Vietnam: Pilot policies addressing challenges of commercial housing projects – CNC

The Ministry of Natural Resources and Environment recently submitted to the Government the draft of the National Assembly’s Resolution on the pilot implementation of commercial housing projects in non-residential lands whose land use rights are to be obtained via agreements or already available (“Pilot Draft”).

Pilot Draft is expected to address the investors’ concerns that are yet to be relieved in the 2024 New Land Law.

Download PDF here: [pdf] Vietnam Pilot policies addressing challenges of commercial housing projects

Policy’s background

The drafts of the 2024 Land Law were expected to permit the enterprises conducting real estate business (“real estate enterprises”) to implement commercial housing projects in non-residential lands whose land use rights are (1) to be obtained via agreements or (2) already available.

However, the official 2024 Land Law does not do so. Some probable reasons for this are that these methods will cause the “excessive” growth of real estate products, the existence of abandoned projects, and the situation where investors acquire lands for the purpose of “speculation”.[1]

Notwithstanding the above drawbacks, there are justifications given on these methods, especially the roles to unfreeze, recover, and promote the development of the real estate market, thereby initiating the recovery and growth of the economy after recent macro-scale changes. This is also the main reason why the Pilot Draft is quickly drafted for promulgation in 2025 under the proposal of the Communist Party of Vietnam.[2]

02 methods for pilot implementation of commercial housing projects

Summary of the Draft’s contents

The Pilot Draft governs commercial housing projects selected for the pilot policy implemented in non-residential lands whose land use rights are (1) to be obtained via agreements or (2) already available.

There are general requirements in which pilot projects shall meet, including:

Consistent with the district-level land use plans or construction plans and urban plans;
Consistent with the approved local program and plan of housing development;
Complied with the requirements set out by the laws by real estate enterprises permitted to change land use purposes for project implementation.

Additional regulations regarding the implementation of commercial housing projects in non-residential lands whose land use rights are to be obtained via agreements

This method might be performed via either purchase or capital contribution agreement in which land use rights are the subject, provided that concerned lands meet the requirements of the transaction.

Along with the above general requirements, pilot projects need the Approval of the agreement by which land use rights are to be obtained by the provincial People’s Committee.

The Pilot Draft also foresees the case if any land user has yet to obtain the Certificate regarding land and properties attached to land but said land user meets the requirements for obtaining the Certificate, the real estate enterprise may obtain the land use rights from such land user without performing any procedures to obtain the Certificate before implementing the transaction.

Implementation of commercial housing projects in non-residential lands whose land use rights are already available

This method might be used for most non-residential lands, except the unused lands under Article 9.4 of the 2024 Land Law.

If any real estate enterprise that already holds land use rights wishes to expand the project’s area, such enterprise may obtain additional lands for the project via method (1).

Concurrently, the Pilot Draft also provides that if any project of method (2) involves any partial area of land under the State’s management that is insufficient to become a separate project, the State shall grant such land to investors to implement the project without land auction and competitive bidding.

Criteria for selecting pilot projects

The Pilot Draft suggests two options on the criteria for selecting pilot projects so that the provincial People’s Committee could prepare a list of pilot projects depending on the situation in the local area to submit to the same-level People’s Council.

Option 1: To apply the upper limit for pilot implementation of “30% of the number of projects” and “20% of the total area” of the approved needs for development of housing projects under the program and plan of housing development until 2030. As there is a limit on the number of pilot projects, projects that meet the following requirements shall be prioritized:

Land in urban areas or approved planning areas for urban development;
The real estate enterprise holds land obtained from the State via land allocation where land use fee shall be paid or land lease where lump sum rental payment shall be paid;
Having any facility relocated due to environmental pollution or being inconsistent with the construction plans and urban plans.

Option 2: Any project might be selected for the pilot policy, provided that:

The investor obtained the approval of the provincial People’s Committee for the implementation of commercial housing projects in lands whose land use rights are to be obtained via agreement before the effective date of the 2024 Land Law;
The investor holds land obtained from the State via land allocation where land use fee shall be paid or land lease where lump sum rental payment shall be paid;
The investor holds non-agricultural land attaching any facilities relocated due to environmental pollution or being inconsistent with the construction plans and urban plans.

Suggesting 02 options on the criteria for selecting pilot projects

The motive behind Option 1 (“upper limit” option) regarding the limit on the numbers and areas of projects for pilot implementation is to harmonize with the other land use methods of implementation of commercial housing projects under the 2024 Land Law (such as land auction and competitive bidding).[3]

However, Option 1 is also viewed as unfair by several experts. To be specific, investors of pilot projects facilitated for dominant positions on the market enjoy unfair enrichments in comparison to those who are not selected for pilot policy. Thus, there will be inequality among real estate enterprises, and the local authorities regarding budget revenues received from land.[4]

Expectations for the policy

The two methods of the Pilot Draft are methods of voluntary land transfers with the following merits: fast track of land handover, reasonable solution to the issue of interest sharing between investors and land users, significant reduction in social costs and claims against administrative authorities due to land revocation.

The pilot policy is scheduled to take effect within 05 years starting from 01 January 2025. This policy is expected to fully optimize the above merits to address the challenges faced by real estate enterprises regarding land access, as well as improve the investment environment, thereby enhancing the competitive advantage of the nation.

Additionally, during the implementation of the pilot policy, competent authorities need to efficiently exercise their power to supervise and evaluate so that the drawbacks regarding the policy implementation can be lessened, thus gaining hoped-for results upon the expiration of the pilot policy.