Bank guarantee mechanism for trade of houses to be formed in the future

Removing the entanglements related to the guarantee of houses to be formed in the future (“Future House”) is one of the legal requirements for the Future Houses to be for sale. Therefore, on 29 September 2017, the Governor of the State Bank of Vietnam issued Circular No. 13/2017/TT-NHNN (“Circular 13”) amending, supplementing a number of articles of Circular No. 07/2015/TT-NHNN dated 25 June 2015 regulating bank guarantees (“Circular 07”), specifically guiding the conditions, procedures for underwriting in the sale, hire-purchase of the Future Houses of credit institutions, branches of foreign banks in Vietnam (the “Bank”).

Pursuant Circular 13, guarantee of the Future House of the Bank is conducted under the following order:

 - Step 1: Based on the offer of the investor or the counter-guarantor, the bank will consider, evaluate and decide on the provision of guarantee to the investor;

 - Step 2: The Bank and the investor sign a guarantee contract over the Future House;

 - Step 3: The investor sends the signed contract on purchase, hire-purchase of the house to the Bank within ten (10) working days from the signing date of such contract;

 - Step 4: The issuing Bank commits to guarantee to each buyer within five (05) working days from the date of receipt of the contract on purchase or lease-purchase of the house from the investor. Accordingly, the validity term of the guarantee commitment is determined from the date of issuance to at least thirty (30) days after the time limit for delivery or receipt of the committed house as stipulated in the purchase or lease-purchase house contract.

In addition, under Circular 13, the guaranteed amount for a future-acquired housing project is equal to the total amount of money the developer is allowed to receive in advance of the purchaser in accordance with legislation on real estate business and other amounts which the investors are obliged to return to the buyer under the signed purchase or lease-purchase house contract when the time for delivery and receipt of the contracted house has arrived yet the investor does not hand over the house to the buyer.

The State Bank of Vietnam will announce a list of Banks that are eligible for guaranteeing Future Houses on the website of the State Bank of Vietnam, updated and adjusted from time by time.