What is real estate business? Regulations on real estate business
10 min read
Real estate is a highly promising business sector that attracts the interest of many investors due to its appealing profitability. So, what does real estate business entail? It is understood as the investment of a certain amount of capital into a specific real estate project with the aim of generating profit. In addition to individual investors, many companies today also invest in real estate business to meet the growing societal demand.
Table of Contents
- 1. What is real estate business?
- 2. Principles of real estate business
- 3. What types of real estate are allowed for business?
- 4. Popular forms of real estate business today
- 5. Conditions of real estate put into business
- 6. Conditions for Organizations and Individuals to Conduct Real Estate Business
- 7. Real Estate Business Contracts as Regulated
- 8. Prohibited acts in real estate business
1. What is real estate business?
Pursuant to the provisions of Clause 1, Article 3 of the Law on Real Estate Business 2023:
“1. Real estate business refers to activities aimed at generating profit through the investment of capital to establish housing, construction works, or land use rights with existing technical infrastructure in real estate projects for the purposes of sale, transfer; leasing, subleasing, or leasing with an option to purchase housing and construction works; leasing or subleasing land use rights with existing technical infrastructure in real estate projects; transferring real estate projects; and providing real estate services.”
Thus, it can be generally understood that real estate business is an economic field that includes investment, buying and selling, leasing, brokerage, management and development of all types of real estate assets to profit purpose.
Real estate here includes: land; Housing and construction works attached to land; Other assets attached to land;… (as prescribed in Clause 1, Article 107 of the 2015 Civil Code).
2. Principles of real estate business
Business of all types of real estate must comply with the principles specified in Article 4 of the Law on Real Estate Business 2023 as follows:
- Real estate and real estate projects put into business must meet the conditions prescribed by the Law on Real Estate Business.
- All real estate business activities must be conducted openly and transparently; freely agree on the basis of respecting the legitimate rights and interests of both parties through the contract, without violating the prohibitions of the law.
- Individuals and organizations are allowed to do real estate business outside of protected areas according to the provisions of law on national defense and security.
3. What types of real estate are allowed for business?
Investing in real estate business attracts the attention of many individuals and organizations thanks to its high profit potential. However, not all types of real estate are allowed for business. So where does real estate business start effectively? First, let’s take a look at the types of real estate that are allowed to be put into business according to the law.
Pursuant to the provisions of Article 5 of the Law on Real Estate Business, types of real estate put into business include:
- Available housing and housing formed in the future.
- Existing construction works, construction works formed in the future, including works with functions serving medical, educational, cultural, commercial – service, tourism and accommodation purposes. , industrial and works with mixed service functions.
- The construction floor area of the project is as prescribed in Clause 2 of this Article.
- Land use rights with technical infrastructure in real estate projects.
- Real estate project.
Each type of real estate mentioned above will have certain differences in business conditions, business registration procedures, business licenses, etc.
4. Popular forms of real estate business today
The real estate market is increasingly diverse with many different types to meet the increasing needs of society. To choose an effective form of business investment, let’s first take a look at some popular forms of real estate business today:
4.1. Residential real estate business
Residential real estate is the most popular form of business in the real estate market today. This form of business includes activities of buying, selling, leasing, developing and managing various types of housing such as apartments, villas, townhouses, condominiums or urban area projects. The demand for residential real estate will depend on many factors such as: population growth rate, per capita income, housing policy,…
4.2. Commercial real estate business – services
Commercial real estate – services is a type of real estate used for commercial and service purposes. This includes commercial center buildings, office buildings, restaurants, hotels, educational systems, medical services, warehouse systems, etc. This form of real estate business requires has a professional management and operation apparatus, ensuring connectivity with other utilities and amenities in the same area.
4.3. Industrial and infrastructure real estate business
This form of real estate business is understood as investment projects to build industrial parks, export processing zones, high-tech zones, etc. for the purpose of research, production or storage of goods. Vietnam is currently attracting a lot of foreign investment (FDI), especially manufacturing enterprises, so the demand for this type of real estate is also on the rise.
4.4. Land real estate business
This is a form of buying, selling, and leasing all types of land, including: plot land, project land, agricultural land, industrial land, warehouse land, etc. This form of business has quite high profit potential. Because land prices tend to increase over time, especially in areas with beautiful locations and many amenities and facilities. However, to invest in real estate effectively, investors need to carefully research market and area information, including: location, planning, market price, legality, and related documents. ,…
5. Conditions of real estate put into business
To ensure transparency and efficiency in the real estate market, Vietnamese law has issued regulations on the conditions of real estate put into business. As follows:
5.1. Business Conditions for Existing Houses and Construction Works
Case 1: For existing residential houses
In accordance with the provisions of Article 1, Article 14 of the 2023 Real Estate Business Law, existing houses and construction works intended for business purposes must meet the following conditions:
– Possess one of the following documents:
- Certificate of ownership of residential houses and land use rights;
- Certificate of land use rights, ownership of residential houses, and other assets attached to the land;
- Other certificates of land use rights, ownership of assets attached to the land as prescribed by the law on land;
- Certificate of ownership of residential houses;
- Certificate of ownership of construction works (excluding residential houses, construction works, and the floor area of construction works within real estate projects specified in Articles 2 and 3 of this Article).
– Real estate intended for business purposes is not subject to disputes; in case of disputes, they must have been resolved by a valid judgment, ruling, or decision of the competent authority.
– Real estate is not mortgaged to ensure the enforcement of judgments.
– Real estate is not subject to cases prohibited by law.
– Real estate is not subject to cases currently suspended or temporarily suspended from transactions as prescribed by law.
Case 2: For Future Residential Houses
The conditions for future residential houses to be brought into business are clearly stated in Article 24 of the 2023 Real Estate Business Law. Specifically, as follows:
– Residential houses and construction works must have commenced construction in accordance with construction laws.
– Possess one of the following documents regarding land use rights
- Land allocation decision;
- Land lease decision and lease contract for land use rights as prescribed by land laws;
- Land use purpose change permission;
- Certificate of land use rights;
- Certificate of ownership of residential houses and land use rights;
- Certificate of land use rights, ownership of residential houses, and other assets attached to the land;
- Other certificates regarding land use rights, ownership of assets attached to the land as prescribed by land laws.
– Ensure the following documents:
- For cases requiring construction permits: Construction permit for residential houses, construction works, and the application dossier for construction permits;
- For cases not requiring construction permits: Commencement notice for the construction of residential houses, construction works, and construction design dossier for residential houses, construction works;
- Documents on the completion acceptance of technical infrastructure construction according to the project progress; for apartment buildings, mixed-use buildings with residential units, documents proving the completion acceptance of foundation construction according to legal regulations are mandatory.
– Before proceeding to sell or lease-purchase future residential houses, the investor must notify in writing the provincial real estate management authority about the eligibility of the houses for sale or lease-purchase.
5.2. Business Conditions for Various Types of Land
– Types of land brought into land use business must firstly possess a Land Use Right Certificate as prescribed by land laws.
– Landowners must not have any disputes regarding land use rights.
– Land use rights for business purposes must not be mortgaged to ensure judgment enforcement, while also ensuring the usage period during business operations.
6. Conditions for Organizations and Individuals to Conduct Real Estate Business
Currently, many investors wonder what is required to legally operate real estate businesses. Apart from capital sources, organizations, and individuals in real estate business must meet the conditions stipulated in Article 9 of the 2023 Real Estate Business Law as follows:
– Organizations and individuals conducting real estate business must establish enterprises according to enterprise laws or establish cooperatives, cooperative alliances according to cooperative laws, register real estate business sectors and occupations (referred to as real estate business enterprises), except for cases specified in Article 3 and Article 4 of this provision.
– Real estate business enterprises must meet the following conditions:
- Not being prohibited, temporarily suspended, or suspended from real estate business activities by judgments, decisions of courts, or competent state agencies;
- Ensuring the credit debt ratio, bond debt ratio over the owner’s equity;
- Real estate business enterprises undertaking real estate projects must have owner’s equity capital not lower than 20% of the total investment capital (for land use scale below 20 hectares), not lower than 15% of the total investment capital (for land use scale of 20 hectares or more) while ensuring the ability to mobilize capital to implement investment projects.
Conditions for organizations and individuals doing real estate business
– Individuals conducting small-scale real estate businesses are not required to establish enterprises but must declare and pay taxes as prescribed by law.
– Organizations and individuals selling residential houses, construction works, or the floor area of construction works not intended for business purposes or construction works below the small-scale threshold are not obligated to comply with the provisions of this Law. However, they must declare and pay taxes as prescribed by law.
– Organizations and individuals engaging in real estate service businesses must establish enterprises as prescribed by law…
7. Real Estate Business Contracts as Regulated
According to Article 3, Clause 8 of the 2023 Real Estate Business Law:
A real estate business contract is an agreement between individuals or organizations engaged in real estate business who meet the prescribed conditions with other individuals or organizations to carry out acts of buying, selling, leasing, lease-purchasing residential houses, construction works; transferring, leasing, subleasing the right to use land with technical infrastructure within real estate projects; transferring the entire or a part of real estate projects.
Depending on the real estate business activity, the content of the contract will vary. Specifically:
Content of contracts for buying, leasing, lease-purchasing residential houses, construction works:
– Names and addresses of the parties involved in the contract;
– Relevant information about the real estate;
– Sale price, rental price, lease-purchase price;
– Method and payment terms;
– Bank guarantee for the financial obligations of the investor in the case of selling future residential houses;
– Delivery time, receipt of real estate and accompanying documents;
– Warranty provisions;
– Rights and obligations of the parties;
– Provisions on contract violations;
– Penalties for contract violations;
– Termination, cancellation of the contract, and measures for handling;
– Dispute resolution methods;
– Effective date of the contract.
Contents of contract for transfer and lease of land use rights with technical infrastructure in real estate projects:
– Names and addresses of the parties to the contract;
– Information about land type, location, area, code number, boundaries and status of land plot and assets attached to land (if any);
– Term of land use;
– Price of transfer, lease, sublease of land use rights, including assets attached to land (if any);
– Payment method and term;
– Land handover deadline and accompanying documents;
– Terms on the rights and obligations of the parties;
– Third party rights to the land plot (if any);
– Clauses on breach of contract;
– Contract violations;
– Resolve the consequences when the contract expires (in case of leasing or subleasing land use rights);
– Cases of contract termination and cancellation and handling measures;
– Argument setllement;
– Effective date of the contract.
Content of real estate service business contract:
– Names and addresses of the parties;
– Service objects and content;
– Service requirements and results;
– Duration of service performance;
– Service fees, remunerations, service commissions;
– Payment method and term;
– Rights and obligations of the parties;
– Argument setllement;
– Effective date of the contract.
8. Prohibited acts in real estate business
Pursuant to the provisions of Article 8 of the Law on Real Estate Business 2023, prohibited acts in real estate business include:
– Real estate business does not meet the conditions prescribed by this Law.
– Forging papers and documents, intentionally falsifying information about real estate and real estate projects put into business.
– Do not disclose information about real estate or real estate projects put into business according to the provisions of law.
– There are acts of deception, fraud, or fraud in the real estate business.
– Collecting money from the sale, lease purchase of houses, construction projects, and construction floor areas in future constructions that do not comply with the provisions of this Law;
– Using money collected from buyers, lease-purchasers of houses, construction projects, and construction floor areas in future constructions contrary to the provisions of law.
– Failure to perform or incomplete implementation of financial obligations to the State.
– Issuing or using a real estate brokerage practice certificate not in accordance with the law.
– Collecting, managing, and using fees, charges, and other amounts related to real estate business contrary to the provisions of law.
Violations of regulations on real estate business can be administratively sanctioned with fines ranging from 100 million VND to 1 billion VND or even suspension of business operations (according to Article 58 of Decree 16/2022/ND -CP).
Real estate business is a potential field with many profitable investment opportunities. However, this field also has many potential risks if investors do not have enough knowledge and experience. Therefore, real estate investors need to equip themselves with important knowledge about the market as well as continuously update new legal regulations in this field. Hopefully the above article from Maison Office has helped you gain more useful knowledge to invest in real estate business effectively.
