Capital mobilization for construction of housing projects

On 23 June 2010, the Government issued Decree No. 71/2010/ND-CP ("Decree 71") on detailing and guiding the implementation of Law on Residential Houses. Decree No. 71 takes effect on 8 August 2010 and replaces Decree No. 90/2006/ND-CP.

Decree 71 stipulates in detail forms of capital mobilization such as (i) signing loan agreements with credit organizations, investment funds or issuing bonds; lenders or bond holders shall not have the priority right to purchase or register to purchase residential houses; (ii) signing contracts, documents of capital contribution or investment cooperation with organizations, individuals; (iii) signing business cooperation contracts with real estate enterprises; (iv) mobilizing capital via advance payment in respect of future house purchase contracts from those who are entitled to own houses in Vietnam. In addition, a project owner of level I may sign capital contribution agreements or business cooperation contracts with a project owner of level II for the purpose of transferring land plus technical infrastructure to the project owner of level II.

In these circumstances (ii) and (iii) above, the investors may receive profits only in cash or shares or receive houses as agreed with the project owners. In-kind distribution shall apply to only investors who are eligible to own houses in Vietnam and not more than 20 per cent total houses in each project. The in-kind distribution is not required to go through real estate trading floors but the project owner must inform to and get certified by the Department of Construction on the quantity, address and category of divided houses as well as list of the beneficiary investors.

Decree 71 also provides for conditions regarding each kind of capital mobilization to protect the investors. For instance, the project owner can mobilize capital from organizations, individuals above only after the project approved, ground breaking commenced and notice sent to the Department of Construction in respect of such capital mobilization.