The Golden Age of Real Estate Cash Deals is Over

Article 48 of the Law on Real Estate Business stipulates that real estate project investors, real estate or property service enterprises must receive contract payments from customers through a bank account in Vietnam. Penalties and compensation for delays in payment or handover must be agreed upon by both parties and stipulated in the contract.

According to a representative of the Department of Housing and Real Estate Market Management, the mandatory bank payment regulation only applies to real estate project investors and enterprises. Small-scale individual real estate businesses, such as those selling residential properties or construction works, with floor areas not intended for business purposes, are not required to use bank transfers.

The 2014 Law on Real Estate Business did not mandate that real estate sales and transfers be made through banks.

Dr. Can Van Luc, a member of the Monetary and Financial Policy Advisory Council, stated that the regulation on cashless payments in real estate transactions is a novel concept. Buyers and sellers must use bank transfers, eliminating the previous practice of carrying bags of cash for transactions. This enhances transparency, reduces the risk of theft, and ensures tax and fee compliance.

“This also aligns with Vietnam’s push towards a cashless society,” added Dr. Luc.

Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, agreed that Vietnam’s participation in the UN Convention against Money Laundering and its implementation of the Law on Anti-Money Laundering in 2012 led to the issuance of Decree 116/2013. This decree details the provisions of the Law on Anti-Money Laundering, making it necessary and reasonable to mandate bank transactions for real estate business dealings.

According to Mr. Chau, this regulation will help combat tax evasion, money laundering, and market opacity. It may also contribute to curbing price manipulation and market disruptions that have occurred in the past.

“Previously, individuals had multiple forms of personal identification, such as citizen identification cards, citizen identity cards, passports, and multiple bank account numbers. This made it challenging to track the source of funds used for real estate purchases. However, with the introduction of individual identification codes, each person will have a unique code, facilitating the implementation of real estate transaction requirements through banks,” Mr. Chau explained.

Additionally, Article 47 of the Law on Real Estate Business stipulates that the selling, transferring, leasing, and leasing-purchase prices of real estate must be recorded accurately in the contract, reflecting the actual transaction price. Organizations and individuals in the real estate business are responsible for recording the correct transaction price to prevent situations where prices are recorded lower to reduce personal income tax and registration fees.

In the past, it was common for real estate transactions to be declared at a lower price than the actual transfer price (dual pricing). Authorities have handled numerous cases of inaccurate declaration of real estate transfer prices to evade taxes.