On 1 March 2022, the new Decree No. 02/2022/ND-CP dated 6 January 2022 giving guidelines on certain articles of Law on Real Estate Business came into its effectiveness (“Decree 02/2022”). This Decree 02/2022 is targeted to mainly address the below:
1. Abolishing the paid-in minimum capital for real estate trading enterprises
Decree 02/2022 abolishes the condition that enterprises conducting real estate business must have a legal capital of at least VND20 billion which is consistent with the changes under the Investment Law 2020.
2. Clarifying equity requirement of the investors implementing real estate projects
Decree 02/2022 clarifies that equity of the investors in a real estate project must:
- reach at least 20% of the total investment capital for projects using land area of less than 20 ha.
- reach at least 15% of the total investment capital for projects using land area more than 20 ha.
Determination of whether or not the investors satisfy the equity requirement shall be reliance on its latest audited financial statement or independent financial statements. If the investor is a newly incorporated company, equity will be determined based on its paid-up charter capital.
3. Information transparency
Decree 02/2022 is aimed to provide more transparency to the Vietnam real estate market by:
- Consolidating requirements for organizations, individuals to be engaging in real estate business.
- Standardizing compulsory contract templates for real estate trading activities i.e., sale and lease of flats, houses and construction structures; transfer of land use rights; transfer wholly or partially real estate projects etc.,
- Imposing disclosure obligation on organizations and individuals being active in real estate business. Information to be disclosed include: corporate information of the company, information of the real property for trading.
4. Conditions for transferring related agreements in real estate trading activity
From 1 March 2022, transfer of sale & purchase agreements with respect to residential houses and construction structures must adhere to all conditions and formalities stipulated in Decree 02/2022.
Please follow our regular Legal Updates and Publications for more detailed information on this critical topic.
5. Regulations on transferring wholly or partially real estate project
Under Decree 02/2022, there are two formalities for transferring real estate projects: (i) project transfer formality under Investment Law 2020 (“Investment Formality”); and (ii) project transfer formality under Law on Real Estate Business and this Decree 02/2022 (“Real Property Transaction Formality”).
- Investment Formality shall be applied for real estate projects that: (i) the investors of such projects are approved following the Investment Law 2020; and (ii) are granted with investment registration certificate(s) in accordance with Investment Law 2020.
- Real Property Transaction Formality shall be applied for real estate projects that are not governed by Investment Law 2020.
Detailed guidelines on the Investment Formality and Real Property Transaction Formality will be published in our upcoming Publications and Legal Updates!