Ensuring Investors Don’t Benefit from “Geographical Differential” in Land Acquisition for Residential Projects
The real estate market is set to experience a much-needed boost with the proposed draft of the “Pilot Project Plan to Grant Authorized Approvals to the National Assembly to Issue Resolutions Permitting the Pilot Implementation of Commercial Residential Projects using Land Use Rights Agreements or Other Land Use Rights not Specified by the Law.” This draft is considered urgent and necessary by Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA).
If approved by the National Assembly, this plan will allow businesses to negotiate the use of suitable land for commercial residential projects that do not conform to the approved investment policy for residential land. Chau believes that this initiative will address the challenges and difficulties faced by the real estate market, ensuring its safe, healthy, and sustainable development.
One of the key benefits of this plan is that it will resolve the current limitations faced by investors. Presently, businesses can only negotiate land use rights for residential purposes, or if they already possess land use rights for residential or other purposes, they can utilize the land for commercial residential projects. However, this arrangement has its restrictions.
The Law on Land 2024 does not permit investors to negotiate land use rights for both residential and non-residential purposes, or for non-residential land. As a result, it does not fully realize the intention of the Central Party Committee. The voluntary land use transfer mechanism, in addition to the state’s land use rights retrieval mechanism for economic and social development, aims to develop, manage, and exploit the land fund for land use rights auctions and project investor selection. This mechanism has been in place since the Land Law of 1993 and has continued to date.
This mechanism offers several advantages. It reduces the time required to transfer land from land users to investors if there is mutual agreement, ensures fair sharing of benefits between investors and land users, takes into account public interests represented by the State, and considers real estate taxes and state budget regulations. It effectively addresses the issue of benefit sharing and harmony between land users and investors.
Furthermore, restricting land use negotiations to only residential land will not provide enough land for large-scale commercial residential projects and urban areas with comprehensive technical and social infrastructures, as the largest residential land area permitted under land law regulations is only up to 400 square meters. Even the largest existing residential land areas in urban areas are only a few thousand square meters.
It is crucial to prevent investors from inappropriately benefiting from the “geographical differential” when implementing land use rights transfer agreements between citizens and businesses for urban and commercial residential projects. The proposed draft plan is essential and aligns with relevant legal regulations and practical applications of the Land Law of 2013.
Key considerations include preventing financial losses to the state budget and avoiding the misappropriation of public assets, such as land resources. Strict and coherent regulations on land prices outlined in the Law on Land 2024 will prevent undue benefits for investors. Ultimately, the state is responsible and has the authority to “determine land prices, determine land pricing methods, and determine the cases and conditions for applying land pricing methods” for land use charges and land lease fees related to real estate projects and commercial residential properties.
By implementing this pilot project plan, the real estate market in Vietnam can overcome its challenges and create a favorable environment for sustainable growth and development.