What impact can the 2024 Land Law have on the real estate market?

The 2024 Land Law (amended) has been approved by the National Assembly, consisting of 16 chapters and 260 articles, and will take effect from January 1, 2025. According to many experts and research units, removing the land price framework 5 years, clear regulations on land valuation methods are important points, greatly affecting the real estate market.

Previously, the Government was responsible for issuing a land price framework every five years for each type of land, according to each region. After that, localities used this framework as a basis for building land price tables.

The revised Land Law no longer mentions regulations on land price frameworks. Instead, in Article 159, the land price list will be announced for the first time by the People's Committees of the provinces on January 1, 2026 and they will be responsible for amending and supplementing this price list annually. Basically, the new regulation will help the state's land price list approach the market price.

The Vietnam Association of Realtors (VARS) believes that removing the land price framework demonstrates the State's determination to maximally protect the legitimate rights and interests of the people, and also creates a favorable environment to regulate the real estate market towards transparency and fairness.

The annual land price list also helps ensure a harmonious balance of interests between parties in the negotiation and site clearance process, thereby limiting disputes and helping the real estate market develop sustainably, according to VnDirect Securities Company.

The revised Land Law also stipulates four valuation methods and determines each specific use case, including comparison, income, adjustment coefficient and surplus. Of which, surplus - the method considered the most important and popular has been retained. The surplus method will be applied in cases where the land plot or land area for project implementation does not meet the conditions for applying the comparison and income methods but the total revenue and development costs of the project can be estimated.

Last year, some opinions proposed to abolish this widely applied land valuation method; not to include land valuation methods in the law. Previously, land valuation methods were regulated in Decree 44 on land prices.

According to MB Securities Company (MBS), the above clear regulation will also speed up the process of resolving land valuation issues - the biggest legal bottleneck for real estate businesses today. This unit pointed out a number of projects that will be cleared when the law comes into effect, such as Izumi City (Nam Long), Gem Riverside (Dat Xanh). Industrial real estate also benefits when the new law facilitates the acceleration of the process of converting land use purposes.

However, there are still some concerns with the new regulation. VARS believes that removing the land price framework to determine according to market prices may require the State to prepare sufficient budget resources to ensure clearance and compensation. This unit also raises the question of whether when land prices are close to market prices, it will cause enterprises' land use costs to increase, and real estate prices will continue to escalate.

MBS also believes that adjusting the land price list will also increase the land use costs of enterprises, affecting the gross profit margin of investors. However, according to MBS, the increase will depend on the guiding circular of the law when stipulating the adjustment coefficient for each area and the level of land price adjustment in localities.

GP Invest Chairman Nguyen Quoc Hiep is concerned about whether the one-year land price list is too short, as it could cause both businesses and local authorities to rush, as they have to immediately update the price for this year (the land price list will be issued on January 1st each year).

According to Mr. Hiep, another important point in this law specifically regulates projects that are allocated land through land use rights auctions or investor selection bidding in Articles 125 and 126. In particular, Article 126 stipulates that the winning investor is responsible for providing capital to implement compensation, support, and resettlement as required by state agencies and must complete these tasks within 36 months from the date of issuance of the decision recognizing the winning bid.

The Ho Chi Minh City Real Estate Association (HoREA) commented that the above regulation ensures the harmony of interests of the three related entities. Land owners are compensated at the correct market value, and there is no longer a situation where investors are "backed" to buy land from people at a low price.

Investors are clearly informed of the costs, compensation time, site clearance and land allocation for project implementation, there is no longer a situation of "brokers" hiding behind landowners causing difficulties for businesses. According to HoREA, all "differential land rent" collected into the state budget to serve the public interest will be supported and agreed by people whose land is recovered and society.

Compared to the old law, the form of compensation for people in the future will also be more diverse, such as in cash, in land with the same purpose of use, in housing and in land with different purposes of use if the person whose land is recovered has a need and the locality has conditions for land funds. This diversity can help projects to speed up the progress of compensation and site clearance.

In addition, the law also stipulates 32 cases in which the State reclaims land to implement projects and works for national and public interests in Article 79. Thus, the provisions on land reclaim are more specific than before, in which the State only reclaims land for commercial housing projects, mixed housing and commercial projects when investing in urban area construction. For other projects, investors must proactively negotiate with people to determine a reasonable compensation level. This also contributes to reducing disputes and litigation situations.

According to HoREA, Article 79 has overcome the situation of some localities reclaiming land indiscriminately as happened before. GPInvest Chairman Nguyen Quoc Hiep assessed that the new regulation creates conditions for the market to develop more realistically. In the previous period, some regulations on land reclaiming that were not close to reality also contributed to the stagnation of business projects.

In addition, the 2024 Land Law also has a group of regulations to expand land use rights for Vietnamese citizens, including those residing abroad. According to Article 4, Vietnamese people residing abroad enjoy full rights to lease, transfer, and be granted land certificates like citizens living in the country.

VnDirect believes that this will help increase the ability to attract remittances to the domestic real estate market, as well as create conditions for Vietnamese-origin personnel and talents to return to the country to work and contribute.

Similarly, access to land for foreign enterprises is also more open. Previously, foreign investors were only allowed to invest indirectly through joint ventures with a Vietnamese company. Under the new law, VnDirect analyzed, FDI enterprises are allowed to directly invest to implement projects without going through a company in Vietnam.