DECODING SOUTH EAST ASIA REAL ESTATE: INSIGHTS … · Hak Milik (HM) or Right to Own > HM is the...

COLLIERS INSIGHTS VALUATION & ADVISORY SERVICES | ASIA | MARCH 2019

INSIGHTS FOR OWNERSDECODING SOUTH EAST ASIA REAL ESTATE:

FOREWORD

With the growth in cross border investment in general and the focus on intra-Asia investment, the ASEAN countries have seen greater interest from foreign investors especially from North Asia.

The challenge for investors is how to find ways to enter and cash in on growth without taking an unreasonable amount of risk. This is of course easier said than done! Basic caution needs to be exercised before making an investment decision whether the ‘new’ market makes it a worthy addition to a portfolio.

In this paper, we look at some basic facts for six emerging markets across South East Asia highlighting where the opportunities lie in each market, some basic information on the land ownership, taxation and suggestions as to the sectors and geography foreign investors are likely to focus on in the next one to two years.

We are happy to discuss any aspects of this report with you and provide further information about these markets as you need.

DAVID FAULKNERManaging Director | Valuation & Advisory Services | Asia Tel: +852 2822 0525 Email: [email protected]

IND

ON

ES

IAThe property market is concentrated in the two major cities – Jakarta and Surabaya, though infrastructure improvements are helping development elsewhere on Java and Sumatra Islands.

Foreign and domestic investment has increased due to government policy changes, opening more areas for foreign investment, such as in health-care and logistics.

Infrastructure development is now the main government focus, including toll roads, mass transportation (MRT, LRT, high-speed rail), airports, and seaports. This creates opportunities for transit-oriented (TODs) and industrial estate developments.

We see opportunities in property investments and developments in TOD’s and industrial estates. Dependent on property type, the typical yields available are between 6 and 10%.

CapitalLegend Major City Major Airport Major PortEconomic Centre

MEDAN

Pelabuhan BelawanKualanamu International Airport

SEMARANG

Pelabuhan Tanjung EmasAhmad Yani International Airport

MAKASSARPelabuhan Soekarno Hatta

BALI

Pelabuhan BenoaNgurah Rai International Airport

YOGYAKARTAAdisutjipto International Airport

SURABAYA

Pelabuhan Tanjung PerakJuanda International Airport

Pelabuhan Tanjung PriokSoekarno Hatta International Airport

JAKARTA

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INDONESIACOUNTRY PROFILE

Area

1,916,862 sq kmPopulation

261.9 millionAverage Household Size

3.9 people

GDP/capita

USD3,707.1Average Age of Population

28.6 years

Capital

Jakarta

Urban Proportion

54%Labour Force Participation Rate

66.7%

GDP Growth

5%

Economic Growth

5.1%

Gross Domestic Product (GDP)

USD970.6 billion

Economic Centres

SurabayaJakarta

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Land and Building Tax¹ 0.3%

Duty on the acquisition of land and building rights 5%

Value Added Tax (VAT) 10%

Income Tax (Final) 10% on rental revenue2.5% on sales revenue

Luxury Tax² 20%

Super Luxury Tax³ 5%

PROPERTY OWNERSHIP

Hak Milik (HM) or Right to Own > HM is the most complete

land title available underthe Indonesian law. HMis transferable and maybe encumbered. HM isequivalent to freehold land orfee simple absolute under thecommon law system

Hak Guna Bangunan (HGB) or Right to Build > HGB is the right to construct and own buildings on land.

HGB is transferable and may be encumbered. Land withan HGB title may be owned by (i) Indonesian citizens and(ii) legal entities established under the Indonesian law anddomiciled in Indonesia, including foreign-owned companies(known as Perseroan Terbatas Penanaman Modal Asing– PT PMA). HGB is granted for a period of up to 30 yearsand extendable for a further 20-year period

Hak Pakai (HP) or Right to Use> HP is the right to use and/or to

harvest from land, which isdirectly controlled by the State,or land of other persons.HP may be encumbered.Ordinarily, HP is granted for aperiod of up to 25 years andcan be extended for 20 years

INDONESIA

SECTOR TRENDSStock Yield*Vacancy Supply

¹ The tax due is calculated by applying the tax rate on the sale value of the tax object (Nilai Jual Objek Pajak/NJOP) deducted by non-taxable NJOP. The non-taxable NJOP is set at Rp 10 million at the minimum. ² Transaction Price > IDR 10 billion. ³ Transaction Price > IDR 5 billion.

PROPERTY INVESTMENT POLICIESForeigners are not able to own freehold property in their own name. Right-to-use titles, or “SHP” (Sertifikat Hak Pakai), are essentially leaseholds that are open to foreigners. Leasehold titles are granted for 25 years and can be extended for another 45 years for a total of 70 years.

The preferable way for foreign to invest and develop property in Indonesia is by way of establishing an Indonesian based company under the Indonesian law. The company shall domiciled in Indonesia.

Indonesian citizen investors may get more favourable terms and conditions.

FOREIGN OWNERSHIP FOR PROPERTYForeigner having an appropriate stay permit (Resident Foreigner) may own a house or an apartment with Hak Pakai (Right to Use).

If the Resident Foreigner is deceased, the house or apartment can be inherited as long as the heir is a Resident Foreigner.

For strata title apartments (known as Hak Milik Atas Satuan Rumah Susun or HMSRS), the title of the underlying land will remain as a HGB title. The title can be converted into a Hak Pakai strata title (known as Hak Pakai Atas Satuan Rumah Susun or HPSRS). Resident Foreigners can own an en-bloc apartment once the ownership of all units have been unified and the land can be converted to Hak Pakai title.

New conditions imposed for 1st hand residential strata-title transaction that is a HPSRS which is derived from the conversion of a HMSRS it is valid for 30 years and can be extended for 20 years + 30 years renewal.

According to the local regulation, Resident Foreigner can purchase apartments in Jakarta with minimum unit price of IDR3,000,000,000 or USD205,500¹, while in the other cities it would be lower.

¹ USD1 = IDR14,600

Land Title in Indonesia

22.3%

18.6%

13.3%

40%

41%

5.8%

16.4%

21.6%

340,789 sq m

34,998 units

201,817 units

41,173 rooms

16,346 rooms

11,518 ha

4,648,998 sq m

1,087,303 sq m

240,000 sq m

31,417 units

41,677 units

4,087 rooms

2,634 rooms

100 ha

434,760 sq m

150,000 sq m

6%

5%

5–6%

10%

10%

8–10%

7–8%

7%

18.1% 9,694,699 sq m 1,409,662 sq m 6–7%

OFFICE JAKARTA SURABAYA

RETAIL JAKARTA SURABAYA

HOTEL JAKARTA SURABAYA

INDUSTRIAL JAKARTA-BEKASI* Yield means the current average capitalisation rateNote: The above data refer to prime assets in the respective city and sector; Vacancy means the existing average vacancy rate; Stock means the existing completed stock; Supply means the anticipated supply in the next 3 years.

TAXES

APARTMENT JAKARTA SURABAYA

MA

LAY

SIA The Malaysian Government is

focusing policies in three areas: to implement institutional reforms, to ensure the socio-economic well-being of Malaysians and to foster an entrepreneurial economy.

GDP grew by 4.7% in 2018, supported by continued expansion in domestic demand and positive growth in net exports.

Tax incentives are proposed to help address these priorities such as digitalising the industrial sector, stabilising the property market, and relieving the cost of doing business in Malaysia via improvements to the Sales and Service Tax (SST) regime. The aim is to improve Malaysia’s attractiveness to foreign capital. The situation continues to evolve following the change of Government in late 2018.

Property market opportunities are concentrated around Kuala Lumpur. Favourable areas for property investment are in the office and retail sectors. Yields are in the region of 5.5% to 6.5%. We see vacancies reducing with time.


GEORGE TOWN, PENANG

Penang PortPenang International Airport

JOHOR BAHRU

Johor PortSenai International Airport

KOTA KINABULU (SABAH)

Kota Kinabalu PortKota Kinabalu International Airport

KUCHING (SARAWAK)Kuching International Airport

Port Klang

Kuantan Port

Kemaman Port

Bintulu Port

Sandakan Port

Sapangar Bay Port

Tawau Port

Port of Tanjung Pelepas

IPOH

PETALING JAYA (SELANGOR)

MALACCA CITY

Kuala Lumpur International AirportKUALA LUMPUR

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MALAYSIACOUNTRY PROFILE

Area

329,613 sq kmPopulation


4.03 people

GDP/capita

USD10,703Average Age of Population

28.1 years

Capital

Kuala Lumpur

Urban Proportion

77.1%Labour Force Participation Rate

68.5%

GDP Growth

4.7%

Gross Regional Domestic Product (GRDP)

USD347.29 billion

Economic Centre

Kuala Lumpur

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Corporate Income Tax 24%

Capital Gain Tax 0%

Sales and Services Tax (SST) 15%

Stamp Duty 4%

Transfer Tax 0%

Real Property Gains Tax (RPGT) 30% and 10% for disposals within and after 5 years after acquisition, respectively

Real Property Tax Individual states in Malaysia levy ‘quit’ rent and assessments at varying rates

Land Titles in Malaysia > Freehold ownership in perpetuity > Leasehold

– For fixed terms (30, 60 or 99 years) and upon expiry of the said fixed term, the land willrevert to the State government

– When a lease expires, an application for a renewal or extension of lease can be made,subject to the payment of premium to the land office

PROPERTY OWNERSHIP

PROPERTY INVESTMENT LAWSFor foreign acquisition of property, the Economic Planning Unit (EPU) Guidelines apply. Approval is also needed from State Authorities. Investment rules in Malaysia are affected by policies that benefit the Bumiputra i.e. the ethnic Malay and indigenous peoples groups in Malaysia.

Under the EPU Guideline, two situations require their approval for the acquisition of property:

> For acquisition of property valued at RM20 million(USD4.96 million) and above that involves the dilutionin the ownership of the property held by Bumiputraand/or government interest.

> When there is an indirect acquisition of property byother than Bumiputra interest and/or governmentagency, having property more than 50% of its totalassets, and the said property is valued more thanRM20 million (USD4.96 million)

In order to acquire a property as mentioned above, a company needs to satisfy the equity and paid-up capital conditions as follows:

> Equity condition – companies to have at least 30%Bumiputra interest shareholding

> Paid-up capital conditions – local company ownedby local interest or foreign interest to have atleast RM100,000 or RM250,000 (USD24,805 orUSD62,013) paid-up capital respectively

For direct acquisition of property, the equity and paid-up capital conditions imposed by the EPU must be complied with before the transfer of the property’s ownership and within one year after the issuance of written approval.

State authorities can vary the EPU Guidelines on the acquisition of property by a foreign interest based on the location and type of property.

FOREIGN OWNERSHIP FOR PROPERTYForeigners require EPU approval of any property acquisition except in the following circumstances:

> Residential units under the “Malaysia My SecondHome” Programme

> Multimedia Super Corridor (MSC) status companiesacquiring property in the MSC for operational needs

> In approved areas in any regional development

MALAYSIA

corridor by companies, subject to status

> Companies with endorsement from the Secretariat of the MalaysianInternational lslamic Financial Centre (MIFC)

> Residential units valued at RM100,000 (USD24,805) and above to be occupiedas a hostels for company‘s employees, subject to state authority approval

> Acquisition of industrial land by a manufacturing company

> Properties in privatisation projects, whether at the Federal or State level,involving companies that are the original signatories in the contracts for theprivatised projects

> Acquisition of properties by companies that have been granted thestatus of International Procurement Centers, Operational Headquarters,Representative Offices, Regional Offices, Labuan offshore companies andBio-Nexus or other special status by the Ministry of Finance, Ministry ofInternational Trade and Industry and other ministries, Economic Planning Unit,Prime Minister’s Department

TAXES

SECTOR TRENDSStock YieldVacancy Supply

3.03 million sq m

6–6.5%14.7% 663,300 sq m

RETAIL: KUALA LUMPUR

8.89 millionsq m

5.5–6%18.9% 1.44 million sq m

PURPOSE BUILT OFFICE: KUALA LUMPUR

Note: The above data refer to prime assets in the respective city and sector; Vacancy means the existing average vacancy rate; Stock means the existing completed stock; Supply means the anticipated supply in the next 3 years; Yield means the current capitalisation rate.

473,884 units

3–5%13.5% 143,284 units

RESIDENTIAL: KUALA LUMPUR

MYA

NM

AR

Government continues to enact new laws and regulations to attract foreign investors such as the new retail and wholesale regulations, relaxation of the insurance sector, and further liberalisation of the banking and finance sectors.

The number of mid-income families in Myanmar is growing translating into higher consumption and overall spending.

Investment opportunities occur mainly around the economic centre – Yangon.

Colliers see the retail market as providing investment opportunities as lifestyle destination malls with wide offerings of entertainment and leisure activities become increasingly available. Vacancy rates are at 5% and yields around 8%.

Investments in offices and serviced apartments also offer high yields of up to 10.5%, though with higher vacancy levels.


MANDALAYMandalay International Airport

YANGONYangon International Airport

Nay Pyi Taw International AirportNAY PYI TAW

Thilawa

Mawlamyine (Moulmein)

Port of Yangon/Rangoon

Sittwe

Dawei

Kyaukpyu

Pathein

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MYANMARCOUNTRY PROFILE

Area



4.3 people

GDP/capita


27.7 years

Capital

Nay Pyi Taw

Urban Proportion


65.1%

GDP Growth

6.7%

Gross Regional Domestic Product (GRDP)

USD69.32 billion

Economic Centre

Yangon

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Withholding Tax > 15% on all interest payments made to a non-resident > 0% resident national

Withholding Tax on Goods and Services

> 2% on goods and services from local providers > 3.5% on services from foreign providers > 0% on goods from foreign providers

Income Tax > 35% for non-residents deriving salary in Myanmar > 25% for foreigners working in Myanmar as residents

Capital Gains Tax > 10% Resident companies and individuals > 40% for non-resident companies and individuals

Property Taxes Not to exceed 20%, 12%, 15% (including general tax, lighting, water, conservancy tax respectively)

Undisclosed Income Tax

30% for buyers of immovable property who are unable to demonstrate the tax of the funds used

Stamp Duty 1.5% for 1–3 years lease

PROPERTY OWNERSHIP

PROPERTY INVESTMENT LAWSVia the BOT agreement, foreign investors can lease the land for initially 50 years, extendable for two consecutive 10 years, with necessary Government approvals. Lease agreements shall be registered at the register office of Deeds and Assurances.

There are three common types of property investment practices: a) incorporated joint venture with a local entity contributing the land for lease, b) unincorporated joint venture with a local landholder, c) locally-owned foreign company or joint venture with BOT (Built-Operate-Transfer) contracts for government-owned land.

Investors who invest in the least developed and remote regions will get longer periods for the rights to lease and use land.

While local investors have the rights to invest on their owned land or property, Myanmar citizen investors may get more favourable terms and conditions.

FOREIGN OWNERSHIP FOR PROPERTYMyanmar does not allow transfer/acquisition of immoveable property to foreigners by sale, purchase, give, away, gift, pawn, exchange or transfer. For inheritance of property, it requires government’s approval in accordance with the Inheritance Act in case of death or departures from Myanmar.

Joint ventures are permitted and commonly found in residential (apartment and condominiums), housing near industrial areas, commercial, low- cost housing, and new townships developments.

100% of foreign investment is allowed only under a BOT contract for infrastructure, hotels (four and five-star), commercial, townships and office developments.

Approval is required from MIC for lease terms over one year for a foreign company.

TAXES

Freehold Land > An outright title with no

restriction to lease, transfer or sell interest to a Myanmar citizen

> Owner can only lease to a foreign investor for a maximum of one year. If longer, it will be subject to Myanmar Investment Commiions (MIC) approval

Grant Land > From government and usually for perpetual use.

Build-Operate-Transfer (B.O.T.) land, is also leased from the government, for 50 years plus two 10-year extensions and shall be transferred back to the government once the lease expires

> May lease to a foreign investor with approval from MIC if lease is over 1 year (the lease period typically is 60 years and can be renewed perpetually unless required for public use.

Government Leased Land > Government owned land, most

common basis of a foreign invested project

> Long term leases of 10/60/90 years

> Lease directly from the Government or sub-lease if government lease allows

MYANMAR

387,903 sq m

403,747 sq m

5,334 keys

10.5%

8.4%

8.7%

28%

5%

57%

225,748 sq m

180,816 sq m

1,693 keys

2,242 units

9.7%21% 2,413 units

* All yields are indicative due to limited informationNote: The above data refer to prime assets in the respective city and sector; Vacancy means the existing average vacancy rate; Stock means the existing completed stock; Supply means the anticipated supply in the next 3 years; Yield means the current average capitalisation rate – office refers to Grade A developments and serviced apartment refers to Grade A developments

SECTOR TRENDSStock Yield*Vacancy Supply

SERVICED APARTMENT: YANGON

UPPER-SCALE HOTEL: YANGON

RETAIL: YANGON

OFFICE: YANGON

PH

ILIP

PIN

ES

Economic activity in the Philippines is concentrated in and around Manila. Government is investing in large scale infrastructure improvements including new roads, railways, and a new airport to the north of Manila.

Metro Manila’s office sector remains robust, maintaining a 5% vacancy level in spite of the substantial 36% YoY growth in supply. Outsourcing companies continue to fuel demand. Philippines Economic Zone Authority (PEZA)-accredited buildings attract most tenants. Yields for prime office assets are in the region of 5.6%.

Residential take-up for 2018 resulted in a new record high of 54,000 units. Colliers believes that future take-up will be slowly affected by the lack of developable land and land price increases. Yields are about 4.5%.

Government policies are friendly to foreign capital. Opportunities are in the fringe areas of major CBDs and areas beside upcoming major infrastructure projects.


CEBUMactan-Cebu International Airport

DAVAO

Davao International Airport

Ninoy Aquino International AirportMANILA

MAKATI

Clark International Airport

Kalibo International Airport

New Bohol-Panglao International Airport

Iloilo International Airport

Puerto PrincesaInternational Airports

Sunic Port

Batangas Port

Mindoro

Iloilo Port

Dumaguete Port

Port of Ozamiz

Port of ZamboangaPort of Talicud

Port of Tagbilaran

Port of Capinpin (Bataan) North Harbour

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PHILIPPINESCOUNTRY PROFILE

Area


105 millionAverage Household Size

4.38 people

GDP/capita

USD2,987

GDP Growth

6.2%Capital

Manila

Labour Force Participation Rate

60.2%Gross Regional Domestic Product (GRDP)

USD313 billion

Economic Centre

Makati

Average Age of Population

23.4 years

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Income Tax 30%

Value Added Tax 12%

Capital Gains Tax 6%

Document Stamp Tax 1.5%

Transfer Tax (depends on the location of the real property)

> Provincial – tax must not exceed 50% of the 1% tax base

> Metro Manila and any city in the Philippines – tax must not exceed 75% of the 1% tax base

PROPERTY OWNERSHIP

PROPERTY INVESTMENT LAWSIn case of a Filipino-owned Condominium Corporation, no interest may be transferred to a foreign individual or corporation that will exceed 40% of capital stock which is owned by foreign nationals. There is a REIT Law passed in 2009, which did not take-off due to ownership structure and taxation issues.

However, government agencies have announced that a new Implementing Rules and Regulation for REIT will be released which will relax ownership requirements and allow tax exemptions for initial transfers of properties.

FOREIGN OWNERSHIP FOR PROPERTYIt is required that at least 60% of the capital of a real estate property must be owned by Filipino citizens and corporations or partnerships. Foreign acquisition of real estate in the Philippines is only allowed in the following cases:

> Acquisition before the 1935 Constitution

> Acquisition by hereditary succession

> Purchase of not more than 40% of the units in a condominium project

> Purchase by former natural born Filipino citizens, subject to the requirements or limitations prescribed by law under BP 185

TAXES

Leasehold > Foreign investors may lease private land for

a maximum period of 50 years and may be renewed once for another 25 years at the option of the landowner

Freehold > Private freehold land is only available for Philippine nationals or corporations of

which 60% of the equity is Filipino-owned

> Foreign nationals and corporations may own condominium units, subject to the provisions of the Condominium Act

PHILIPPINES

Note: The above data refer to prime assets in the respective city and sector Vacancy means the existing average vacancy rate; Stock means the existing completed stock; Supply means the anticipated supply in the next 3 years Yield means the current average capitalisation rate.


3,000 rooms

USD120 Room Rate

79% 1,200 units

HOTEL: MAKATI CBD

470,300 sq m

USD30.7 Ayala Center –

Rental Rates

2% 73,000 sq m

RETAIL: MAKATI CBD (AS OF 3Q 2018)

3.3 million sq m

5.6%1% 286,000 sq m

OFFICE: MAKATI CBD

27,000 units

4.5% Prime 3BRs

10.8% 1,700 units

RESIDENTIAL: MAKATI CBD

TH

AIL

AN

DBangkok drives the Thai economy, particularly in the hospitality and office sectors.

Tourist arrivals have continued to increase, and hotel investors can capitalise on this, as well as the Bangkok luxury sector with an extensive demand for food and beverage (F&B) facilities. Yields are in the region of 6%.

Opportunities are available for office renovation projects in the Bangkok central business district (CBD), where the market is currently experiencing stock shortage. Despite the expectation for many new grade A stock to reach the market in approximately 2 years, refurbishment of existing stock can still lead to a higher rate of return. Office yields are around 5.5% at this time.

The export-oriented Eastern Economic Corridor in the eastern seaboard area, targeted for high-value investment, can also be considered for property investment.


Laem ChabangPort

Bangkok Port

Ranong Port

Chiang Saen PortChiang Khong Port

CHIANG MAIChiang Mai International Airport

PHUKET

Don Mueang International AirportSuvarnabhumi International Airport

BANGKOK

Mae Fah Luang Chiang Rai International Airport

Udon Thani International Airport

Krabi International Airport

Samui International Airport

U-Tapao International Airport

Surat Thani International Airport

Hat Yai International Airport

Phuket International Airport

PATTAYA

PATTAYA

BANGKOK

Eastern Economic Corridor (EEC)

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THAILANDCOUNTRY PROFILE

Area



3.2 people

GDP/capita


37.3 years

Capital

Bangkok

Urban Proportion


68.1%

GDP Growth

4.1%


USD455.4 billion

Economic Centre

Bangkok

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Leasehold > Foreign investors are able to lease land and properties for

a period of up to either 30 or 50 years, depending on the intended utilisation

Freehold > Available on land and properties registered under full title deeds

> Condominium law allows the purchase of individual strata titles within a building registered under freehold ownership


Capital Gain Tax 0%

Property Tax 12.5%

Stamp Duty 0.5%

Property Transfer Tax 2%

PROPERTY OWNERSHIP

PROPERTY INVESTMENT LAWSForeign investors can lease land from a freeholder for a period of either 30 or 50 years, depending on the property use. The condominium law allows foreigners to purchase up to 49% of individual strata titles within a building registered under freehold ownership. While local investors have the right to purchase freehold property.

All land plots and property ownership are recorded at the local provincial land offices. And in order to register a sale and/or disposal of a property, it must be recorded in person at the land office i.e. cannot be done electronically or by post.

FOREIGN OWNERSHIP FOR PROPERTYForeigners are generally not allowed to own freehold property, according to Thai law. However, leaseholds can be purchased for a period of either 30 or 50 years in total length.

The Thailand Board of Investment (BOI) can provide a permit for 100% foreign ownership for certain business purposes, upon application.

Condominium law allows up to 49% of the strata titles to be purchased by foreigners.

EASTERN ECONOMIC CORRIDOR (EEC)Thailand is targeting high-value investment in the eastern seaboard area by offering incentives to both foreign and local investors. The Eastern Economic Corridor, as the area is known, is a developing economic zone that Thailand wants to build export-oriented companies. The government is also keen to promote new industries, including healthcare and aircraft maintenance, in addition to the successful auto, petrochemical and logistics sectors. Logistics infrastructure, and an ease of doing business, will provide opportunity for investors of industrial and supporting industries, such as in hospitality and serviced apartments.

TAXES

THAILAND

Note: The above data refer to prime assets in the respective city and sector Vacancy means the existing average vacancy rate; Stock means the existing completed stock; Supply means the anticipated supply in the next 3 years Yield means the current average capitalisation rate.


11,436 keys

6%19% 3,051 keys

HOTEL: BANGKOK CBD

3.43 million sq m

5.5%7.3% 467,000 sq m

OFFICE: BANGKOK CBD

590,000 units

5%27% 20,000 units

CONDOMINIUM: BANGKOK CBD

22,000 ha

5.5%27% 3,200 ha

INDUSTRIAL: EASTERN ECONOMIC CORRIDOR

VIE

TN

AM

The country attracted total registered foreign direct investment of approximately USD300 billion in 2018. It is a popular destination for Japanese, Singaporean, and other property investors.

The country has become a key manufacturing hub for electronics, clothing, footwear and furniture products.

The industrial sector is poised for strong growth in the next couple of years, as Vietnam is increasingly seen by global businesses as an attractive destination for their industrial operations.

Colliers expect to see more merger and acquisition deals in industrial parks across Vietnam, by foreign investors, and more foreign businesses taking advantage of sale and leaseback structuring. Thus, it is an asset class to look out for.

In the major cities, the office and retail sectors enjoy low vacancy levels, and with yields in the order of 5.5 to 8.5%, also attractive.

| 19


Vung Ang Port

Quy Nhon Port

Cam Ranh International Airport

Phu Quoc International Airport

HO CHI MINH CITYTan Son International Airport

DA NANG

Da Nang PortDa Nang International Airport

CAN THO

Noi Bai International AirportHA NOI

HAI PHONG

Hai Phong PortLach Huyen Port

Cat Bi International Airport

Cat Lai PortVung Tau Port

Cai Mep Port

VIETNAMCOUNTRY PROFILE

Area



2.58 people

GDP/capita


30.5 years

Capital

Ha Noi

Urban Proportion


76.81%

GDP Growth

7.1%


USD223.9 billion

Economic Centre

Ho Chi Minh City

| 20

Corporate Income Tax > Standard: 20% > Oil and gas industries: 32% to 50% > Prospecting, exploration, exploitation of mineral

resources: 40% to 50%

Value Added Tax (VAT)

Standard 10%; 0% and 5% rates applicable for certain areas of the economy

Land Tax Progressive tax rates from 0.03% to 0.15% for non-residential property

In accordance with the Land Law (2013), all land used by households and individuals for residential purpose are regarded as land for stable and long-term use. Organisations and individuals can acquire land-use rights (LUR) via a land lease or land

allocation, which may require a land-use fee (LUF). The term of a land lease or land allocation cannot exceed 50 years (or 70 years in special circumstances).

PROPERTY OWNERSHIP

PROPERTY INVESTMENT LAWSAccording to the Law on Foreign Investment in Vietnam (2014), investment in real estate shall be made through (a) business cooperation through a business cooperation contract, (b) setting up a joint venture, (c) constitution of a 100% foreign capital company, (d) Opening a subsidiary or a representative office but such entity will not have a legal status. The purpose is to allow investors to integrate and understand the market before making substantial foreign investment in Vietnam.

In order for foreigner to invest in Vietnam including real estate, and the following documentations will need to be submitted to the government for approval – investment certificate; permission from the Vietnamese Government; valid visa; residency permit and working permit.

FOREIGN OWNERSHIP FOR PROPERTYThere are two most common regulations that related to real estate for foreign owners: Housing Law and Law on Real Estate Business (2015) and the Law on Sale and Transfer of Real Properties (2015).

Foreigners can buy property by simply having a tourist visa and there is no limit to the amount of properties one can buy (previously only one property). However, foreigners are restricted to acquire a maximum of 30% of the units in a condominium development and cannot own more than 10% of the properties in a landed development.

For houses, foreigners cannot own more than 250 of the houses in a given ward.

For leasehold assets, the lease term is 50 years with right of renewal.

Please note that there is no clear guideline by the government regarding the issuance of property titles to foreigners.

TAXES

VIETNAM


15,000 rooms

6.0%24.7% 1,600 rooms

HOTEL: HO CHI MINH CITY

311,000 sq m

8.5%5.3% 129,000 sq m

OFFICE: HO CHI MINH CITY

27 million sq m

10%17.4% 61 million* sq m

INDUSTRIAL: HA NOI * Expecting 14 additional industrial parks/zones will come in operation.Note: The above data refer to prime assets in in the respective cities and sector; Vacancy means the existing average vacancy rate; Stock means the existing completed stock; Supply means the anticipated supply in the next 3 years.

1,000,000 sq m

5.5%7.5% 202,000 sq m

RETAIL: HO CHI MINH CITY

Our Specialistsin the Region

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DAVID FAULKNERManaging Director Valuation & Advisory Services | Asia +852 2822 0525 [email protected]

PHILIPPINES

THERESA TEODORO+63 2 858 9051 [email protected]

VIETNAM

DAVID JACKSON+84 28 3827 5665 [email protected]

MALAYSIA

MELISSA LEE+65 6531 8530 [email protected]

MYANMAR

KARLO POBRE+95 (0) 931 491 678

[email protected]

INDONESIA

MONICA KOESNOVAGRIL+62 21 3043 6740

[email protected]

THAILAND

RATCHAPHUM JONGAKDEE+66 2 656 7000

[email protected]

DECODING SOUTH EAST ASIA REAL ESTATE: INSIGHTS … · Hak Milik (HM) or Right to Own > HM is the...

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