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Vietnam’s real estate market opened in 2015 as restrictions were lifted on foreign ownership.
A decade or two back, you could barely find new highrise condominiums as few foreigners were living in the country and developers eyed opportunities elsewhere.
Regulations have become significantly more relaxed and you can invest in real estate if you’re allowed to enter the country. There’s no regulation on the number of condo units you can buy as well.
With that said, the buying process differs much from what many people are used to at home. In this article, I explain how it works when buying off-plan properties in Vietnam.
Topics covered:
- What is an off-plan property?
- Buying Process for Off-Plan Property in Vietnam
- Payment in Instalments
- Receiving a Delegation Letter
- The Differences of Buying From Vietnamese and International Developers
- Opening a Bank Account
What is an off-plan property?
Off-plan and pre-construction properties are properties or pieces of land that are not yet developed or with any structures.
By selling units as construction commence, the developer can secure funding and proceed to the next stage of the development.
Buyers, on the other hand, can purchase units at lower prices as the value will increase as the construction commence and the surrounding areas develop.
Novice investors can even make great profits by procuring and selling units before construction has started.
Of course, there might be risks of investing in off-plan properties as well. The market might drop, the final result be different from your expectations, or the developer might not be able to finalize the project.
In such scenarios, other developers can take on and finalize the project, if they are willing to.
Buying Process for Off-Plan Property in Vietnam
Below I’ve included the step-by-step process that foreign buyers adhere to 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 in helping foreigners. A good agent has experience in helping foreigners and works with several developers, acting as a liaison.
Besides, agents can help you find discounted deals and distressed units that are otherwise virtually impossible to find. At least without the right connections.
2. Initial announcement of new projects
This part of the process is referred to as the ‘rumor phase’. The developer will announce some basic information about the future project, including:
- The location
- The area
- The type of project (condominium or townhouse)
- The amount of units
- The price range
- Others
The information is normally only provided to real estate agents and it’s difficult to get hold of the information as an individual buyer and foreigner.
3. Paying the booking fee
At the initial announcement of new projects, the developer will start collecting refundable booking fees from potential buyers. This is typically done with help of the agent.
The booking fee is generally as follows:
- $2500 for average properties
- $5000 for high-end properties
- $10,000 for luxury properties
After you receive a booking number and you’ll be on the list of the ‘first buyers’. Persons on the list of ‘first buyers’ have priority when the first sales event is launched later on.
Can the developer refund 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, hence its name “refundable booking fee”.
At this stage, you don’t need a Vietnamese bank account yet. However, if you want a refund of the booking fee later, the fee can only be transferred to a Vietnamese bank account.
4. Attend the official sales event
At the end of the rumor phase, the developer will organize an official sales event.
Most often, the developer accepts attendees by invitation only – you need a booking number received at the booking phase to get an invitation letter to the sales event.
The developer normally shares more information about the project 1 to 2 weeks before the sales event. Examples include information about:
- Floor plan
- The type of units
- The designs
- Unit layouts
- Unit sizes (GFA, NFA)
Those who have booking numbers can choose units from a list during the event. At this time, the exact price and promotions are still not 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 area of Thu Thiem, Ho Chi Minh City, can be seen above. Many skyscrapers will pop up here in the coming years
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. Or, you can decide to choose units at this stage.
6. Sign the deposit agreement
2-3 weeks after the official sales event, you’ll sign a deposit agreement. The deposit agreement will change the refundable booking into a non-refundable deposit.
Once the deposit agreement is signed you can’t request any refund. Depending on the payment scheme, you need to pay 10% – 20% of the unit value at this stage.
7. Signing the Sales & Purchase Agreement (SPA)
Around 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, which differs between developers).
According to the Law on Real Estate Trading (2014) off-plan real estate projects can be put up for sales once the foundation of the building is completed, which normally takes 3 – 6 months.
Payment in Installments
Each project has its own payment scheme. Generally, you can expect the payment scheme to be 1% – 3% on a monthly basis.
According to the Law on Real Estate Trading (2014), 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 and wait for the completion of the building.
At the time of the handover, you’ll need to pay an additional amount equal to 25% – 45%.
The remaining 5% you pay once you received the certificate of ownership (also known as the pink book).
Before you can acquire the unit, you also need to pay a maintenance fee which is 2% of the purchase value and 1 year of management & operation charges.
Summary:
- Refundable Booking Fee: USD 2,500 to USD 5,000
- Deposit Agreement: 10% to 20% of property value
- Installments: 1% to 3% per month – up to 50% of property value
- Hand Over: Pay 45% (totally 95% paid at this stage)
- Hand over and issuing Certificate of Ownership: 5%
- Maintenance fee/sinking fund: 2%
The total is 102% due to the maintenance fee of 2%.
Receiving a Delegation Letter
Before sending any money, including 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 your money if the agent runs away.
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.
Buying From Vietnamese vs. International Developers
Vietnamese and international developers work differently in terms of processes buy also building standards.
While Vietnamese developers receive a big part of the money directly, international developers work with banks that keep the money until certain stages of the development are completed.
This is sometimes referred to as Bank Guarantee. In short, if international developers go bankrupt or can’t finalize a project, you’ll get your money back.
It can be more pricey to buy from international developers but also more secure.
If you decide to work with a Vietnamese developer, confirm their track record and check their portfolio of finalized projects.
Opening a Bank Account
You need to open a Vietnamese bank account at some point, either to receive the booking fee or to pay the remaining parts of the units. It’s comparatively simple to open a bank account and your agent should help you.
Documents Needed to Open Bank Accounts
You need your passport and an entry-stamp / 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 upfront. When you arrive in Vietnam, you just need to visit the bank and sign all the documents prepared. It takes a maximum of 30 minutes instead of a whole day.
Finding a Real Estate Agent
As you’ve probably understood by now, it’s crucial working with a reputable and trustworthy agent who understands the regulations and processes that apply to foreigners.
There’s much bureaucracy, administrative tasks, and documentation involved when investing in Vietnam.
Also, you may not stay in Vietnam on a permanent basis but visit the country occasionally to manage the steps involved.
