Key Changes in the Law on Real Estate Business 2023

The Law on Real Estate Business 2023, effective from August 1, 2024, introduces significant changes that reshape the operations of Vietnam’s real estate market. Aimed at enhancing transparency, protecting the rights and interests of the parties, and promoting sustainable development, the Law on Real Estate Business 2023 includes several critical amendments compared to the Law on Real Estate Business 2014. Below are the key amendments of the Law on Real Estate Business 2023: 

Deposit not exceeding 5% of the selling price for off-plan real estate 

Clause 5, Article 23 of the Law on Real Estate Business 2023 stipulates that real estate project developers may only collect a deposit not exceeding 5% of the selling or lease-purchase price of off-plan real estate, provided the real estate meets the conditions for business operations. The deposit agreement must clearly state the selling price or lease-purchase price of the property, along with other required details as prescribed by law. 

This is a new provision compared to the Law on Real Estate Business 2014, which did not set a maximum limit for the deposit amount. This could impact the development costs of real estate enterprises, potentially leading to higher selling prices. However, it is expected to improve market transparency, filter out non-compliant entities, and better protect customer rights. 

Reduction in prepayments for lease-purchase of off-plan real estate 

Next, Clause 2, Article 25 of the Law on Real Estate Business 2023 governs the payment regime for lease-purchase transactions involving off-plan real estate. Payments may be made in multiple installments, but the total prepayment to the lease-purchase provider must not exceed 50% of the lease-purchase contract value. 

Compared to the Law on Real Estate Business 2014, this ratio has been reduced from a maximum of 70% to 50%. This provision aims to protect customer rights and minimize financial risks for customers engaging in lease-purchase transactions for off-plan real estate. 

The right of customers to waive bank guarantees for the sale or lease-purchase of off-plan housing 

Article 26 of the Law on Real Estate Business 2023 allows customers to waive bank guarantees, whereby a bank guarantees the financial obligations of the project developer to the buyer or lessee in case the developer fails to deliver the housing as committed. If a customer agrees to waive the bank guarantee, such an agreement must be documented in writing at the time of signing the contract with the developer. 

This provision marks a departure from the Law on Real Estate Business 2014, which mandated bank guarantees in all cases. However, this new provision may expose customers to financial risks if they choose to waive the guarantee. 

Requirement for project developers, real estate enterprises, and service businesses to receive payments via bank accounts 

Clause 2, Article 48 of the Law on Real Estate Business 2023 stipulates that project developers, real estate businesses, and real estate service providers are required to receive payments via bank accounts opened at domestic credit institutions or legally operating foreign bank branches in Vietnam. 

For individuals engaged in small-scale real estate business, or for organizations and individuals selling real estate not for business purposes or falling below the small-scale threshold, payments via bank accounts are not mandatory. 

This is a new requirement compared to the Law on Real Estate Business 2014, which only stipulated that payments in real estate transactions be agreed upon by the parties in the contract and comply with the payment regulations. This provision aims to enhance financial transparency and facilitate state authorities’ oversight of cash flows in real estate transactions. 

Real Estate Brokerage 

• Supplementing the conditions for real estate brokerage services businesses 

Clause 1, Article 61 of the Law on Real Estate Business 2023 stipulates that organizations and individuals engaged in real estate brokerage services must establish a real estate brokerage business and meet the following conditions: (a) Have regulations governing real estate brokerage service operations; (b) Possess facilities and technical infrastructure that meet operational requirements; (c) Have at least one individual holding a real estate brokerage certificate; and (d) The enterprise's information must be published by the provincial real estate business authority where the enterprise is established on the housing and real estate market information system. 

Compared to the Law on Real Estate Business 2014, the Law on Real Estate Business 2023 introduces three new conditions for organizations and individuals engaged in real estate brokerage services and reduces the minimum number of individuals holding real estate brokerage certificates from two to one. 

• Prohibition on independent real estate brokerage 

Clause 2, Article 61 of the Law on Real Estate Business 2023 stipulates that individuals practicing real estate brokerage must meet the following conditions: (a) Hold a real estate brokerage certificate; and (b) Practice within a real estate trading floor service enterprise or a real estate brokerage service enterprise. 

Thus, effective from the implementation of the Law on Real Estate Business 2023, individuals must practice within a real estate brokerage service enterprise and are no longer allowed to engage in independent real estate brokerage, as previously allowed under Clause 2, Article 62 of the Law on Real Estate Business 2014. 

Mandatory full disclosure of real estate information for business 

Article 6 of the Law on Real Estate Business 2023 requires real estate businesses, before and after putting real estate or real estate projects into business, to fully and truthfully disclose information about the real estate project, existing real estate, off-plan real estate, and land use rights with developed infrastructure within the real estate project. This information must be published on the housing and real estate market information system and the real estate business enterprise’s website. In case of any changes to the disclosed information, the real estate business must update the information within five working days from the date of the change. 

Financial requirements for real estate businesses 

Point (c), Clause 2, Article 9 of the Law on Real Estate Business 2023 stipulates that real estate businesses implementing real estate investment projects must have equity capital of at least 20% of the total investment capital for projects with land use scales below 20 hectares, and at least 15% for projects with land use scales of 20 hectares or more. They must also ensure the capacity to raise capital to carry out the investment project. 

Previously, the Law on Real Estate Business 2014 did not include such financial requirements. This new provision aims to ensure the financial capacity of real estate businesses, reducing the risk of bankruptcy or insolvency. 

Conclusion 

The Law on Real Estate Business 2023, with its significant amendments, lays a solid foundation for a more transparent and professional real estate market in Vietnam. From tightening capital mobilization conditions and protecting homebuyers to simplifying transaction procedures, these new regulations not only enhance trust but also create opportunities for sustainable development in Vietnam’s real estate market. However, these stricter financial controls are expected to lead to an increase in real estate prices due to higher input costs for real estate development enterprises.