Articles
New Decree offers more funding channels for property projects

12 - 10 - 2010
By Le Nguyen Huy Thuy and Cao Tran Nghia* 

On 23 June 2010, the Government issued Decree No. 71/2010/ND-CP guiding the implementation of the Law on Residential Housing ("Decree 71").  Effective and superseding Decree No. 90/2006/ND-CP dated 6 September 2006, from 8 August 2010 Decree 71 addresses a number of persistent problems with current residential development projects.

Decree 71 liberalizes the mobilization of funds for residential development projects. Methods for fundraising now range from traditional funding via loans from credit institutions and investment funds to co-operation agreements or investment agreements. In the case of investment agreements, investors are allowed to receive funds from contractual partners in return for apartments or houses as soon as their project design is approved and the foundation construction has started. Two conditions for this fundraising via investment agreement are (i) the number of apartments or houses distributed to the partners does not exceed 20% of the total project, and (ii) the distribution is conducted through official real estate exchanges.

For contracts signed with buyers of completed apartments or houses, however, investors can mobilize advance payments only after construction of the project's foundation is completed.  Decree 71 also clarifies how to determine when the foundation of a project is completed and thus clarifies when the investors can sell, transfer or assign a house or apartment attached to the project. Decree 71, however, allows project owners to retain future use rights in apartments or houses (up to 20% of the project), as returns for investment. Hopefully, these will help to regulate the transaction, and protect the interests of both: the project developer and the buyers.

Decree 71 does little to alter the rules for foreigners and overseas Vietnamese. The decree, however, provides some updates to comply with the Law on Residential Housing regarding house ownership by overseas Vietnamese. Specifically, those individuals who do not have Vietnamese citizenship but can trace their origins to Vietnam, as certified by Vietnamese authority, and are permitted to reside for six or more months in Vietnam are allowed to own one apartment or house in Vietnam.

To a lesser degree, Decree 71 introduces a more detailed definition for villas. It defines villas as houses with at least three sides surrounded by garden. Some villas are classified as "historical" or as "architecturally valuable items" that cannot be modified in any way unless such modifications are for the purpose of reinforcement, renovation, or repair. The Decree also provides more details on separate and common ownership in cases of apartment blocks or condominiums with multiple owners.

In sum, Decree 71 provides clarifications to a number of questions that have posed obstacles to both the investors and end-use buyers of residential development projects.  These developments will hopefully provide clearance on funding regulations for new projects to rise.

(*) Please contact the author at thuy.le@indochinecounsel.com and nghia.cao@indochinecounsel.com or our partners if you wish to have more information or specific advice for the topic of this article.

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