The Government has recently issued Decree No. 96/2024/ND-CP detailing certain provisions of the 2023 Real Estate Business Law ("Decree 96"). Decree 96 includes the following notable provisions:
- Detailed Guidance on Information Related to Real Estate Projects That Must Be Disclosed Before Transactions
Article 6 of Decree 96 mandates that real estate businesses must fully disclose 18 categories of information related to the project before entering into contracts for the sale, transfer, lease, lease-purchase of real estate, or the transfer of real estate projects. These include:
- Information about the real estate project: Disclosure of information such as the investment policy decision, land allocation decision, land lease, land-use change, and detailed planning information.
- Information about housing and construction works to be formed in the future: Disclosure of details such as the type of real estate, basic design, land-use documents, guarantee documents, and confirmation of eligibility for selling future housing, among others.
- Information about existing housing and construction works.
- Information about land use rights with technical infrastructure in the real estate project.
Real estate businesses must fully, truthfully, and accurately disclose information on the housing and real estate market information system as well as on the company's website. Any disclosed information must be updated within 5 days when there are changes.
- Regulations on the Ratio of Credit and Bond Debt to Equity for Real Estate Businesses
Article 5 of Decree 96 specifies that real estate businesses must meet certain conditions regarding the ratio of credit debt and corporate bond debt to equity as follows:
- Compliance with financial safety ratios: Businesses must adhere to financial safety ratios and comply with the laws on credit and corporate bonds.
- Debt limit for project execution: If a real estate business borrows from credit institutions or issues corporate bonds to execute a real estate project approved by the competent state authority, the total credit debt, bond debt, and equity for each project must not exceed 100% of the total investment of that project.
- Debt-to-equity ratio limits: The total ratio of credit debt and bond debt to equity for each real estate project must not exceed 4 times the business's equity for projects with land use below 20 hectares and must not exceed 5.67 times the equity for projects with land use from 20 hectares or more.
Equity is determined based on:
- The financial statements or the audit results of the equity item for the year, or the financial statement results or audit results for the equity item of the preceding year.
- Charter capital (in cases where the business has been established and operating for less than 12 months).
- Issuance of Mandatory Contract Templates for Real Estate Business Activities and Restrictions on Altering Contract Content
- Decree 96 introduces 11 mandatory contract templates for use in real estate business activities. These templates cover contracts such as the sale of housing, lease-purchase of housing, lease of construction works, transfer of land use rights with technical infrastructure, and transfer of part or the whole project, among others.
Real estate businesses must adhere to the principles when establishing, signing, and executing standard contracts:
- Real estate businesses must strictly adhere to the content of these contract templates as provided in the Appendices of the Decree. They are not allowed to modify the content, except where the template explicitly permits the addition of content. However, any additions must not alter or contradict the existing terms in the contract template.
- The contracts can only be used after the required information about the real estate, or the project has been disclosed according to the regulations.
- Businesses must comply with checks on the usage, establishment, signing, and execution of these contract templates.
- Any modifications or additions to the content of real estate business contracts must be publicly disclosed (if any).
- Businesses will be subject to penalties and must compensate for any damages arising if the contract signed with customers contains content that deviates from the mandatory contract template.
- Requirement to Establish a Business for Real Estate Activities, Except for Small-Scale or Below Small-Scale Operations
Article 7 of Decree 96 outlines the criteria for determining small-scale real estate business operations, non-business transactions, and operations below small-scale as follows:
- Individuals Engaging in Small-Scale Real Estate Business must meet the following requirements:
- They are not required to develop an investment project according to the laws on construction and housing.
- Their transactions do not exceed 300 billion VND per contract, and they conduct no more than 10 transactions in a year. If they engage in only one transaction per year, the transaction value is not counted.
- Organizations and Individuals Engaging in Non-Business Real Estate Transactions or Operations Below Small-Scale include:
- Individuals who are not required to develop an investment project according to the laws on construction and housing.
- Organizations whose transactions do not exceed 300 billion VND per contract, and they conduct no more than 10 transactions in a year. If they engage in only one transaction per year, the transaction value is not counted.
- Transitional Provisions
Credit and Bond Debt Ratios: The regulations on the ratio of credit debt and corporate bond debt for real estate businesses do not apply to credit debts and bond debts incurred by real estate project investors before this Decree takes effect.
Small-Scale Real Estate Business Criteria: The requirement that an individual's real estate business operations must not exceed 300 billion VND per contract and must not involve more than 10 transactions per year does not apply to individuals or organizations that have signed contracts for the purchase, transfer, or acquisition of real estate, including future real estate, in projects before Decree 96 took effect.
The Decree 96/2024/ND-CP officially came into effect on August 1, 2024.
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