What are cases where banks are eligible to do real estate trade in Vietnam as of July 1, 2024?

What are cases where banks are eligible to do real estate trade in Vietnam as of July 1, 2024? (Internet image) 

Regarding this matter, LawNet would like to answer as follows:

On January 18, 2024, the National Assembly passed the Law on Credit Institutions 2024, taking effect on July 1, 2024, except for Clause 3, Article 200 and Clause 15, Article 210 of the Law on Credit Institutions 2024, which takes effect on January 1, 2025.

1. What are cases where banks are eligible to do real estate trade in Vietnam as of July 1, 2024?

According to Article 139 of the Law on Credit Institutions 2024, a credit institution must not trade in real estate, except for the following cases:

(1) It purchases, invests in and owns real estate to be used as its business building and office or warehouse in direct service of its professional operations;

(2) It leases out part of its business building which is not yet used;

(3) It holds real estate as a result of debt treatment. Within 05 years from the date on which a decision to treat collateral that is real estate is issued, the credit institution shall sell, transfer or repurchase this real estate, In case of repurchase of real estate, the ratio of investments in fixed assets specified in Clause 3 Article 144 of of the Law on Credit Institutions 2024 and use purposes specified in (1) shall be maintained.

- Does not exceed 50% of its charter capital and additional reserve fund of charter capital as recorded in the accounting book with respect to a commercial bank, cooperative bank, non-bank credit institution and microfinance institution;

- Does not exceed 100% of its charter capital and additional reserve fund of charter capital as recorded in the accounting book with respect to a people’s credit fund;

- Does not exceed 50% of its provided capital and additional reserve fund of provided capital as recorded in the accounting book with respect to a foreign bank’s branch;

Thus, according to the above regulations, credit institutions are not allowed to do real estate trade except in the cases mentioned above.

2. Are banks allowed to transfer collateral that are real estate projects in Vietnam?

Article 200 of the Law on Credit Institutions 2024 stipulates the transfer of collateral in Vietnam as follows:

- The agency competent to register right to ownership or use of collateral shall follow procedures for transferring the right to ownership or use of collateral to purchaser or transferee of collateral of bad debt of a credit institution or foreign bank's branch.

- Except for court fees, taxes and charges directly incurred from the transfer of collateral of bad debts according to regulations in Article 199 of the Law on Credit Institutions 2024, the secured party or transferee is not required to cover tax or fee liabilities payable by the guarantor from the collateral transfer amount upon formalities of registration or changes of the right to ownership or use of collateral of the bad debts. Tax payment made by the guarantor or transferee related to the transfer of collateral of the bad debts shall comply with regulations of the tax law.

- Credit institutions, foreign bank branches, asset management companies affiliated to credit institutions, and Vietnam Asset Management Company (VAMC) established and operating in accordance with regulations of the Law on Real Estate Business 2023are entitled to transfer entire or partial real estate projects as collateral in order to collect debts according to regulations on transfer of entire or partial real estate projects of the Law on Real Estate Business 2023 and other relevant laws but are not required to meet the eligibility requirements to engage in real estate business to be satisfied by transferors of real estate business projects laid down in the Law on Real Estate Business 2023.

Thus, according to the above regulations, from January 1, 2025, banks have the right to transfer all or part of real estate projects as security assets to recover debt according to regulations on full transfer. or part of a real estate project according to the provisions of law.

Nguyen Ngoc Que Anh

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