A question that often appears straightforward in practice is: can our company simply buy the plot next to our factory?

In Vietnam, answering that question requires a different way of thinking about land. Unlike many other jurisdictions, Vietnamese law does not recognize private ownership of land. Land is owned by the entire people, with the State acting as representative owner and exercising unified administration.

Individuals and businesses therefore do not acquire ownership of land itself. Instead, they acquire land use rights ("LURs") — rights to use a particular parcel of land for an approved purpose, for a specified or stable term, with the scope of those rights depending on the legal basis on which the land is held. For foreign investors, this distinction is particularly important. The legal route through which an investor accesses land can determine not only whether the proposed project may be implemented, but also the investor's ability to construct on the land, obtain financing, mortgage its rights, transfer the project, or ultimately exit the investment. Accordingly, the more relevant question for a foreign investor is generally not whether it can "own" land in Vietnam, but what legal route is available for it to obtain and use the land for its proposed project, and what rights that route provides. In practice, foreign investors typically access land or real estate in Vietnam through several different routes under the Land Law No. 31/2024/QH15, as amended ("2024 Land Law"), the Housing Law No. 27/2023/QH15, the Law on Real Estate Business No. 29/2023/QH15, and related investment legislation.

Route 1: Direct lease of land from the State

A foreign-invested economic organization ("FIE") may, where the statutory requirements are satisfied, lease land directly from the State to implement an investment project.

This can be relevant to factories, logistics facilities, offices, commercial developments and other projects developed on a dedicated site.

The land term will generally be linked to the duration and nature of the investment project and, as a rule, may not exceed 50 years, although a longer term of up to 70 years may be available for qualifying projects.

The Land Law distinguishes between two principal methods of paying land rent:

Annual land rental. An FIE leasing land from the State with annual rental payments generally has more limited rights than an FIE paying land rent in a lump sum for the entire lease term. The Land Law 2024 nevertheless recognizes a distinct "lease right under the land lease contract", which, in qualifying cases, may be transferred together with the FIE's lawfully owned assets attached to the land, subject to statutory conditions, including that the lessee pay for support and resettlement costs related to the land. The purchaser may then continue leasing the land for the approved purpose and remaining lease term.

One-off land rental for the entire lease term. An FIE leasing land from the State and paying land rent in a lump sum for the entire lease term generally has broader rights in relation to the LUR than an FIE paying land rent annually. Subject to applicable statutory conditions, the FIE may transfer, lease, contribute as capital or mortgage the LUR, together with the assets attached to the land.

The Land Law 2024 also permits conversion from annual rental to one-off rental for the remaining lease term in qualifying circumstances, with the relevant financial obligations recalculated at the time of conversion.

For dealmakers: the land rental structure can materially affect financing and exit options. It should be considered together with the investment and financing structure before the project is implemented, rather than after substantial construction expenditure has already been incurred.

Route 2: Sub-lease in an industrial park, industrial cluster or other designated zone

For manufacturing FDI, this is often the most practical route.

An infrastructure developer obtains the underlying land rights and develops the relevant industrial park or zone. The foreign-invested tenant then leases or sub-leases a plot, a ready-built factory, a warehouse, or other premises from the infrastructure developer instead of obtaining land directly from the State. For investors, the attraction is straightforward: much of the zoning, site clearance, and common infrastructure has already been addressed by the developer, allowing the investor to focus on licensing and on construction or fit-out of its own facility. However, the tenant's legal position still depends on how the infrastructure developer holds the land and on the structure of the lease or sub-lease. The Land Law 2024 expressly permits foreign-invested economic organizations to acquire LURs by way of transfer in industrial parks, industrial clusters and hi-tech zones, subject to the applicable conditions and procedures under Vietnamese law.

For operators: review the developer's underlying LUR, permitted land-use purpose, remaining land term, and rent-payment structure. A tenant cannot obtain better or longer land rights than those legally available through the developer's underlying title.

Route 3: Receiving land use rights as capital contribution

Land may also be introduced into a foreign-invested structure by way of a capital contribution of land use rights. For example, a Vietnamese partner that lawfully holds an eligible LUR may contribute that LUR as capital to an enterprise or joint venture, allowing the recipient enterprise to use the land for the relevant investment project, subject to applicable land and investment law requirements. The Land Law 2024 expressly recognizes circumstances in which a foreign-invested economic organization may receive LURs by way of capital contribution, including LURs originating from State allocation with payment of land-use fees, or for land leased by the State with land rent paid in a lump sum for the entire lease term.

For dealmakers: this structure is particularly relevant where a Vietnamese partner's principal contribution to a joint venture is the project site itself. Because the contribution's legality, scope, and value depend heavily on the underlying land rights, land due diligence should be completed before the parties agree on the valuation or transaction structure. At a minimum, the investor should verify the LUR certificate, the origin and legal basis of the LUR, the applicable land-rental payment regime, the remaining land-use term, the approved land-use purpose, any mortgages or other encumbrances, compliance with applicable financial obligations, and the legal permissibility of the proposed capital contribution.

Route 4: Acquiring the company that holds the land

Instead of acquiring an LUR directly, a foreign investor may acquire shares or contributed capital in a Vietnamese enterprise that already holds the relevant land.

In a conventional share deal, the landowner either establishes an SPV that holds the land or has an SPV that holds the land, and the purchaser buys the target company. Thus, the buyer buys the company that holds the land. This structure can be particularly useful for an investor seeking to acquire an existing factory, hotel, logistics facility, or operating business, together with its land position. But it also means that the purchaser acquires the company with all its existing liabilities.

The 2024 Land Law separately recognizes the acquisition of investment capital, represented by the value of LURs, as one of the mechanisms through which land-related economic interests may be transferred, subject to statutory conditions. This route has been available to foreign investors since, at least, the 2013 Land Law. The 2024 Land Law (effective August 1, 2024) clarified and expanded options, including direct LUR transfers in industrial parks, industrial clusters, and high-tech parks, as mentioned above.

For dealmakers: land due diligence is therefore critical in an M&A transaction. The purchaser should confirm, among other things:

A change in shareholders does not cure an underlying defect in the target's land rights.

Route 5: Transfer of a real estate project

Where the target is a real estate development itself, rather than the corporate entity holding it, a project transfer may be more appropriate.

Vietnam's real estate business legislation permits the transfer of all or part of a real estate project where the statutory conditions are satisfied. The transaction may involve the transfer or continuation of the associated land rights and project rights in accordance with the Land Law, the Law on Real Estate Business, and investment legislation.

This structure is particularly relevant to acquisitions of residential, commercial, resort or mixed-use developments.

The ability to transfer the project depends on the project's legal status and the satisfaction of statutory conditions applicable to the project, the transferor, and the transferee. A project cannot simply be transferred because the commercial parties agree to sell it.

For dealmakers: the first step should be a project-level legal audit of the relevant investment approvals, land allocation or lease decisions, LUR documentation, financial obligations relating to the land, construction and planning approvals, project implementation status, mortgages and the statutory conditions for project transfer.

This determines whether an asset/project deal is available before the parties spend time negotiating its commercial terms.

Route 6: Ownership of residential property by foreign individuals and organizations

Residential property is a separate regime.

Foreign individuals and qualifying foreign organizations may own certain houses in Vietnam under the Housing Law 2023, subject to eligibility requirements, national defense and security restrictions, foreign ownership quotas, and other statutory conditions.

This should not be confused with private ownership of the underlying land. The foreign owner acquires ownership of the qualifying house together with the associated rights recognized by Vietnamese law; the constitutional and statutory regime of entire-people ownership of land remains unchanged.

For foreign ownership, the statutory limits include:

Different rules apply depending on whether the owner is a foreign individual or foreign organization.

For an eligible foreign individual, ownership is generally permitted for up to 50 years from the date of issuance of the ownership certificate, subject to extension in accordance with law. A foreign individual married to a Vietnamese citizen and residing in Vietnam may enjoy residential ownership rights on the same basis as Vietnamese citizens, subject to the statutory requirements. For a qualifying foreign organization, the ownership period is instead tied to the term stated in its investment documentation and is not simply a uniform 50-year period applicable to all foreign owners.

For individual and institutional investors: foreign-ownership eligibility and the remaining quota should be confirmed for the specific project before a deposit or acquisition agreement is signed. Eligibility cannot safely be assumed merely because foreign purchasers already own other units in the same development.

Choosing the right route

There is no single "foreign investor land structure" in Vietnam.

The appropriate route depends on what the investor is trying to acquire:

(1) For developing a new factory or commercial facility on a dedicated site, consider a direct State land lease (Route 1) or an industrial-zone structure (Route 2).

(2) For establishing a joint venture where the Vietnamese partner contributes the site, consider an LUR capital contribution (Route 3), subject to verification that the LUR can legally be contributed.

(3) For acquiring an existing operating company together with its land and its improvements, consider a share or capital acquisition (Route 4).

(4) For acquiring a particular real estate development without acquiring the developer itself, consider a whole or partial project transfer (Route 5).

(5) For acquiring apartments or houses as a foreign individual or qualifying foreign organization, consider the foreign housing ownership regime (Route 6) and verify both eligibility and the applicable foreign-ownership quota.

It is crucial to remember that a seller's control over real estate and their legal entitlement to it are not the same thing. An investor may agree a purchase price, sign a term sheet and even establish an acquisition vehicle, only to discover later that the proposed entity cannot receive the relevant LUR, that the land-use purpose does not permit the intended business, or that the selected land-rental structure prevents the financing or security package contemplated by the transaction. For that reason, due diligence should be conducted, and land structure should be tested at the term-sheet stage, not after signing.

For advice on structuring a specific land acquisition, investment project, or real estate transaction, or on reviewing land use rights as part of legal due diligence, please contact Dilinh Legal at contact@dilinh.com.