In recent years, investment flow from Europe has become important for Vietnam’s real estate market. Such foreign investment shows the strength of the real estate market as well as Vietnam’s international economic integration. However, there are still some barriers due to simple reasons.

On September 9, 2019, Mr. Kent Wong and Mr. Tran Thai Binh, legal experts from the Real Estate Working Group of the EuroCham Legal Sector Committee, were interviewed by Reatimes, an online magazine about the real estate market, discussing the viewpoints of European investors in real estate in Vietnam.

According to the two experts, Vietnam’s real estate market has been on the rise for the past 4 years due to the boost in investment aided by the Government’s support policies and regulations (such as concluded trade agreements, amendments to new laws …).  However, Vietnam has been tightening capital flows into the real estate market by issuing fewer construction permits and reviewing current construction projects, which appears to be an attempt to bring land back to its true value, as well as finding the most attractive projects for investors.

With a prime strategic location in Southeast Asia and for the international maritime system, ports and warehouses are expected to jump steady as soon as the EVFTA comes into force.  Real estate in industrial zones also have good potential.

Another problem mentioned was capital mobilization. Up till now, the main capital source for Vietnam’s real estate is from bank loans. Essentially, this is the only channel because the bank is the only financial institution licensed to provide land loans and is strictly controlled by the law.

Investors are calling for the loosening of the rules in the search for new capital channels. EuroCham believes that new capital mobilization such as corporate bonds, joint ventures will be used by real estate investors to raise funds.  Moreover, there are some regulations regarding capital raised from customer deposits or real estate ownership that have differences between domestic and international investors, which also have hidden risks.

Kent Wong noted that there are many differences between the laws on paper and in practice, which real estate investors in Vietnam are now facing.  The Vietnamese Government must therefore improve the legal framework to be transparent, creating a fair legal environment for international investors, and to protect their rights.

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Kent Wong’s contribution to Reatimes is part of EuroCham’s and VCI Legal’s ongoing commitment to developing Vietnam’s legal framework and helping to find a solution to develop real estate which attracts  and protects European investors.