How Much Deposit Is Allowed When Buying Real Estate? The 5% Cap Under the 2023 Law on Real Estate Business

A deposit is the opening step in most real estate transactions, yet it is also where the greatest number of disputes and risks arise for buyers. For many years, a considerable number of developers exploited deposit agreements, capital-contribution agreements or reservation agreements to mobilise customers’ funds at a very early stage, when the project was not yet legally eligible for sale and sometimes before land obligations had even been fulfilled. The consequence was that, once a project stalled, buyers who had paid large deposits had no solid legal basis on which to recover them and were left in a weak position for years.

The 2023 Law on Real Estate Business, effective from 1 August 2024, added a landmark provision intended to put an end to this practice: it caps the deposit amount and restricts the earliest point at which a deposit may be received. This article analyses the content, the underlying rationale and the practical legal considerations surrounding the new rule.

Mục 01The 5% cap and the timing condition for receiving a deposit

Under Article 23.5 of the 2023 Law on Real Estate Business, a developer of a real estate project may collect a deposit of no more than 5% of the sale or hire-purchase price of the housing or construction works from the depositing party, and only once the housing or construction works satisfy all the conditions for being put into business as prescribed. The provision restricts two elements at once: the ceiling of the deposit and the earliest permissible time to receive it. This is a fundamental departure from the 2014 Law on Real Estate Business, which neither limited the deposit amount nor tied the receipt of a deposit to the project’s legal eligibility.

The significance of the rule lies in the way it severs the route to disguised capital mobilisation. Where a developer may receive at most 5%, and only after the project qualifies for business, the deposit returns to its true nature as a means of securing the conclusion of a contract, rather than a channel for appropriating the funds of hundreds of customers while the project exists only on paper. For buyers, this is an important layer of protection that reduces the risk of tying up capital in projects that are not yet legally eligible.

Mục 02The deposit agreement must be transparent as to price

The Law also requires the deposit agreement to state clearly the sale or hire-purchase price of the housing and construction works, and of the floor area within the construction works. This requirement appears simple but offers buyers considerable protection. In practice, many deposit agreements previously recorded only a provisional price or left the price open, so that when the formal sale and purchase contract was signed the developer would put forward a much higher price, placing the buyer in a fait accompli: either accept the new price or forfeit the deposit. When the price is fixed transparently from the outset in the deposit agreement, the buyer is protected against a price increase imposed after payment has already been made.

To illustrate the impact of the 5% cap, take the example of an apartment priced at three billion dong. Previously, a developer could demand a reservation deposit of several hundred million, or even a billion dong, while the project was not yet eligible. Under the new rule, the maximum deposit is only 150 million dong, that is 5% of three billion, and it may be collected only once the project qualifies for business. The sum the buyer must part with at the riskiest stage is therefore substantially reduced, and is tied to a project resting on a clearer legal foundation.

Mục 03Distinguishing the deposit from the sale contract and payment instalments

One point that must be clarified is that the 5% cap applies only to the deposit, that is the sum securing the conclusion of the contract, and is not a limit on the entire payment process. After a contract for the sale of off-plan housing is signed, payment follows the progress-based payment mechanism with its own ceilings set out in Article 25 of the Law. The deposit is usually credited against the first payment instalment. Confusing the deposit with progress-based payment may cause a buyer to fail to realise that they are being charged above the permitted limit at each stage.

As for arrangements bearing other names such as reservation, expression of interest or capital contribution, but whose substance is the mobilisation of customers’ money while the project is not yet eligible, buyers must exercise the utmost caution. An arrangement that is not, in form, a deposit but whose content involves collecting money in excess of 5% or before the eligibility conditions are met still carries legal risk and may have its lawfulness called into question. Buyers should require the developer to provide documents proving that the project qualifies for business before paying any sum.

Mục 04Common risks and how to avoid them

The most common risk is that a buyer pays on the strength of promises and marketing materials without verifying the project’s actual legal status. Before placing a deposit, a buyer should confirm that the project has a decision on land allocation or land lease, has fulfilled its financial obligations relating to land, holds a construction permit where one is required, and, in the case of off-plan housing, has a written confirmation from the provincial housing authority that it is eligible for sale. Such verification helps ensure that the 5% deposit is placed in a project with a solid legal foundation.

Another risk lies in unfavourable deposit-forfeiture clauses. A deposit agreement should provide for balanced consequences where either party is in breach, avoiding a situation in which the buyer loses the deposit for withdrawing while the developer bears no commensurate sanction for late handover. In practice, the real estate lawyers of HTIC Law Firm carefully review deposit-forfeiture clauses and refund conditions to protect clients’ interests before signing.

Mục 05Frequently asked questions

Is it lawful for a developer to require a deposit of 10% of the sale price? Where the party receiving the deposit is the developer of a real estate project and the subject matter is housing or construction works within the project, a deposit exceeding 5% of the sale price is not consistent with Article 23.5 of the 2023 Law on Real Estate Business. The buyer has the right to refuse and to require compliance with the rule. A developer deliberately collecting an amount above the cap may be signalling that the project is facing funding or legal difficulties.

Is a house sale between two individuals subject to the 5% limit? The 5% cap is designed to apply to the real estate business activity of a project developer. A sale of housing or land between individuals not carried out for the purpose of doing business under a project is subject to a deposit agreed by the parties under the general rules of civil law. Even so, in an individual transaction, a deposit agreement that is clear as to price, term and consequences of breach remains a necessary condition for preventing disputes.

Mục 06Conclusion and recommendations

The 5% deposit cap and the timing condition for receiving a deposit under Article 23.5 of the 2023 Law on Real Estate Business represent a significant step towards a healthier market. However, their protective effect is realised only when the buyer proactively verifies the project’s legal eligibility and carefully reviews the terms before paying. Businesses and individuals may consult the real estate lawyers of HTIC Law Firm for support in conducting legal due diligence on a project and drafting a safe deposit agreement.

HTIC Law Firm specialises in real estate legal advice for domestic enterprises and FDI investors. Fixed fee quotation per matter or project — Hotline +84 379 044 299.

This article is for reference only and does not replace legal advice on any specific matter.