Buying an Apartment in Vietnam? New 5% Deposit Cap

What has changed in Vietnam real estate law from August 2024?

From August 2024, the new Law on Real Estate Business 2023 (LREB 2023) tightens rules on off-plan sales, limits deposits to 5%, requires bank guarantees, and expands what counts as tradable real estate, including floor areas in buildings. The law focuses on protecting buyers from ghost projects and making developers more transparent and accountable.

• Key statute: Law on Real Estate Business 2023, effective August 2024 (replacing the 2014 law).
• Core objectives:
  • Protect individual buyers from unfinished or illegal projects.
  • Clean up pre-sale practices (no more disguised capital contributions instead of proper SPAs).
  • Clarify what assets you can trade: land use rights, houses, apartments, and now floor areas.
• Main consumer-facing changes:
  • Maximum 5% deposit before SPA for off-plan homes.
  • Stricter conditions before a project can be sold (land, construction and information disclosure requirements).
  • Mandatory bank guarantee for developers selling off-plan.
  • Clearer templates and minimum content for contracts.
• Key authorities involved:
  • Ministry of Construction (MoC) - issues guiding decrees and circulars.
  • Provincial People's Committees - approve projects and land allocation.
  • Department of Construction (DoC) - issues eligibility notices for sales and supervises real estate business.
  • Department of Natural Resources and Environment (DoNRE) and Land Registration Offices - handle land and ownership certificates.

Why can developers in Vietnam now collect only 5 percent before signing the SPA?

Developers can now legally collect a maximum of 5% of the selling price as a deposit or reservation fee before you sign the Sale & Purchase Agreement (SPA) for an off-plan property. The law prohibits any structure that results in you paying more than 5% before the SPA, even if parties call it "capital contribution" or "cooperation".

Legal basis and purpose of the 5% rule

• Legal basis:
  • LREB 2023 provisions on off-plan real estate business limit pre-SPA money collection to 5% of the agreed selling price.
  • Guiding decrees (issued by the Government and MoC) will set out detailed enforcement and penalties.
• What counts towards the 5%?
  • Any amount you pay before signing the SPA:
    • "Reservation" or "booking" fees
    • "Deposit" under a separate deposit agreement
    • "Capital contribution" or "investment cooperation" cash
    • Any "internal policy" early payment for priority selection
  • If total pre-SPA payments exceed 5%, the excess violates the law.
• Why the cap is 5%, not 20-30% anymore:
  • Previously, developers often collected 20-30% (or more) via creative structures before they had full approvals or even land cleared.
  • Many buyers lost money in ghost projects when developers disappeared or projects never got construction permits.
  • By limiting pre-SPA cash to a small amount, the law reduces your exposure before the project reaches key legal milestones.

Comparison: old practice vs new legal rule

What if a developer still asks for more than 5%?

• Recognize the red flags:
  • Any document that requires you to pay more than 5% before SPA signing.
  • Developers saying "this is not a real estate sale, it is an investment cooperation" while you are clearly buying a home or unit.
• Your options:
  • Refuse to pay more than 5% before SPA; ask the developer to show the legal basis for their request.
  • Report the case to the provincial Department of Construction and local People's Committee.
  • Consult a lawyer if you already paid; you may claim contract invalidity and demand a refund.
• Possible sanctions on developer:
  • Administrative fines (often in the tens or hundreds of millions of VND under sanctioning decrees).
  • Suspension of project sales or request to return unlawfully collected money.
  • In serious fraud cases, criminal investigation for appropriation of property.

How does the 5 percent deposit rule work in practice for buyers?

In practice, you may pay up to 5% as a deposit to reserve a unit, then you pay larger amounts only after you sign a proper SPA for an eligible project. Your payment schedule must follow legal limits on maximum percentages at different construction stages.

Typical lawful payment flow for an off-plan apartment

1. Reservation / deposit (up to 5%)
   • You sign a short deposit agreement to reserve a specific unit.
   • You pay no more than 5% of the selling price.
   • The agreement should state what happens if either side cancels and how the deposit is applied to the price.
2. Project reaches "eligible for sale" status
   • The developer completes required land procedures and obtains:
     • Land allocation or land lease decision and land use rights certificate (or eligibility).
     • Construction permit (if required).
     • Foundations or required construction stage, as specified in LREB 2023 and related decrees.
   • The provincial Department of Construction issues or posts an eligibility notice for off-plan sale.
3. Signing the SPA
   • Once the project is officially eligible for sale, you and the developer sign the SPA.
   • The 5% deposit is usually counted as part of the first installment.
   • The SPA must include mandatory clauses: timeline, quality, penalty, handover, warranty, dispute resolution, etc.
4. Post-SPA installments
   • After the SPA, you can pay larger installments, subject to maximum cumulative payment thresholds set by LREB 2023 and guiding decrees.
   • Common schedules (illustrative only):
     • First installment at SPA signing (including deposit) up to a certain percentage.
     • Next payments linked to construction milestones: topping-out, finishing, pre-handover.
     • A final payment upon receiving the ownership certificate (pink book).

Practical tips when handling the 5% deposit

• Check the contract title and content:
  • The agreement should clearly say "deposit" or "reservation" for a future SPA for a specific unit in a named project.
  • Avoid vague "cooperation" contracts that do not clearly state your right to receive a specific home.
• Payment method:
  • Pay by bank transfer to the developer's official account, not to personal accounts of sales agents.
  • Reference the unit code and contract number in the transfer description.
• Get proper documentation:
  • Obtain a signed and stamped receipt from the developer.
  • Keep copies of your deposit agreement, receipts, and any email or text communication.
• If the SPA is not signed:
  • Check your deposit agreement for deadlines for SPA signing and refunds.
  • If the developer cannot meet conditions for sale, you should request a full refund and possibly penalty if agreed.

What is a bank guarantee and why is it now mandatory for off-plan sales?

A bank guarantee for off-plan sales is a written commitment by a licensed Vietnamese bank that it will refund buyers if the developer fails to hand over the property as promised. From August 2024, developers must obtain such a guarantee before they sell or sign SPAs for off-plan homes.

How the bank guarantee protects you

• Who guarantees:
  • A commercial bank operating legally in Vietnam.
  • The bank issues a guarantee in favor of homebuyers for that specific project.
• What is guaranteed:
  • The developer's financial obligations under the SPA if it:
    • Fails to complete and hand over the property on time, or
    • Cannot return your payments after contract termination due to its fault.
• How you use it:
  • If the developer defaults, you can claim payment from the guarantor bank under the terms of the guarantee.
  • The bank pays you up to the guaranteed amount, then recovers the money from the developer.

What the new law requires from developers

• Timing:
  • The developer must have a valid bank guarantee in place before selling off-plan homes and signing SPAs.
  • The guarantee should cover the entire selling period or be renewed in time.
• Disclosure to buyers:
  • Developers must provide:
    • Name of the bank.
    • Guarantee number and issue date.
    • Scope and term of the guarantee.
  • You should receive a copy or at least be able to verify its existence and terms.
• Scope of projects:
  • Applies to off-plan residential projects and other off-plan units sold to individual buyers.
  • Details may differ for very large commercial deals between companies, depending on guiding regulations.

How to check if the bank guarantee is real and useful

• Ask for documentation:
  • Request a certified copy or at least a written confirmation from the developer of the project guarantee.
  • Check that the project name, address, and developer name match your SPA.
• Verify with the bank:
  • Contact the branch or hotline of the named bank and ask them to confirm:
    • That a project guarantee exists.
    • Its validity period.
    • Whether it covers buyers individually, and how claims are made.
• Review key terms:
  • Events that trigger a payout (e.g. failure to hand over, project cancellation).
  • Maximum guaranteed amount per unit or overall.
  • Any procedures (documents, notice periods) you must follow to claim.

Who pays for the guarantee and what are the risks?

• Who pays:
  • The developer pays guarantee fees to the bank as part of its project financing costs.
  • These costs are usually priced into the selling price, but you should not be charged a separate line item for "guarantee fee".
• Main limitations:
  • You still need to comply with SPA terms and claim processes.
  • If the guarantee is too narrow or expires too early, your protection weakens.
• Practical tip: For large purchases, have a lawyer review both the SPA and guarantee terms together so they align.

What are "floor areas" as legal assets and how can you invest in them?

"Floor areas" are now recognized as independent real estate assets, meaning you can legally buy, sell, lease, or mortgage an entire office or retail floor in a building, not only separate units. This opens up new investment options in commercial real estate, subject to project approvals and building management rules.

What counts as a "floor area" under the new law

• Definition in practice:
  • A complete floor in a building (for example, level 5 of an office tower or level 2 of a shopping center).
  • It can include:
    • Office space
    • Retail / shophouse space
    • Other commercial service areas as approved in the construction design
• Legal treatment:
  • LREB 2023 lists floor areas as one of the real estate objects that can be traded.
  • The ownership and rights to use and manage that floor are registered in land and building records.

Conditions to buy or sell a floor area

• Project approvals:
  • The building must have:
    • Approved construction design showing the commercial floors.
    • Construction permit (if required) and completion acceptance for the relevant part.
    • Land use rights suitable for commercial use.
• Ownership registration:
  • The floor area must be clearly identified with:
    • Location (which floor, which part of that floor).
    • Net and gross floor area.
  • Ownership is recorded in the land/house ownership certificate issued by the Land Registration Office.
• Management and common areas:
  • The building management regulations must state:
    • Use of common systems (lifts, lobbies, fire escapes).
    • Allocation of maintenance fees and service charges.

Who typically invests in floor areas and what to watch out for

• Typical investors:
  • Companies needing a whole floor for their headquarters.
  • Investors leasing out floors as serviced offices or co-working spaces.
  • Retail investors acquiring shopping mall floors for rental income.
• Key due diligence points:
  • Demand and rental yields in that location.
  • Building quality, fire safety, and car parking capacity.
  • Clarity of ownership boundaries and common area shares.
• Legal checks:
  • Confirm that the floor can be privately owned under the approved master plan.
  • Review the management regulations and service fee structure.
  • For off-plan floors, apply the same safeguards as for off-plan apartments: 5% deposit rule, bank guarantee, eligibility for sale.

How can homebuyers protect themselves from "ghost projects" under the new law?

You protect yourself from ghost projects by refusing to pay more than 5% before the SPA, insisting on proof of eligibility for sale, checking the bank guarantee, and verifying all key project approvals. The new law gives you more tools, but you still need to actively check documents and walk away from non-compliant offers.

Step-by-step due diligence checklist

1. Check the developer
   • Search the developer's name on:
     • Provincial Department of Construction website.
     • News sites for information on past projects and disputes.
   • Ask for a list of completed projects and visit at least one in person.
2. Verify project legal documents
   • Ask to see at least:
     • Land allocation / lease decision or land use rights certificate.
     • Approved 1/500 detailed planning (or equivalent).
     • Construction permit (if required).
     • Environmental impact assessment approval for large projects.
   • For off-plan, request the Department of Construction's written notice or online listing that the project is eligible for sale.
3. Confirm 5% rule compliance
   • Before signing anything, ask:
     • "How much in total will I pay before the SPA?"
     • "Please show me the payment schedule with percentages and timing."
   • If total pre-SPA payments exceed 5%, do not sign and consider reporting the case.
4. Check the bank guarantee
   • Ask the sales team for:
     • Name of the guarantor bank.
     • Guarantee reference number.
     • A copy of the guarantee or official confirmation.
   • Verify with the bank if needed, especially for high-value purchases.
5. Review the SPA terms
   • Key clauses to check:
     • Handover date and penalties for late handover.
     • Conditions for termination and refund of payments.
     • Warranty and maintenance responsibilities.
     • Dispute resolution method (court or arbitration) and location.
   • Have a lawyer review if anything is unclear or very one-sided.

Warning signs of a potential ghost project

• Site has no visible construction or workers despite heavy marketing.
• Sales staff push you to pay large amounts quickly and downplay legal questions.
• Contracts use vague "cooperation" language instead of clear sale terms.
• Developer avoids showing you original or certified copies of key approvals.
• Project or developer name appears in negative media reports or official warnings.

What are the key costs and taxes when buying real estate in Vietnam?

When you buy real estate in Vietnam, you face the purchase price, taxes (usually paid by the seller in practice), registration fees, notary fees, and for apartments a 2% maintenance fund. Many of these are calculated as a percentage of the property value and paid in Vietnamese dong.

Typical costs for a standard apartment or house purchase

Payment currency and method

• Currency: All payments inside Vietnam must be in Vietnamese dong (VND); paying in foreign currency in Vietnam is heavily restricted.
• Bank transfers: Use bank transfer for larger payments to have clear proof of payment and to satisfy anti-money laundering requirements.
• Installments: Off-plan purchases follow the SPA schedule; completed properties often require larger upfront payments at signing and handover.

Additional costs for foreign buyers or corporate investors

• Foreign individuals:
  • Can buy and own certain apartments and houses within foreign ownership quotas and project conditions under the Law on Housing.
  • May pay fees for translation, consular legalization of documents, and representation if not in Vietnam.
• Companies:
  • May incur additional legal and tax advisory costs.
  • Should consider VAT input credit, corporate income tax, and transfer pricing if the property is held as an investment.

Which authorities regulate real estate projects and transactions in Vietnam?

Vietnam regulates real estate through the Ministry of Construction, provincial People's Committees, Departments of Construction and Natural Resources and Environment, and the State Bank for banking aspects. These bodies approve projects, supervise developers, and register ownership.

Main regulators and their roles

• Ministry of Construction (MoC)
  • Drafts and guides implementation of the Law on Real Estate Business and Law on Housing.
  • Issues technical regulations and standard contract templates.
• Provincial People's Committees (PPCs)
  • Approve key project decisions and land allocation or land lease to developers.
  • Issue investment policy decisions for large-scale projects.
• Department of Construction (DoC)
  • Reviews project compliance with construction and housing laws.
  • Issues public notices that particular projects or blocks are eligible for off-plan sale.
  • Inspects and sanctions illegal real estate business activities in the province/city.
• Department of Natural Resources and Environment (DoNRE) & Land Registration Office
  • Handle land allocation, land use rights certificates, and registration of house/apartment ownership.
  • Process changes of ownership after secondary sales.
• State Bank of Vietnam (SBV)
  • Supervises the banking system, including banks that issue guarantees for real estate projects.
  • Issues prudential rules on real estate lending and guarantees.
• Courts and arbitration centers
  • Resolve contract disputes between buyers and developers.
  • Can order developers to refund payments or pay damages for breach.

When should you hire a real estate lawyer or professional advisor in Vietnam?

You should hire a real estate lawyer or advisor when buying off-plan property, investing large sums, facing complex documents, or if the developer's practices feel aggressive or unclear. A short legal review before you pay can prevent years of dispute and loss.

Situations where professional help is highly recommended

• Buying off-plan (apartments, villas, floor areas)
  • To confirm the project is legally eligible for sale.
  • To check that payment schedules respect the 5% deposit cap and other limits.
  • To verify the existence and strength of the bank guarantee.
• Foreign buyer or overseas Vietnamese
  • To confirm you qualify to own that particular property under foreign ownership rules.
  • To ensure your SPA and documents are bilingual and accurately translated.
  • To represent you at notary or in dealings with authorities if you are not in Vietnam.
• Corporate or high-value commercial investment
  • To structure the deal (asset vs share purchase, use of SPVs).
  • To understand tax, accounting, and regulatory consequences.
  • To negotiate management, service, and fit-out terms in office or retail deals.
• Disputes and delays
  • If the project is delayed, or the developer demands extra payments.
  • If you want to exit the contract and recover as much as possible.
  • If the developer threatens to forfeit your deposit or installments.

What a good lawyer or advisor will typically do for you

• Review and explain the SPA, deposit agreement, and any annexes in clear terms.
• Check project approvals and eligibility with public records and, if needed, informal regulatory checks.
• Confirm compliance with LREB 2023, the 5% rule, and housing and land laws.
• Propose changes to key clauses on payment, penalties, handover, and dispute resolution.
• Support you in negotiations and handle notary and registration formalities where agreed.

What are the practical next steps before you sign or pay anything?

Before you sign or pay, you should verify the project, insist on compliance with the 5% rule and bank guarantee, and have key documents reviewed, especially for off-plan deals. A simple checklist and a pause before transferring money can save you from ghost projects and long disputes.

1. Confirm your goal and budget
   • Decide if this is for living, renting out, or long-term investment.
   • Set a realistic budget including taxes, fees, and fit-out costs.
2. Shortlist projects or properties
   • Use official channels and reputable agents; visit the site.
   • Check developer track records and existing completed projects.
3. Request and review core documents
   • Project approvals, land documents, construction permit.
   • Department of Construction eligibility for sale (for off-plan).
   • Draft deposit agreement and SPA, including payment schedule.
4. Check compliance with new protections
   • Verify that total pre-SPA payments are not more than 5% of the price.
   • Ask for bank guarantee details for off-plan sales and verify with the issuing bank if necessary.
5. Engage a lawyer or advisor for review
   • Share all documents and your questions before signing.
   • Ask for a written list of key risks and proposed changes.
6. Only then sign and pay
   • Sign contracts at a licensed notary office where required.
   • Pay by bank transfer to official accounts and keep all receipts.
7. Follow up on registration and handover
   • Track construction progress and compare with contractual deadlines.
   • Push for timely issuance of ownership certificates after handover.