlord.

- Failure to complete temporary residence registration not only subjects the landlord to fines but also exposes foreign tenants to administrative penalties and negatively impacts their future immigration/residence records.

6. Authority and Conditions for Leasing Commercial/Office Space

For entrepreneurs and experts seeking to lease space to establish a company, representative office, or retail outlet:

- Purpose of Use: The Law on Housing strictly prohibits using residential condominium apartments for commercial office purposes. Therefore, foreign enterprises may only rent space in commercial/office buildings, standalone residential houses outside apartment complexes, or retail spaces (Shophouses/Podiums) designated for commercial functions.

- Legal Status of the Landlord: It is essential to verify whether the lessor is the legitimate owner or holds valid subleasing rights (in the case of sub-lessors).

7. Payment Terms and Foreign Exchange Control Regulations

Vietnam’s foreign exchange management regime is strictly enforced (Ordinance on Foreign Exchange as amended in 2013).

- Currency of Transaction: All transactions, price listings, valuations, and payments for rent or real estate purchases within Vietnamese territory must be executed in Vietnamese Dong (VND), except for specific cases explicitly licensed by the State Bank of Vietnam.

- Denominating rent in USD or making direct payments in foreign currency cash/transfers from foreign currency accounts creates a significant risk of the contract being declared entirely null and void due to violating statutory prohibitions.

8. Notarization Requirements for Real Estate Contracts

Pursuant to the Land Law and Law on Real Estate Business:

- Real estate purchase, transfer, donation, and mortgage contracts between individuals must be notarized or authenticated at a legally operating Notary Office in Vietnam.

- Lease contracts for housing or commercial premises where at least one party is a licensed real estate business organization do not strictly require notarization; however, notarizing the lease agreement is strongly recommended to protect the foreign tenant’s rights against potential disputes (such as unilateral termination or withholding of security deposits).

9. Tax and Financial Obligations in Real Estate Transactions

Parties involved in real estate transactions in Vietnam must fulfill their tax obligations to the state budget:

- For Sales/Transfers: Personal Income Tax (typically 2% of the transfer value payable by the seller) and Registration Fee (0.5% payable by the buyer upon ownership registration) will apply.

- For Property Leasing: If an individual generates rental revenue exceeding VND 100 million per year, the landlord must pay Personal Income Tax (5%) and Value Added Tax (5%). Commercial tenants should clearly stipulate in the agreement whether the agreed rental price is inclusive of these taxes to avoid unforeseen expenses.

10. Opening Bank Accounts and Legally Remitting Funds Abroad

When investing in or reselling real estate in Vietnam, foreign investors must pay strict attention to capital flows:

- Purchase payments for real estate must be transferred through a legitimate bank account opened at a licensed bank operating in Vietnam.

- When selling property or receiving deposit/penalty refunds, to legally remit these funds back to their home country, banks in Vietnam will require complete documentation: the notarized Transfer/Sale Contract, tax completion certificates, customs declaration forms, and proof of the initial legitimate source of funds entering Vietnam.

- Failure to adhere to proper financial compliance and fund flow procedures from the outset will cause significant difficulties when attempting to withdraw or transfer capital out of Vietnam.

CONCLUSION

The Vietnamese real estate market presents numerous attractive living and investment opportunities for the international community. However, the legal framework governing land, housing, and foreign exchange demands strict compliance and due diligence. Proactively staying updated on legal regulations and thoroughly reviewing transaction documents not only safeguards capital for tourists, experts, and investors but also ensures that residential and business activities proceed smoothly and in full compliance with the law.

In the event of legal disputes or when requiring comprehensive legal due diligence for real estate transactions in Vietnam, seeking professional advice from specialized legal advisors is the optimal solution to protect your legitimate rights and interests.

Disclaimer: This article is prepared for general informational purposes only and does not constitute formal legal advice for any specific case. For detailed legal inquiries, please contact us directly for tailored assistance.