The skyline of Ho Chi Minh City, Vietnam's largest city, has been changing with a boom of new high rise residential and office buildings in last ten years. Prime Minister Nguyen Tan Dung has backed proposals that would make it easier for foreigners to buy homes in Vietnam. PHOTO: AFP
Prime Minister Nguyen Tan Dung has thrown his support behind proposals that would make it easier for foreigners to buy homes in Vietnam, exhibiting yet another attempt to resuscitate the struggling property market and resolve bad debts.
At a cabinet meeting last week, Dung instructed concerned agencies to continue amending laws to create an environment most conducive to would-be foreign home buyers here in Vietnam.
Since August, Vietnamese lawmakers have been debating draft laws that would allow foreigners to buy more than one apartment unit, secure apartment leasehold rights for longer than the current limit of 50 years and buy land.
The ministries of construction and planning and investment have also pushed for relaxing the laws in a bid to add more liquidity to an ailing real estate market that has been frozen by a bad economy and soaring inflation.
The property freeze has also aggravated banks' problems with non-performing loans, prompting a vicious cycle in which banks have dramatically cut lending, slowing property sales across the country and stalling many real estate projects.
Consequently, news that the housing and real estate market may soon see an influx of foreign buys is music to the ears of real estate companies.
"It is very positive and puts foreign ownership regulations [in Vietnam] alongside, if not further ahead, than in other Southeast Asian countries," Marc Townsend, managing director of real estate firm CBRE Vietnam, told Vietweek.
"It would remove some irregularities and road bumps from the investment law and would make the idea of buying to occupy and investment much more palatable for foreigners working in Vietnam, for Viet Kieu [overseas Vietnamese] and [Southeast Asia]-based investors," he said.
In the offing
In a report sent to Prime Minister Dung by the Ministry of Construction last July, the ministry proposed new regulations that would allow organizations like foreign investment funds, banks, Vietnamese branches and representative offices of overseas companies, as well as all foreigners who have a visa to the country that is valid for at least three months, to buy homes "“ both apartments and independent houses "“ in Vietnam.
But diplomatic institutions, NGOs, and their employees would not be allowed to purchase homes in the country, according to the proposed regulations.
The ministry also proposed that foreign organizations and individuals eligible for home purchase in Vietnam be allowed to buy different types of properties, including townhouses and villas with less than 500 square meters of land and apartments.
These properties could be leased if their foreign owners are not living in them and the houses could only be sold or given as gifts 12 months after the ownership certification is granted, if the ministry's proposals become law.
Under a law that took effect on January 1, 2009, foreigners are allowed to buy apartments, but not houses, and each individual or organization can own one apartment that cannot be leased or used for other purposes except living.
The ministry put forth two options for individual purchasers. Under one, foreigners could buy any number of housing properties, and under the other, the number would be limited to one or two. The number of houses an organization can buy would depend on the number of foreign employees it has.
Among the most significant changes in the proposals are the two options for the duration of ownership of housing properties by foreigners. The regulations would allow ownership for 50 years with the possibility of a 50-year extension, or 70 years with no extension.
The construction ministry's proposal, however, mentioned no proposed change in ownership duration for foreign organizations. Under current regulations, an organization's ownership lasts until the organization's investment registration expires.
But by and large, "allowing for a 50-year lease plus a further 50 years or straight 70 years lease and allowing the right to lease out are all game changers for foreigner investors," Townsend said.
The National Assembly has yet to set a date to vote on the ministry's proposed regulations.
"˜Need to act decisively'
The 2009 law, which was to be implemented on a trial basis for five years, also stipulates that only five categories of foreign individuals and organizations are allowed to own apartments: individuals who invest directly in Vietnam or who are employed in management positions here; foreigners who receive certificates of merit or medals from the president or government for their contributions to the country; those who work in socioeconomic fields, hold at least a bachelor's degree or higher, and possess special knowledge and skills that Vietnam needs; foreigners who are married to Vietnamese nationals; and foreign-invested companies operating in Vietnam, except for those in the real estate industry, that need to buy homes for their employees.
But most foreigners in Vietnam do not belong to the five categories.
According to the construction ministry, only 126 expats and foreign organizations had purchased apartments in Vietnam as of the end of June 2013, most of whom were in southern and south-central localities like Ho Chi Minh City and Ba Ria-Vung Tau, Binh Duong and Khanh Hoa provinces.
At the cabinet meeting last week, Minister of Planning and Investment Bui Quang Vinh said a number of officials responsible were still inculcated with the deep-seated but unfounded fears that foreigners would take over Vietnam if they have a chance to buy homes here.
Vinh said the most recent statistics showed that there are currently around 130,000 South Koreans who have resorted to renting homes owned by Vietnamese because they are not eligible to buy them.
"Given the difficulties in the property market over the past two years, the easing of foreign ownership laws would lure more potential foreign home buyers and help bring liquidity to the [property] market in 2014," he said.
"We need to act decisively on this."
Though analysts say that opening up the property sector to foreign buyers will not be able to shore up the entire market, foreigners could become a much-needed layer of sustainable buyers as opposed to the groups just looking to speculate.
"Over the past several years we have seen significant interest from foreign investors who are unable to purchase housing in Vietnam due to restrictions," David Blackhall, managing director of VinaCapital's real estate arm, told Vietweek.
"Loosening these restrictions should help bring the demand needed to clear out the current stock, which is an important step towards a full recovery," he said.
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