The Vietnam government recently enacted Decree No. 96/2024/ND-CP, which provides detailed regulations for certain aspects of the Law on Real Estate Business in Vietnam. This decree became effective from August 1, 2024. Its aims is to regulate the market, curb speculation, and ensure fair practices.
The following explores some of aspects of real estate business in Vietnam, the requirements for real estate transactions, and the broader impact on the Vietnamese real estate market.
Key Provisions of Decree No. 96/2024/ND-CP
Transaction Limits for Small-Scale Real Estate Businesses
Under Decree No. 96/2024/ND-CP, small-scale real estate operators are limited to conducting no more than ten transactions per year, with the total value of these transactions not exceeding VND 3,000 billion. This specific regulation is aimed at individuals engaged in real estate activities without forming a business entity.
It should also be noted that individuals operating small-scale real estate businesses, whom are regular people buying houses or selling houses in Vietnam are not required to establish a real estate enterprise in Vietnam but must declare and pay taxes according to the law. This provision simplifies the administrative burden for small-scale operators while ensuring they contribute to the tax system.
Exemption from Establishing a Real Estate Business
For individuals who do not meet the criteria for small-scale business, the Law on Real Estate Business in Vietnam mandates the establishment of a real estate enterprise in Vietnam, cooperative, or union of cooperatives. However, those qualifying as small-scale operators are exempt from this requirement, provided they adhere to the transaction limits.
Specific transaction limits: The decree specifies that small-scale real estate transactions should not exceed 300 billion VND per contract, and the total number of transactions should not surpass ten per year. This dual criterion ensures that both the frequency and the financial scale of transactions are regulated.
Tax Declaration and Payment
All individuals engaged in real estate business must declare and pay taxes according to Vietnamese law. This requirement ensures transparency and accountability, contributing to the overall integrity of the real estate market.
Real Estate Brokerage Regulations
Certification Requirement
Decree No. 96/2024/ND-CP mandates that all real estate brokers must obtain certification and operate in association with a real estate exchange, brokerage company, or consulting and management company. This regulation aims to professionalize the brokerage sector and eliminate unlicensed, freelance brokers from the market.
Implications for real estate brokers: For a long time, when the real estate market is booming, there are plenty of traders whom call themselves real estate brokers. When market is cold, such people leave the work force. They change jobs because the competition is too fierce, they do not have specialized skills in real estate business and they are not committed professionals. Now thing changes. The certification requirement ensures that brokers possess the necessary knowledge and skills to conduct real estate transactions effectively. It also ties brokers to recognized entities, fostering greater accountability and professionalism within the industry.
Impact on Freelance Brokers
Freelance brokers, who previously operated independently, are now required to cooperate with licensed entities. This shift is expected to reduce instances of unethical practices and enhance consumer protection.
Mitigating Real Estate Speculation
Addressing Speculation and Price Inflation
One of the primary objectives of the Law on Real Estate Business in Vietnam which is guided by Decree No. 96/2024/ND-CP is to curb speculation and price inflation in the real estate market. By limiting the number of transactions and imposing strict regulations on brokers, the decree aims to create a more stable and transparent market environment.
Impact on Market Stability
The transaction limits and regulatory requirements are expected to deter speculative activities that often lead to artificial price inflation. This stability benefits genuine buyers and sellers, promoting sustainable growth in the real estate sector.
Prohibition of Land Subdivision Sales
The Law on Real Estate Business in Vietnam, reinforced by Decree No. 96/2024/ND-CP, prohibits the subdivision and sale of land for individual housing in special urban areas (categories I, II, and III). This measure aims to prevent the fragmentation of urban land, which has been a significant driver of speculative activity.
Long term market benefits: By restricting land subdivision, the decree seeks to maintain orderly urban development and prevent the speculative practices that can distort land prices. In the long run, this approach is expected to lead to more balanced and sustainable urban growth.
Mandatory Bank Payments for Real Estate Transactions
Eliminating Dual Pricing
Law on Real Estate Business in Vietnam requires all real estate transactions to be conducted through bank payments. This measure is designed to eliminate the practice of “dual pricing,” where different prices are reported for tax evasion purposes which one contract states a price for actual transaction and another contract states a different lower price for tax declaration.
Building a Transparent Market
Mandatory bank payments for real estate transactions help build a transparent market by creating a verifiable record of all transactions. This transparency is crucial for building trust and integrity in the real estate sector.
Advantages for Data Collection
Bank-based transactions facilitate the creation of a comprehensive real estate database, providing valuable data for market analysis and policy-making. This data can be used to monitor market trends, detect irregularities, and support informed decision-making by regulators and industry stakeholders.
Last Few Words
Decree No. 96/2024/ND-CP which reinforce the Law on Real Estate Business in Vietnam represents a significant step towards regulating real estate businesses in Vietnam. By setting clear transaction limits, requiring tax declarations, and mandating certification for brokers, the decree aims to curb speculation and enhance market transparency.
These measures collectively aim to foster a healthier and more transparent real estate market in Vietnam, benefiting both industry participants and the broader economy. By understanding and adhering to these regulations, individuals and businesses can contribute to a more stable and equitable real estate sector.
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