HO CHI MINH CITY -- Vietnam has proposed barring foreigners from buying single houses, allowing them to only purchase apartments instead.

The proposed revision to the housing law is expected to be taken up by the National Assembly during its next session, scheduled to run from Oct. 17 to Nov. 20, after having received preliminary review from the legislature's Standing Committee earlier this month.

The move would not change Vietnam's longstanding principle that land is owned collectively by the people and administered by the state. Instead, it would remove a category of home ownership currently available to foreigners, namely landed houses within approved residential developments.

The proposal stems from Resolution 21, a Communist Party directive issued on July 28 that says Vietnam "absolutely cannot privatize land and must not allow foreigners to receive the transfer of land use rights in any form." Drafters have repeatedly cited the directive while revising the law.

The party said "land speculation and landholding distorts the market, pushing" prices far past "the ability of the people to pay." The priority is "the right to have a place to live," especially building new apartments and rental housing, the resolution said.

With high economic growth in Vietnam, a major factory hub, the country's real estate market has taken off, sending home prices soaring to more than 19 times median incomes "There could be some impact on luxury villas and resort developments targeting international buyers," David Jackson, CEO of Avison Young Vietnam and Cambodia, said of the draft law. Foreigners have bought beach houses as vacation homes or to rent to tourists. A developer at one seaside project said many of his clients were Vietnamese but that the proposed restriction "doesn't help."

Jackson said a "bigger concern is that tighter restrictions could push more buyers toward alternative arrangements, reducing market transparency and increasing legal risks." Foreign buyers have used nominees, corporate structures and powers of attorney to gain access to landed property, he said, although such arrangements carry legal risks and do not necessarily confer ownership rights.

Vietnam faces a market mismatch, whereby locals want affordable homes, but businesses construct pricey flats. CBRE Vietnam head of residential project marketing Vo Huynh Tuan Kiet said the revised law could shift foreigners away from houses and toward the oversupplied units.

While the communist country has been transitioning to capitalism for decades, including opening sectors to foreigners, land remains one of the most tightly-guarded areas.

The 2014 version of the housing law introduced broad rights of non-citizens to buy flats and landed property. But the new revision, if approved, would mark a partial reversal of that policy by effectively closing the door to new purchases of landed homes by most foreigners while preserving access to apartments.

The recent draft amending the law, dated Sept. 13, excludes the about land. Instead it says, "Foreign organizations and individuals are entitled to own apartments by purchasing or entering into lease-purchase agreements" for homes from developers or other owners, or by receiving apartments as gifts or inheritance.

Apartment buildings in Ho Chi Minh City. The proposed law would preserve foreign ownership of apartments while barring new purchases of landed homes. The law would take effect on March 1 if passed by the National Assembly.

If that happens, current owners are likely to be grandfathered in, says Tran Long of law firm APFL Partners. He expects a transitional provision that "will allow foreigners who already own private houses attached to land to continue holding ownership rights," meaning they will remain "protected even if the new law no longer allows new purchases," he said.

As for those buying apartments going forward, they "will be issued with a title certificate recording the foreign buyer's apartment ownership" with "the right to use, sell, lease, donate, bequeath, or mortgage the apartment," he told Nikkei Asia.

The communist party said that land is public property under collective management, even though individuals can use it.

"Land belongs to all the people, with the state acting as the representative owner," Resolution 21 said. It added, "Land is a special resource of the nation and a space for living and development." Currently, the share of any apartment block that can be owned by foreigners is 30%. The updated law would retain that cap. An older provision, stating that non-citizens could own up to 250 houses in a single development, would no longer be relevant. Foreigners would continue to have the right to lease out their property to tenants, while still being prohibited from owning real estate in regions deemed sensitive due to matters of national defense or national security.

The government reiterated the party position, saying speculation has become a "game of manipulators" that increases inequality and diverts resources from production, innovation and productive activity.

"Unlike many countries that recognize private ownership of land, the Vietnamese constitution affirms that the land is owned by the whole people," the government said in a statement on Oct. 1.