How to invest in Vietnam – LAND ISSUES
1. Land Management Regime
All land in Vietnam is owned by the people and managed by the State. Land use rights (as opposed to land ownership) can be allocated or leased by the State for stable and long-term use. Land law divides land into three categories:
(i) agricultural land (for example annual cropland and forestry land);
(ii) non-agricultural land (residential land, land for building offices, industrial parks and business establishments, land for national defense and public security, land used for public purposes, such as landscapes landmarks, historical and cultural sites, and land used by religious facilities); and
(iii) unused land.
The implementing regulations of the 2004 Land Law have been updated and revised regularly by the Government to recognize and enforce a range of ownership rights related to land use rights, including the right to exchange and transfer. , lease, sublease, give, leave and mortgage land use rights or similar uses for a guarantee or capital contribution purposes, as well as streamline land management procedures and streamline the posting process. Sign land use rights.
The two new laws enacted in 2006 are the Real Estate Business Law (effective from January 2007) and the Housing Law (effective from July 2006), aimed at gaining greater access and participation in Vietnam real estate market for foreign investors and Vietnamese foreigners, recognize a series of real estate market transactions and facilitate more market-oriented land pricing.
In Ho Chi Minh City, land management, including the grant of land use rights, is carried out by the City People’s Committee.
2. Land Use Right Certificate
Beginning on July 1, 2007, land users must have a land use right certificate to exercise their land use rights, including rights to exchange, transfer, lease, sublease, give, leaving, mortgaging, land use rights or equally using for a guarantee or capital contribution purposes.
3. FIEs and Foreign Invested Projects
Foreign-invested enterprises may lease land from the State or organizations that hold land ownership for 70 years and, if necessary, the lease may be extended several times but not exceeding 70 years at a time. Decree 181 explicitly allows foreign investors to lease and sub-lease industrial parks, economic zones, or export areas for their projects.
Foreign investors also have a basic decision to make about the time of rent payment to the State. They may choose to pay the rent annually or in a lump sum for the length of the lease.
If FIEs lease land from the State and pay annual rent, those FIEs will have limited land use rights. For example, FIEs are not allowed to create pledges or mortgages or guarantees using the value of their land use right. FIEs also cannot sublet their land-use rights.
However, FIEs may mortgage or guarantee or contribute capital by using their owned assets attached to the leased land and transfer or sell the properties attached to the land and the buyer will eventually sign the contract. renting new land to the State.
If FIE leases the State’s land and makes a payment of the land rent for the entire lease term, they will have full rights to the land and assets attached to the land, for example, transfer/sale of land use rights. use their land and assets, or sublease their land use rights and assets.
FIEs also have the right to compensation if the State is forced to return land use rights.
4. Foreign Investments in Real Estate
Foreign developers can invest in both commercial housing projects and low-income housing projects. Foreign commercial housing developers must have an investment certificate under the General Investment Law as set out in Part 1 of Part A above. If more than one developer is interested in project development, then the project will be awarded through bidding.
The scope of real estate businesses that foreign developers are allowed to perform is narrower than that of domestic investors. Normally, foreign investors may choose to invest in the following real estate projects:
(i) Invest in-home creation and construction for sale, lease, or lease-purchase;
(ii) Invest in upgrading land and invest in infrastructure works on leased land to lease out the completed land;
(iii) Other services in real estate such as real estate brokerage services, real estate assessment, real estate trading floor services, real estate consulting services, real estate auction services real estate advertising service, and real estate management service.
Foreign investors are not allowed to (i) buy houses or constructions for resale, lease or lease-purchase, and (ii) lease houses or constructions for sublease because these two activities are reserved for domestic investors.
For housing investment projects where their investors make a payment of land rent for the entire term, the investors will be entitled to build houses for sale and lease.
If the rent payment is made annually, FIE is only allowed to build houses for rent. A joint venture investing in housing for sale and having land contributed by the Vietnamese party will not have to pay a land rental.
5. New Urban Center Development
Foreign and domestic investors can develop new urban centers in Vietnam. A new urban center must have an area of at least 50 hectares unless surrounded by existing urban centers or limited by other projects. In such a case it may cover from 20 to 50 hectares.
The selection of new urban center developers can be through bidding or appointment. They must also maintain a debt/equity ratio not exceeding 5 to 1 and be allowed to issue project bonds.
New urban center projects using the land of less than 200 ha can be decided by the Provincial People’s Committee. Larger projects must be submitted to the Prime Minister for approval after being appraised by the relevant Provincial People’s Committee.
6. Land Management in Ho Chi Minh City and Incentives in Investing in Ho Chi Minh City
In order to rent land for foreign investment projects, a foreign investor must submit to the Department of Natural Resources and Environment of Ho Chi Minh City or the Southern Region Management Board of Ho Chi Minh City the following documents:
· Application for land lease;
· Investment License;
· Land cadastral map;
The investor is required to prepare land lease documents. In the case of a file submitted to the South City Management Board, the department, after checking the file, will forward it to the Department of Natural Resources and Environment.
An application for a land lease may be submitted to the Department of Natural Resources and Environment after the enterprise has an investment license from a competent state agency because it is necessary to submit an investment license to apply the land use right. For investment projects that require the approval of state agents, foreign investors can complete the application with such approval before receiving land use rights.
Within twenty working days after receiving the land lease application, the City People’s Committee will decide and sign the Land Lease Decision and the Department of Natural Resources and Environment will sign and issue a land-use certificate. for FIEs.
With respect to the projects on-site that have not yet been cleared, the Department of Planning and Investment is responsible for providing foreign investors with an average compensation rate for land acquisition. After the City People’s Committee signs the decision on land acquisition, the District People’s Committee will cooperate with investors to carry out the compensation and site clearance of those areas.
In addition, if such projects are encouraged and the compensation for such projects is large, the People’s Committee of Ho Chi Minh City will consider supporting foreign investors in site clearance or compensation costs. usually with an amount not exceeding the total rent.
In certain cases, the Ho Chi Minh City People’s Committee will assist investors by conducting compensation and site clearance or demolition and resettlement for residents in the area. After receiving the investment, the investors must return to the Ho Chi Minh City People’s Committee such compensation and site clearance costs plus interest rates (equivalent to the current interest rate of the Bank). State goods).
During project preparation, developers can also get information on urban architecture and planning, rental fees, legality, land status, sources, and types of land in Ho Chi Minh City. at Department of Planning and Investment (DPI) or Investment and Trade Promotion Center (ITPC).
The Information and Housing Register Center (Department of Natural Resources and Environment) is responsible for providing cadastral maps to investors within two (02) working days of receipt of the request. If the maps are not available, within two (02) working days, the Ministry will notify and guide investors on the procedures to create a map of the project location.
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