Foreign loans are becoming increasingly common as the demand for capital from various sectors of the Vietnamese economy continues to grow rapidly. To secure large-scale foreign loans, having high-value and highly liquid collateral—such as real estate—is often essential.

However, under Vietnam’s Land Law 2013 and Housing Law 2014, all real estate assets—including land use rights; houses and buildings attached to land; and other assets affixed to land, houses, or buildings, regardless of their form—can only be mortgaged to credit institutions licensed to operate in Vietnam.
In other words, foreign banks are not permitted to take real estate in Vietnam as security.

This raises the question: How can foreign banks provide loans to Vietnamese enterprises based on real estate assets owned by those enterprises?

This article explores several transaction structures through which foreign banks can indirectly secure interests over real estate in Vietnam.

Structure 1: Security Agent Structure

Under this structure, a Vietnamese licensed credit institution acts as a security agent on behalf of the foreign lender. The mortgage over the real estate is executed in favor of the security agent, who holds and enforces the security on behalf of the foreign bank under a parallel contractual arrangement.

Structure 2: “Seed Loan” Structure

In this model, the foreign lender provides an unsecured initial loan, which is subsequently replaced or refinanced by a secured loan issued by a Vietnamese credit institution that takes the real estate as collateral. The foreign bank may have a back-to-back arrangement or participate via sub-loan or credit enhancement.

Structure 3: Guarantee Structure

Here, a Vietnamese guarantor or third-party entity provides a guarantee or issues a promissory note to secure the obligations of the Vietnamese borrower. The real estate may be pledged to a local bank that, in turn, supports the foreign loan via inter-creditor or tripartite agreements.