VIETNAM Law and Practice Contributed by: Tran Thai Binh and Duong Thi Minh Han, LNT & Partners
3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders In Vietnam, foreign lending is permitted subject to restrictions on the purpose, currency, secu - rity transaction, the maximum principal and the fees or expenses incurred on the foreign loan. However, residential housing projects can only secure loans from Vietnamese-licensed credit institutions. Foreign loans with a term of more than 12 months must be registered with the State Bank of Vietnam. Furthermore, the laws on land provide that foreign directly invested enterprises, having obtained the land-use right through land allo - cation or lump-sum land lease from the state may only charge its land-use right and/or assets attached on land to credit institutions duly incor - porated in Vietnam. Any charge of real estate to any foreign lender is not permitted and is not recognised as having any legal authority. How - ever, foreign lenders can hold the LUR indirectly as collateral through an agent bank in Vietnam with the proper legal structure. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Security over real estate needs to be duly exe - cuted and registered with the competent author - ity and usually incurs land registration and nota - ry’s fees. 3.5 Legal Requirements Before an Entity Can Give Valid Security To grant security over a land-use right, the fol - lowing are required: • a land-use right certificate; • the right must be free from dispute, or the dispute is settled by dispute settlement authority;
In acquiring commercial real estate, finance is more complex because the lenders assess the loan repayment capacity of the borrower in addi - tion to the real estate value. However, the same principle in lending is applied – ie, the borrower must have funds available of at least 30% of the real estate value and a loan for the remain- ing amount, subject to conditions assessed and agreed with the creditors, which can be local or foreign-owned banks operating in Vietnam. Loans can also be structured and provided by overseas banks, parent companies, sharehold - ers or business partners overseas. However, res - idential housing projects can only obtain loans from Vietnamese-licensed credit institutions, as parent company loans are no longer permitted. In addition, the buying entity may consider sev - eral other options, such as corporate bonds by private placement, convertible loans, business co-operation, joint ventures with other entities, raising funds from business co-operation con - tracts, calling for equity, or collection of advanc - es from the homebuyers of off-plan properties if the project is a residential housing development project. The borrower may also use other assets While raising funds from credit institutions is most common, the lender usually requires the first charge over: • the land on which the project is premised; • the right in respect of the project develop - ment; • off-plan properties; or • the receivables or proceeds from the sale of the properties. or personal guarantees as collateral. 3.2 Typical Security Created by Commercial Investors
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