On November 27, 2023, during the 6th session of the 15th National Assembly, the amended Law of Housing was officially passed and will come into force as of January 1, 2025. Notably, there are many new provisions to deal with current societal issues in Vietnam and tighten the legal framework for state management of various types of housing. This article focuses on highlighting new points that have a significant impact on Vietnam’s housing market. Such content may change the citizen’s behaviors regarding buying, selling, investing, constructing, and other purposes.
1. Tightening regulations on the sale of dividing land lots
Under Clause 2, Article 41 of Decree 43/2014/NĐ-CP 4 detailing a number of articles of the land law, investors of projects on construction of houses for sale or for combined sale and lease may transfer land use rights in the form of sale of dividing land parcels for sale into the areas outside the inner districts of special urban centers; areas with strict requirements on landscape architecture, central areas, and around buildings that are prominent architectural points in urban centers; the frontages of regional- or higher-level roads and main landscape roads in urban centers.
However, according to Clause 5 Article 5 of the Law of Housing 2023, the areas where division of land parcels for sale are not permitted have been expanded to include ” developers of housing investment and construction projects shall develop houses for sale in respect of wards, districts, cities in special, class I, class II, and class III urban areas. In respect of other areas, provincial People’s Committees shall, depending on local conditions, determine areas where developers of housing investment and construction projects develop houses for sale, lease purchase, or lease or transfer land use rights in the form of land subdivision to allow buyers to build their own houses.”
Thus, compared to current regulations, the Law on Housing 2023 has expanded the areas where land parcel division for sale is not allowed. In particular, developers of housing investment and construction projects are not allowed to transfer Land use rights in the form of land parcel division for sale in respect of wards, districts, and cities in special, class I, class II, and class III urban areas. For other areas, provincial People’s Committees have the authority to determine areas for land parcel division for sale. First, this regulation is designed to align with the Law on Real Estate Business 2023’s provisions. Additionally, tightening regulations on land parcel division for sale may mitigate and stabilize the situation of rampant land splitting for conversion into residential land, breaking urban planning, land wastage, and the speculation of real estate in recent years.
2. New regulations on mini apartments
2.1. Definition of mini apartments
“Mini apartments” is a familiar term for the model of multi-storey apartments with multiple apartment units for sale, combined sale, and lease, or lease. Mini apartments have moderate sizes and affordable prices, making them suitable for individuals with medium to low incomes. Article 57 of the Law on Housing 2023 describes this type of housing as a “Private multi-storey, multi-unit houses for sale, lease purchase, and lease,” with the following structure:
– Houses of at least 2 storeys where each storey accommodates dwelling units designed, built for sale, lease purchase, or a combination of sale, lease purchase, lease; or
– Houses of at least 2 storeys and at least 20 dwelling units for lease.
2.2. Eligibility for individuals who have a demand to invest in mini-apartments
According to the provisions of Clause 1 of Article 57 of the Law on Housing 2023, individuals who want to construct mini apartments must satisfy the eligibility of developers of housing investment and construction projects. According to Article 35 of the Law on Housing 2023, developers of housing investment and construction projects include cooperative enterprises, joint cooperatives, and foreign-invested business organizations established and operating under Vietnamese laws, and satisfy requirements such as:
– Have equity under real estate trading laws for implementation of each housing investment and construction law; and
– Obtain land use rights for each type of housing investment and construction law under the Law on Housing 2023 or be assigned with land or leased land by Land Law; and
– Have sufficient capacity and experience in executing housing investment and construction projects as per legal regulations.
2.3. Eligibility for constructing mini apartments
Individuals have the right to use the land for constructing residential houses of at least 2 storeys and less than 20 dwelling units where each storey accommodates dwelling units designed and built for lease, shall comply with the following regulations:
– Satisfy construction requirements of private multi-storey multi-unit houses according to regulations of the Minister of the Ministry of Construction;
– Satisfy fire safety requirements under regulations on fire safety applicable to private multi-storey multi-units houses; and
– Satisfy conditions regarding roads for firefighting facilities prescribed by provincial People’s Committees in respect of private multi-storey and multi-unit houses.
Individuals who have the right to use residential land building houses of at least 2 storeys and at least 20 dwelling units where each storey accommodates dwelling units designed, built for sale, or lease purchase must satisfy eligibility similar to those of individuals who want to construct mini apartments.
2.4. Mini apartments are granted ownership rights
Based on Clause 2 of Article 57 of the Law on Housing 2023, apartments that satisfy the above conditions shall be issued with a certificate according to land laws. However, this matter has not yet been specifically guided.
In general, the Law on Housing 2023 supplements regulations on the conditions, and standards for building mini apartments. This will form the basis for tighter and more effective management of this type of housing, contributing to ensuring fire fighting and prevention, satisfying construction standards, facilitating operation and use of mini apartment types, as well as ensuring stability in safety and health for residents.
However, the eligibility that individuals must satisfy to participate in investing in this type of housing is conflicting with the Law on Housing 2023. In particular, to invest in the construction of mini apartments, individuals must meet conditions to become project developers of housing investment and construction projects according to this Law. Meanwhile, to become investors, those entities must be Cooperative enterprises, joint cooperatives engaged in real estate trading.
3. Unlimited ownership duration of apartment buildings
The Law on Housing 2023 does not set a limit on the duration of ownership but only the lifespan of apartment buildings. Specifically, Article 58 of this Law stipulates that the lifespan of apartment buildings shall be determined by design dossiers and the actual useful life of apartment buildings according to the conclusion of competent authority. Suppose the lifespan of apartment buildings according to design dossiers expires or the apartment buildings in question are damaged, prone to collapse, or do not guarantee safety for owners and users of apartment buildings before the expiry of lifespan. In that case, provincial People’s Committees shall coordinate the inspection and quality assessment of apartment buildings according to the regulations.
This regulation is reasonable because the ownership rights of each entity to their property need to be protected by law and can only be terminated at the will of the owner. Moreover, setting a time limit for apartment ownership may affect the mentality of buyers, leading to behavioral changes, and not choosing to buy the apartment.
4. New preferential policies for social housing
(a) Adding entities allowed to buy social housing: Pursuant to Article 76 of the Law of Housing 2023, two new entities are allowed to buy social housing including (i) Students, learners in universities, academies, higher education institutions, colleges, vocational education and training facilities, specialized education institutions as per the law; students of public ethnic boarding schools; and (ii) Enterprises, cooperatives, and joint cooperatives in industrial parks.
Moreover, according to the Law on Housing 2023, within 5 years, the buyer, lease-purchaser can only resell the social housing to developers of social housing investment and construction projects or entities eligible for purchase of social housing at a maximum price equal to the sale price of the social housing under sale contracts signed with developers of social housing investment and construction projects.
(b) Adding incentives for developers of housing investment and construction projects
– Exempted from land rent, the land levy for the land area of the projects; are not required to determine land value, calculate land rent, land levy from which they have been exempt; are not required to apply for exemption from land rent and land levy, except for other cases as specified by law (Point a Clause 2, Article 85);
– Eligible for maximum profit of 10% of total investment regarding the area on which social housing is built (Point c, Clause 2, Article 85);
– Allowed to reserve up to 20% of total residential land area for construction of commercial services, commercial housing property structures, separately record expenditure and revenues, must not include costs for investment and construction of service and mercantile structures in social housing price, and may benefit from all revenues generated by the service and mercantile structures, must pay the entire land use fee for the commercial construction area (Point d, Clause 2, Article 85).
Expanding the entities eligible for assistance policies regarding social policies and adding incentives for investors participating in social housing construction projects promote the development of this type of housing at present. This is the orientation of the State in developing society which is suitable for the current economic and social situation of Vietnam, supporting medium and low-income groups to attract skilled labour among localities, stabilizing production, and improving people’s lives.
The above are some of the highlight new points of the Law of Housing 2023 that TNTP wants to convey to readers.
Best regards,
