Using Land in Vietnam: The Rise of Condotels and Green Areas
Understanding the rules regarding the ownership and use of land in Vietnam can be confusing as neither citizens nor foreigners, can actually own land. However, there are still many opportunities that foreign buyers and investors can tap into as land prices in Vietnam remain relatively low.
Leasing land in Vietnam
In Vietnam, private ownership of land is technically not permitted, but land can be leased for 50 years by foreign nationals, which can be extended under certain conditions. The investor can then choose between an annual payment agreement or pay a lump sum for the lease period of 50 years which gives the investor rights similar to buying the piece of land.
Up until recently, foreigners did not have equal rights to land, but since July 2015 as per the Housing Law No. 65/2014/QH13, foreigners could also have right to use land just like Vietnamese citizens.
Reselling leasing rights
When reselling rights to leased land, the price cannot be more than 20 percent of the state-sanctioned value, which is set each year.
In Vietnam, many wealthy families have started to invest in a second vacation home, including foreigners from Hong Kong, Singapore, and few from Europe, as prices are significantly lower in the country.
Japanese investments in real estate
Japanese investors have emerged as one of the biggest investors in the Vietnamese real estate industry. For example, Mitsubishi Corporation recently entered into a joint venture with Bitexco, a Vietnamese property developer, to build 240 housing units and two high-rise condominiums.
- Location Analysis and Site Selection
In addition to private investors, the Japanese government is also involved in projects in Vietnam including building a “smart city” in Nhat Tan-Noi Bai, north of the Red River. With a total investment of nearly 4.2 billion USD, the project is regarded as Japan’s biggest foreign investment project.
Condotels popular for tourism
Since 2014, the Vietnamese tourism industry has seen an impressive growth, leading to the rise of Condotels. In 2017, there were around 29,000-33,000 condotel units for sale in Vietnam. Although this may seem like a large number of units, the demand exists as the tourism sector is going through a rapid growth, and such spaces are highly desired by travelers.
In the last three years, green buildings projects have slowly emerged as a growing trend in Vietnam, and investors focusing on such projects will have a competitive edge in the Vietnamese market as it brings value to its buyers.
For a project to be considered a green project, there are five main areas to focus on:
- Sustainable construction location
- Efficient use of water and energy resources
- Use of environmentally friendly materials
- High-quality indoor environment
- Designs should be innovative
Opportunities in 2018
Foreigners in Vietnam cannot own more than 30 percent of a building’s units, which presents a challenge for companies looking to invest in a consolidated area. However, foreign firms can enter the market through a joint-venture with local firms, similar to one between Mitsubishi Corporation and Bitexco, in which case, the restrictions do not apply.
Demand for apartments
Driven by low prices and a high supply, the demand for apartments will continue to rise in Vietnam. According to JLL Research, in Q1 2018, total sales of apartments in Ho Chi Minh City and Hanoi grew by 91.5 percent and 29.7 percent year-on-year respectively, largely driven by rising demand in the affordable and mid-end section.
Going forward, the premium and luxury real estate market sectors are also predicted to attract investments from wealthy individuals looking to buy a second home.
In addition, investors should also focus on the development of green projects. Although the sector is currently at a nascent stage, being environmentally friendly adds significant value to projects.