Solutions for selecting a safe FDI structure in industrial real estate

Selecting a secure FDI structure in industrial real estate is essential to avoid financial exposure, transaction delays, and loss of project control. Foreign investors must assess market access requirements, real estate business restrictions, and land-use approval authority under the Law On Land. Effective structuring requires comprehensive due diligence on industrial projects, land-related financial obligations, and licensing pathways before capital deployment. Whether using land subleases, joint ventures, or project transfers, each option creates different compliance consequences. Long Phan Consulting helps investors compare structures, manage regulatory risks, and build a sustainable industrial investment strategy.

Strategic Importance of FDI Structures in Industrial Real Estate for Risk Management

The selection of an appropriate FDI structure for industrial real estate projects is not merely a choice of investment vehicle; it dictates the investor’s legal capacity to exploit land, mobilize capital, and ensure the validity of the entire transaction. Many deals fail – even after the execution of a Memorandum of Understanding (MOU) or the payment of deposits – because investors adopt unsuitable models or fail to meet market access requirements.

For a Foreign – Invested Enterprise (FIE), investing in industrial real estate requires simultaneous compliance with multiple regulatory layers. Relying solely on the Law on Investment while overlooking land-use conditions or the restricted scope of real estate business may result in the denial of an Investment Registration Certificate (IRC) or the inability to commercially exploit the project.

Foreign investors must conduct a rigorous assessment of the following legal tiers:

• Market Access Conditions: Verification of foreign ownership ratios and restricted business lines pursuant to Clause 1, Article 8 of the 2025 Law on Investment.
• Corporate Establishment: The mandatory requirement to establish a legal entity with registered “Real Estate Business” functions to implement projects or exploit infrastructure, as stipulated in Clause 1, Article 9 of the Law on Real Estate Business 2023.
• Land-Use Rights (LUR) Status: Analysis of land rental payment structures (annual vs. one-off payments), subleasing rights, and the capacity to mortgage or transfer land use rights.
• Foreign Exchange and Profit Remittance: Compliance with regulations regarding investment capital flows, capital contribution payments, share transfers, and the repatriation of profits derived from industrial park operations.

In practice, the chosen investment structure determines whether an investor gains “Asset Control” or merely “Leasehold Exploitation Rights.” This distinction is a strategic cornerstone when choosing between land subleasing, joint ventures, or the M&A of a project company. Any misalignment in this structure may lead to the transaction being deemed a “sham” or a violation of investment conditions.

Furthermore, current regulations strictly limit the scope of real estate activities for FIEs. Investors are only permitted to engage in authorized activities, such as investing in infrastructure for sublease or acquiring projects for commercial operation, pursuant to Point b and Point g, Clause 3, Article 10 of the Law on Real Estate Business 2023.

For industrial park infrastructure projects, the authority to grant Investment Policy Approval now rests with the Provincial People’s Committee, pursuant to Point a, Clause 3, Article 25 of the Law on Investment 2025. While this decentralization significantly accelerates approval timelines, it necessitates higher standards for dossier completeness and the investor’s ability to demonstrate financial feasibility.

Comparative Analysis of 05 Common FDI Structures for Industrial Real Estate under New Regulations

Selecting the correct investment structure directly dictates the speed of implementation, the level of land fund control, and the overall legal security of the deal. Each FDI model for industrial real estate is tailored to specific objectives, such as manufacturing, logistics, infrastructure development, or land fund M&A. Investors must simultaneously evaluate market access conditions, commercial exploitation rights, and land-related financial obligations before finalizing their investment model.

Establish a new foreign-invested economic organization to lease land in the industrial park

This is the most prevalent structure for manufacturing, logistics, and warehousing enterprises. This model allows investors to directly control operations without inheriting the historical legal liabilities of a target company.

• Applicability: Used when the primary need is factory exploitation or subleasing land use rights associated with existing industrial park infrastructure.
• Constraint: Commercial exploitation rights are more restricted compared to infrastructure development or project M&A models.
• Requirement: Pursuant to Clause 1, Article 9 of the 2023 Law on Real Estate Business, investors must establish an entity with registered real estate business lines or sectors appropriate to the project activity.

Joint venture with a Vietnamese company that owns land or infrastructure projects

Joint ventures are ideal when the Vietnamese partner possesses advantages in land funds, zoning, local relationships, or operational experience. Foreign investors leverage these assets to accelerate implementation and reduce initial land-related administrative burdens.

• Risk Factor: This model frequently generates governance disputes. Without a meticulously drafted Joint Venture Agreement (JVA) and Shareholders’ Agreement (SHA), foreign investors risk losing veto rights or facing equity dilution.
• Key Controls: Investors must secure veto rights over material asset transactions, capital increases, and define clear exit mechanisms, pre-emptive rights, and deadlock resolution protocols.

Contributing capital, purchasing shares, or acquiring capital contributions to economic organizations

This corporate M&A structure provides rapid access to the land fund and existing legal framework of a target company. Instead of applying for a new project, the investor acquires control of an entity already operating or owning an industrial project.

• Regulatory Trigger: If the transaction results in foreign ownership exceeding 50% of the charter capital, investors must perform registration procedures for capital contribution or share purchase prior to changing shareholders, pursuant to Point b, Clause 3, Article 21 of the 2025 Law on Investment.
• Financial Risk: Pursuant to Clause 1, Article 9 of Decree No. 102/2024/ND-CP, this structure is only secure if the target entity holds land via “lump-sum” rental payments or State-allocated land with land-use fees. Contributing capital using land rights under “annual” rental payments is prohibited.

Acquisition of an Entire or Partial Industrial Real Estate Project

This structure allows investors to take over an industrial project directly rather than buying the company that owns it. It is a preferred model for investment funds or infrastructure developers seeking rapid land fund expansion.

• Key Advantage: The transferor is not required to have completed the Land Use Rights Certificate for the entire project before the transfer.
• Financial Obligation: Pursuant to Clause 3, Article 40 of the 2023 Law on Real Estate Business, the transferor must have fulfilled all land-related financial obligations regarding the transferred area.
• Timeline: Approval takes approximately 30 days for projects under the Provincial People’s Committee or 45 days if under the Prime Minister’s authority, pursuant to Article 42 of the 2023 Law on Real Estate Business.

Direct investment in new industrial park infrastructure projects

This model offers the highest level of control but requires the most significant financial and legal management capacity. The investor handles investment, land, zoning, construction, and environmental compliance throughout the project lifecycle.

• Phasing Requirement: Pursuant to Point a, Clause 2, Article 9 of Decree No. 35/2022/ND-CP, projects exceeding 500 hectares must be phased, with each phase not exceeding 500 hectares.
• Occupancy Condition: New projects are only considered for establishment if the average occupancy rate of existing industrial parks in the province has reached at least 60%, pursuant to Clause 6, Article 9 of Decree No. 35/2022/ND-CP.

Mandatory Legal Prerequisite Checklist for Selecting Investment Structures

The following legal checklist serves as a mandatory filter before any capital disbursement, MOU execution, or share transfer. In Vietnam’s industrial real estate sector, oversights during the initial review can paralyze transactions during the IRC, ERC, or land-transfer approval stages. Legal counsel must evaluate each layer of conditions based on the investment objective and the specific Foreign-Invested Enterprise (FIE) scope.

This checklist should not be treated as a mere administrative procedure. The real value of Legal Due Diligence lies in detecting conflicts between commercial objectives and legal limitations before funds are transferred into a transaction.

Safety Matrix: Comparing Land Sublease, M&A, and Joint Ventures

No “perfect” FDI structure exists; selection depends on the trade-off between speed, control, and risk appetite. While manufacturers prioritize rapid deployment, infrastructure funds typically prioritize long-term land control and commercial exploitation rights.

For manufacturing enterprises requiring immediate operations, subleasing land use rights with existing infrastructure is often the safer choice, as it bypasses risks related to land origin and shareholder disputes. Conversely, Corporate M&A offers rapid scale but requires verifying that the target company is not using land with “annual” rental payments, as such land cannot be used for capital contribution pursuant to Clause 1, Article 34 of the Law on Land 2024.

Identification of Critical Legal Risks and Penalties for Sham Transactions

The most profound risks in industrial FDI do not always stem from purchase prices or project timelines, but rather from legal structures that fail to reflect the true nature of the transaction. Misalignment in M&A, joint ventures, or pre-closing deposits can lead to voided agreements, project stagnation, or the total loss of capital control.

Nominal/Proxy Holdings and Sham Transactions

Proxy structures (nominee arrangements) are often utilized to circumvent market access restrictions or land use limitations. This represents a severe risk as the legal record does not reflect the actual beneficiary.

• Regulatory Sanction: Pursuant to Clause 1, Article 68 of Decree No. 96/2026/ND-CP, the investment registration authority has the power to terminate a project, in whole or in part, if the transaction is determined by a court or arbitration to be a “sham civil transaction.”
• Operational Risk: Investors risk losing control of the project and may be unable to recover funds transferred to a nominee or prove legal standing during disputes.

Confusion between land sublease rights and land use rights transfer rights

In industrial zones, manufacturing investors typically only have the right to lease the land use rights associated with the infrastructure. This right does not equate to the right to transfer land use rights, unlike infrastructure developers or entities with full land rights.

A common mistake is viewing land sublease contracts as assets that can be freely transferred, mortgaged, or contributed as capital. If the land is leased with annual payments, the business only has the right to sell or lease the legally owned assets on the land; it is not permitted to transfer or contribute the land use rights as capital, according to Clause 1, Article 34 of the 2024 Land Law.

In M&A projects involving companies, a crucial point of scrutiny is the method of land lease payment. If the payment method (a lump sum or annual payments) is not clearly defined, investors may misvalue the asset and acquire non-transferable rights.

Risks related to deposits, MOUs, and project documentation are insufficient

An MOU, term sheet, or deposit cannot replace the legal conditions of a project. Transferring funds before verifying land finance obligations, planning, environmental conditions, and transfer conditions can put the investor at a disadvantage in negotiations.

The law strictly prohibits the falsification of documents or the intentional misrepresentation of information regarding real estate projects, as stipulated in Clause 2, Article 8 of the 2023 Law on Real Estate Business. Therefore, all data in the data room must be cross-referenced with the original records at the competent authority.

For construction projects under construction, the investor is only allowed to collect a deposit of no more than…5%The selling price or lease-purchase price is determined according to Clause 5, Article 23 of the 2023 Law on Real Estate Business. This limit needs to be carefully checked if the transaction structure includes a deposit or reservation fee.

Risks related to land finance obligations and land use progress

Land financing obligations are a hidden risk in many industrial park M&A deals. A project with complete planning documents may still be rejected if the transferor has not completed land lease payments or related financial obligations.

When transferring all or part of a real estate project, the transferring investor is required to fulfill their financial obligations regarding land to the State according to Clause 3, Article 40 of the 2023 Law on Real Estate Business. This is a condition that needs to be checked before signing a SPA or making installment payments.

If the project is behind schedule, the investor will only be granted a maximum extension of land use rights 24 months. After this period, the State may reclaim the land without compensation for the land, assets attached to the land, and remaining investment costs, in accordance with Clause 8, Article 81 of the 2024 Land Law.

The process of consulting on establishing a safe FDI structure and the licensing roadmap

A secure FDI structure cannot be built solely from M&A contracts or IRC documents. Investors need to implement a synchronized roadmap from investment objectives, legal due diligence, transaction design to licensing procedures and post-investment governance.

In practice, many transactions fail not because of a lack of capital, but because of incorrect legal procedures. Particularly with industrial real estate, signing a Spam Agreement (SPA) or disbursing funds before completing the Legal Due Diligence often creates irreparable risks later on.

Identify investment objectives and exploitation models

Investors need to clearly define their core objectives from the outset to choose the appropriate structure. Each objective will entail different legal requirements and licensing strategies.

Common targets include:

• Rent land or factory space for production.
• Logistics, warehousing, or data center operations.
• M&A involves companies that own projects or land plots.
• Invest in industrial park infrastructure to facilitate land leasing.
• The joint venture aims to develop and operate the project.

Incorrectly defining objectives can lead to the selection of the wrong industry, capital structure, or investment profile that does not meet market access requirements.

Review market access conditions and investor eligibility

This is a fundamental check before proceeding with any transaction. Investors need to assess the equity ownership ratio, restricted business sectors, and applicable conditions for foreign-invested economic organizations.

In the event that an M&A transaction results in foreign investors holding more than [amount] shares, 50% of charter capital Investors must register their share purchase before any change in shareholders, as stipulated in Point b, Clause 3, Article 21 of the 2025 Investment Law.

For projects located in sensitive areas such as coastal, border, or island regions, the dossier must also obtain opinions from the Ministry of National Defence and the Ministry of Public Security, as stipulated in Clause 3, Article 10 of Decree No. 102/2024/ND-CP.

Implement Legal Due Diligence for target land, projects, and businesses

Legal Due Diligence is a crucial step in determining the safety of the entire transaction. The goal is not just to check the paperwork, but to comprehensively assess the legality of the land use rights and the feasibility of transfer.

The document groups that need to be reviewed include:

• Documents related to land allocation, land leasing, and methods of land lease payment.
• Planning, building permits, and environmental permits.
• Land-related financial obligations, taxes, and infrastructure fees.
• Mortgage contracts, disputes, or restrictions on transferability.
• Conditions for transferring a project or transferring capital.

If the target business is leasing land on an annual payment basis, investors need to be especially cautious because the law does not permit contributing capital in the form of land use rights in this case, according to Clause 1, Article 34 of the 2024 Land Law.

Designing the transaction structure and risk control contract set

After completing the due diligence, investors need to design a trading structure that matches their desired level of control and the ability to allocate risk among the parties involved.

Commonly used contract sets include:

• Joint Venture Agreement (JVA).
• Shareholder Agreement (SHA).
• Share purchase agreement (SPA).
• Industrial land lease agreement.
• EPC contract or operational management contract.

For joint ventures or M&A, veto clauses, anti-dilution, deadlock, and divestment mechanisms should be designed from the outset to avoid governance disputes after disbursement.

Licensing and Investment Adjustment Procedures

Following structure finalization, the enterprise must implement or adjust the IRC/ERC and register capital contributions.

Competent Authorities: For industrial park projects, the Management Board of Industrial Parks, Export Processing Zones, or Economic Zones is the direct authority for issuing Investment Registration Certificates, pursuant to Point b, Clause 3, Article 34 of Decree No. 96/2026/ND-CP.

Long Phan Consulting Company provides consulting services on FDI investment structuring in industrial real estate

Industrial real estate FDI in Vietnam is governed by a complex intersection of investment, land, and real estate business laws. Even minor errors in structure design or due diligence can result in the loss of commercial exploitation rights. Long Phan Consulting Company partners with foreign institutional investors and infrastructure funds to engineer secure investment structures and optimize long-term operational viability.

• Reviewing market access conditions and foreign ownership limits for specific industrial sectors.
• Designing bespoke FDI structures (100% Foreign Capital, Joint Ventures, SPVs, or Project M&A).
• Conducting comprehensive Legal Due Diligence on land funds, zoning plans, and environmental permits.
• Drafting and negotiating high-stakes bilingual Joint Venture Agreements (JVA), Shareholders’ Agreements (SHA), and Share Purchase Agreements (SPA).
• Managing the issuance and adjustment of IRCs, ERCs, and capital contribution registrations.

For a preliminary evaluation of your legal structure or project risks, please forward your project dossiers and draft agreements to our specialists via Email: info@longphanpmt.com or Zalo/WhatsApp: 0906.735.386 

Frequently Asked Questions regarding FDI structure in industrial real estate

Navigating the development of industrial real estate projects involves specific legal hurdles regarding documentation transitions and land use terms. Leveraging “legal safety buffers” allows foreign investors to protect profit margins and optimize capital structures. The following expert insights address critical compliance strategies.

Conclusion

Industrial real estate FDI is only truly secure when the transaction structure is engineered to align with investment objectives, land fund control requirements, and the specific legal conditions applicable to Foreign-Invested Enterprises. Investors must meticulously verify land financial obligations, project transfer conditions, and exploitation limits across sublease, joint venture, and M&A models to avoid the risk of voided transactions or loss of control post-disbursement. For specialized advisory on investment structuring, Legal Due Diligence, and FDI licensing roadmaps, contact the Hotline at 1900636389 of Long Phan Consulting Company.