Vietnam attracted $1.98 billion in foreign direct investment (FDI) in its property sector in the first five months of 2024, a 70% increase year-on-year, according to the Ministry of Planning and Investment. This makes it the second-highest recipient of FDI after manufacturing, which received $7.43 billion. Total FDI reached $11 billion with Singapore leading at $3.25 billion.
According to Vietnam's Ministry of Planning and Investment, $1.98 billion of foreign direct investment ("FDI") flowed into the nation's property sector in the first five months of 2024, an increase of 70% from the same period last year. The inflows were the second highest behind manufacturing which received $7.43 billion.
In total, $11 billion of FDI has been invested in Vietnam during the five-month period, up 2% year-on-year. 78 countries invested, led by Singapore which invested $3.25 billion, followed by Hong Kong, Japan, China, and South Korea. Together the five accounted for 74% of the FDI inflows.
Property professionals in Vietnam attribute the surge in investments to several factors. These include the effective control of inflation, a decline in interest rates coinciding with an expansion of credit, and optimism over continued public investments and infrastructure development.
It's also possible that the significant increase in FDI in the property sector is a result of investors adjusting to the aftermath of the $12.5 billion real estate corruption scandal involving Ms. Truong My Lan. The scandal, which was one of the largest financial fraud cases in Vietnam's history, came to a head with Ms. Lan's sentencing to death on April 11, 2024, for her role as the lead orchestrator. This event has likely led to a more transparent and regulated environment, which can be more attractive to foreign investors.
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Land Reforms in Vietnam
The uptick in investment can also be partially explained by recent land reforms aimed at addressing investor concerns about land procedures which have been problematic in terms of gaining entitlements and approvals from authorities for land compensation and land fees. Land compensation is typically paid to displaced land owners and figures based on the value of the land and any improvements. Land fees are levied by the government for use of land which is all controlled and owned by the state.
Here is a breakdown of several of the reforms directly impacting foreign real estate investors.
Redefinition of Foreign-Invested Companies
The new laws adopt the prevailing law on investment for their definitions of foreign-invested companies. This means that companies with 50% or less charter capital held by foreign investors can, under specific cases and circumstances, be entitled to the same rights, conditions, and procedures as wholly Vietnamese-owned companies.
Permission to Mortgage Land Use Rights and Assets
Foreign-invested enterprises (FIEs) that lease or sublease land in industrial parks can now mortgage land use rights and assets built on the land to credit institutions or banks, as well as other economic organizations and individuals in Vietnam.
Acquisition of Land Use Rights in Industrial Zones/Parks
FIEs with land use rights can now acquire land use rights in industrial zones/parks for the registration of real estate projects. This allows FIEs to transfer and receive real estate projects to other FIEs and local Vietnamese companies within industrial zones/parks.
Introduction of Commercial Arbitration for Land Disputes
The new Land Law introduces commercial arbitration for settling land-related disputes. This provides an alternative to court proceedings, which can be time-consuming and complex.
Access to Non-Bank Lenders
FIEs can now seek financing from non-bank lenders, including foreign creditors. This can provide them with more options to secure financing for their projects.
