According to the Law on Housing, which took effect from 2014 foreign individuals are eligible for ownership if they are allowed to enter Vietnam. You only need a tourist visa to buy, it’s simple as that.
As you can see, Vietnam’s property market opened up very recently. This in combination with the country’s rapid economic growth makes Vietnam one of the top spots for foreign investors. You can buy, rent, receive or inherit ‘commercial’ housing, including condos and detached houses in projects of housing construction.
However, before you buy, it’s important that you study the buying process and payment schemes well in advance, as these might differ quite much compared to home. Therefore, I’ve written this guide where I explain the following:
- Process when buying off-plan
- Information about payment instalments
- Other useful information
Process when buying off-plan property in Vietnam
Below I’ve included a step-by-step guide when booking and paying for an off-plan property in Vietnam.
1. Get in touch with a real estate agent
First of all, you should find a reputable agent that has experience of helping foreigners. The agents have contact with a number of developers and can act as a liaison between the two of you.
You can get in touch with an experienced agent by simply filling in the contact form on this page (see the bottom of this article).
2. Initial announcement of new projects (‘rumor phase’)
For new projects (condos, townhouses and more), there’s a so-called ‘rumor phase’. In this phase, the developer will announce some basic information about the future project, such as:
- The location
- The area
- The type of project (condominium or townhouse)
- The amount of units
- The price range
As mentioned, this information is normally provided to agents and it’s not that easy to get hold of the information as an individual buyer.
3. Pay the booking fee
At the initial announcement of new projects (see above), the developer will also start collecting refundable booking fees from potential buyers. This is normally done together with the agent.
How high is the booking fee?
The booking fee is normally:
- $2500 for mid-end properties
- $5000 for high-end properties
- $10,000 for luxury properties
After you paid the booking fee, you’ll receive a booking number, which means that you’ll be in the list of ‘First buyers’, and have priority when the first sales event is launched within a near future.
Can I get a refund of the booking fee?
You can cancel the booking and get back your money at any time, for any reason, or for no reason at all (and that’s why it’s called a refundable booking).
Do I need a Vietnamese bank account at this stage?
At this stage, you don’t need a Vietnamese bank account. But keep in mind that in case you want a refund of the booking fee later, the fee can only be transferred to a Vietnamese bank account. Hence, sooner or later you’d better open one.
4. Attend the official sales event
At the end of the rumor phase, the developer will organize an official sales event. Most often, this sales event accepts people by invitation only: if you have a booking number you’ll get an invitation to attend the sales event.
The developer normally shares official information about the project to the public 1-2 weeks before the sales event, including: Floor plan, the types of units, the design, unit layouts, area (GFA, NFA). Those who have booking numbers can choose units from the list during the event.
Note that at this time, the exact price, and the promotions, are still not yet announced.
Do I need to attend the sales event in person?
In case you’re not capable of attending the event in person, the agent can attend on your behalf and provide information about the project.
5. Option to get a refund
The exact price and promotions will be officially announced at the sales event. After reviewing the price and all other conditions at the sales event, you have the right to get a refund (if you are not satisfied), or you can decide to choose units at this stage.
Differences when buying from Vietnamese and international developers
The way of working is a bit different between Vietnamese and international developers. In Vietnam, the developers receive a big part the money directly, while international developers work with banks, who keep the money until certain stages of the development are completed.
This is sometimes referred to as bank guarantee, which means that if an international developer defaults or can’t finalize a project, you’ll be able to receive your money back. Working with an international developer can be more pricey, but also more secure.
If you decide to work with a Vietnamese developer, be sure that they have finalized a number of projects in the past.
6. Sign the deposit agreement
At a later stage, you’ll sign a deposit agreement, which basically changes the refundable booking into a non-refundable deposit. This is done around 2-3 weeks after the official sales event, you can see that we’re working within short milestones here.
From this moment, you can’t request any refund. Depending on the payment scheme, when signing the deposit agreement, you need to pay 10-20% of the unit value at this stage.
7. Signing the Sales & Purchase Agreement (SPA)
About 3-6 months after signing the deposit agreement, you can sign the sales and purchase agreement (SPA) and pay another 10-20% (depending on the payment scheme).
According to the Law on Real Estate Trading, which had effect from 2014, off-plan real estate projects can be put up for sales on the market once the foundation of the building is completed, which normally takes 3-6 months.
Each project has its own payment scheme. However, you can expect the most typical payment scheme to be 1-2% on a monthly basis.
According to the Law on Real Estate Trading, the total installments should not exceed 70% of the unit value, before the unit handover. For projects dedicated to foreign investors, the number is set to 50%.
Hence, you pay by installments and up to 50-70% of the purchase price, then you simply wait for the completion of the building. At the time of the handover, you’ll need to pay a remaining 25-45%. The last 5% you pay once you received the certificate of ownership (also known as the pink book).
The process may vary from projects to projects. But the above described process is the most common form.
What should I consider before buying?
Let’s have a look at some important items you need to pay attention to before and during the buying process.
First of all, and one of the most important things: You will not work directly with the developer, but through an agent, most likely. Below are some important steps you should know about beforehand.
Receive a Delegation Letter from your agent
Before sending any money, even the refundable booking, it’s important that your agent provides the official Delegation letter, assigning the agency/broker to receive the booking.
If there’s no Delegation letter, you may end up losing all your money (if the agent run away)
Secondly, as mentioned above, if you choose to get a refund, the developer or the agent will only refund the money to a Vietnamese bank account, as it’s not easy to transfer money out of Vietnam.
Opening a bank account in Vietnam
At this point, you’ve probably noticed that you need to open a Vietnamese bank account at some point, luckily, it’s a fairly simple process and needed for any transactions you will make in the future. The agent should be able to help you setting up a bank account.
What documents do I need to bring?
You’ll need your passport and a Vietnam visa. Also, you’ll need to be present at the bank. However, some agents simplify the process for their customers, as you can simply send a copy of your passport and the visa by WhatsApp/Viber/Email.
The agent then asks the bank to prepare everything up front. When you arrive in Vietnam, you just need to visit the bank and sign all the documents prepared. It takes maximum 30 minutes, instead of the whole day.
Choosing an experienced agent
Lastly, choose a good agent who understands the laws and regulations, procedures, processes that apply to foreigners. Most importantly, he or she should be a person with a long-term plan in this profession.
There’s a lot of administrative tasks and documentation involved when investing in Vietnam.
Also, you may not stay in Vietnam on a permanent basis, but visit the country on an occasional basis, to manage the steps involved. It’s therefore important that you find a reliable and serious agent, who can act on your behalf, while you’re not in Vietnam.
(Asia Property HQ)