Bank guarantee regulations for future housing

Bank guarantee regulations for future housing serves as a vital mechanism to protect buyer interests against developer-related risks. These regulations impose strict conditions on guaranteeing banks and define the financial accountability of developers during capital mobilization. Long Phan Consulting Company provides a technical analysis of the current scope, legal framework, and practical applications of these guarantees under Circular 61/2024/TT-NHNN.

Conditions for developers to be granted guarantees for future housing projects

According to Clause 1, Article 13 of Circular 61/2024/TT-NHNN, commercial banks and branches of foreign banks shall consider and decide to grant guarantees to investors when the following conditions are met:

1. Meeting the basic requirements for a customer (except in cases where a commercial bank or foreign bank branch guarantees the investor on the basis of a counter-guarantee):

• Possesses full civil legal capacity and civil capacity as prescribed by law.
• The guaranteed obligation is a legitimate financial obligation.
• The guarantee is assessed by the credit institution or foreign bank branch as having the ability to repay the amount that the credit institution or foreign bank branch is obligated to pay on its behalf when fulfilling the guarantee obligation.

Credit institutions and branches of foreign banks are prohibited from guaranteeing the payment obligations of bonds issued by enterprises for the following purposes: restructuring the debts of the issuing enterprise itself; contributing capital or purchasing shares in other enterprises; and increasing working capital.

2. The provincial-level state management agency for real estate business has received a document responding to the investor regarding whether the housing units are eligible for sale or lease-purchase.

>>> See more: Conditions  for guarantee housing formed in the future

Procedure for obtaining a guarantee for housing under construction

The procedure for providing bank guarantees for housing under construction is specifically stipulated in Clause 2, Article 13 of Circular 61/2024/TT-NHNN, and includes the following steps:

Step 1: Decision to grant guarantee

Commercial banks and branches of foreign banks will review, assess, and decide whether to grant a guarantee to the investor based on the investor’s request or the counter-guarantor’s request.

Step 2: Sign the guarantee agreement.

The guarantor and the investor will sign a guarantee agreement. Accordingly, the guarantee agreement is effective from the time of signing until the guarantee obligations of all guarantee letters to the buyer expire and all obligations of the investor to the guarantor under the guarantee agreement have been fulfilled (unless the parties agree to terminate the guarantee agreement before its expiration).

Step 3: Issue the commitment letter to issue the guarantee letter.

After signing a housing purchase or lease-purchase contract, which stipulates the financial obligations of the developer, the developer sends the housing purchase or lease-purchase contract to the guarantor to request the guarantor to issue a guarantee letter to the buyer;

The guarantor, based on the housing purchase/lease-purchase contract, the guarantee agreement, and the commitment letter to issue the guarantee letter, issues the guarantee letter and sends it to the investor to provide the guarantee letter to the buyer.

Rights and obligations of the guarantor

The bank must issue guarantee letters upon receiving valid contracts and perform financial obligations if the developer fails to deliver.

• Long Phan Consulting Company monitors bank announcements on corporate websites if a guarantee agreement is terminated early.
• We verify the bank’s obligation to continue honoring previously issued letters until their expiration.
• Our experts ensure the bank only rejects claims if the buyer exceeds statutory payment ratios under Article 25.

Rights and obligations of the investor

Developers must provide individual guarantee letters to buyers and accurately report all received prepayments to the bank.

• Consultants verify that developers cease providing expired commitment letters once the master agreement ends.
• Long Phan Consulting Company assists in calculating the exact prepayment amounts for individual buyers to update the bank.
• We represent developers in notifying provincial housing authorities about the status of bank guarantees.

Buyers are entitled to receive individual guarantee letters covering their prepayments plus other agreed amounts.

• Our team audits the guarantee’s validity period, which must extend at least 30 days beyond the committed handover date.
• Long Phan Consulting Company assists buyers in preparing claim dossiers if the developer breaches handover commitments.
• We provide legal guidance on the choice to opt-in or out of the financial guarantee during contract negotiation.

Long Phan Consulting Company provides consulting services on bank guarantees for future-built housing

Long Phan Consulting Company offers professional expertise in managing the complexities of bank guarantees in the real estate sector. We provide technical solutions to secure project feasibility and protect stakeholder interests.

• Conduct a legal review of the project and assess its eligibility for a bank guarantee.
• Providing advice on transaction structuring and completing the necessary documents for a bank guarantee application.
• Review and standardize sales contract terms to align with the guarantee mechanism.
• The representative will work with and negotiate with the bank regarding the terms, fees, and scope of the guarantee.
• Providing advice on risk control and handling situations arising related to guarantee obligations.

>>> See more: Important Criteria When Selecting Off-Plan Housing for Investment

Frequently Asked Questions about Guarantees for Under Construction Housing

Below are some frequently asked questions regarding bank guarantee regulations for future housing projects; please refer to them:

How is the maximum amount that a bank can guarantee for each buyer determined?

The guarantee balance for each customer is determined not to exceed the total amount of advance payments that the developer is legally permitted to receive. This advance payment is usually no more than 70% or 95% of the contract value, depending on the specific case. In addition, the guarantee balance also includes other amounts agreed upon by the parties in the purchase or lease-purchase contract. Determining the guarantee balance must ensure it is consistent with the content and value of the signed contract.

(Legal basis: Clause 6, Article 13 of Circular 61/2024/TT-NHNN.)

How long is a bank guarantee valid?

The guarantee letter is valid from the date of issuance until at least 30 days after the deadline for the developer to fulfill its financial obligations to the buyer if the developer fails to deliver the housing unit as committed in the purchase or lease-purchase contract, except in cases where the guarantee obligation terminates as stipulated in Article 23 of Circular 61/2024/TT-NHNN. If the guarantor and the developer terminate the guarantee agreement before the deadline, the guarantee letters issued to the buyers previously remain valid until the guarantee obligation terminates.

(Legal basis: Point a, Clause 5, Article 13 of Circular 61/2024/TT-NHNN.)

Is the developer required to send a copy of the guarantee commitment document to the buyer?

Yes, based on the guarantee agreement, the guarantor issues a written commitment to issue a guarantee letter to the investor, who then sends a copy to the buyer upon signing the purchase or lease-purchase agreement for the housing unit.

(Legal basis: Point c, Clause 2, Article 13 of Circular 61/2024/TT-NHNN.)

When does a bank have the right to refuse to fulfill its guarantee obligations to the buyer?

The bank has the right to refuse to fulfill its guarantee obligations for amounts that are not part of the investor’s financial obligations, or for amounts paid by the buyer exceeding the percentage stipulated in Article 25 of the Law on Real Estate Business, or if the buyer fails to present the guarantee letter issued by the guarantor to the buyer.

(Legal basis: Point a, Clause 8, Article 13 of Circular 61/2024/TT-NHNN.)

What financial obligations of the investor are covered by the guarantee?

The developer’s financial obligations to the buyer, guaranteed by a commercial bank or foreign bank branch, include the amount the developer is obligated to pay the buyer if the developer fails to deliver the housing unit within the timeframe committed in the signed purchase or lease-purchase contract. This includes: the amount the developer has received as an advance from the buyer after the buyer has received the guarantee letter from the guarantor, and other amounts (if any) that the developer is obligated to pay the buyer according to the agreement in the signed purchase or lease-purchase contract.

(Legal basis: Point b, Clause 4, Article 13 of Circular 61/2024/TT-NHNN.)

What happens to the guarantee letter if the developer and the bank terminate the guarantee agreement prematurely?

The guarantees previously issued to the buyer remain valid until the guarantee obligation is completely terminated, regardless of whether the framework agreement between the bank and the developer has been canceled.

(Legal basis: Point a, Clause 5, Article 13 of Circular 61/2024/TT-NHNN.)

What responsibilities does the bank have when terminating a guarantee agreement with the developer?

In the event that the guarantor and the investor terminate the guarantee agreement prematurely, no later than the next working day, the guarantor must publicly announce on its website and notify in writing the provincial housing management agency in the area where the investor’s housing project is located. This notification must clearly state that the guarantor will no longer issue guarantee letters to buyers who have signed purchase or lease-purchase contracts with the investor after the termination of the guarantee agreement with the investor. For guarantee letters already issued to buyers, the guarantor will continue to fulfill its commitment until the guarantee obligation is terminated.

(Legal basis: Point b, Clause 8, Article 13 of Circular 61/2024/TT-NHNN.)

>>> See more: What Regulations Must Be Met to Trade Future-Formed Housing?

Conclusion

Bank guarantees for future housing are essential for transaction security and market stability. Adhering to the standardized process—from project assessment to individual certificate issuance—is decisive for the project’s feasibility. For timely legal support and technical guidance on future housing guarantees, contact Long Phan Consulting Company via hotline 1900636389