Pilot project for businesses to buy agricultural land for housing: Will landowners stop being oppressed?

The draft Resolution of the National Assembly on piloting the implementation of commercial housing projects through agreements to purchase and build commercial housing on non-residential land (agricultural land, non-agricultural land) is being assigned by the Government to the Ministry of Natural Resources and Environment (MONRE) to complete before submitting it to the National Assembly for approval.

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Once there is a plan, the State needs to propagate and mobilize people to follow the plan. If it is left alone, it will be difficult for businesses to develop projects systematically, and there will certainly be a messy and sloppy situation.

Mr. Nguyen Chi Thanh (General Director of Ho Tay International Building Company)

Untie the knot "have 1m"²New land for housing projects"

Experts assess this as a breakthrough mechanism, bringing land closer to the market, contributing to increasing the supply of commercial housing in the coming years as this pilot mechanism will "untie" hundreds of commercial housing projects that are being "suspended" in Hanoi and Ho Chi Minh City because the project land is not related to residential land.

According to the Ho Chi Minh City Real Estate Association, there are about 20 commercial housing projects in the city that do not have a single square meter of residential land and are not recognized as investors because they do not meet the condition of having residential land within the project construction area.

Clause 6, Article 127 of the 2024 Land Law, effective from January 1, 2025, also stipulates that only cases with the right to use residential land or the right to use residential land and other land can propose commercial housing projects.

According to the Ho Chi Minh City Real Estate Association, the regulation that a project must have 1 square meter of residential land to be able to build commercial housing is one of the reasons why hundreds of commercial housing projects in Hanoi and Ho Chi Minh City cannot be implemented in the period of 2015 - 2020.

This has caused a shortage of commercial housing supply in major cities, pushing housing prices up continuously in recent years and increasing the "phase difference" between supply and demand in the market. The high-end housing segment has always dominated the market, accounting for about 70% of market supply in recent years.

The pilot project allowing enterprises to negotiate and transfer and build commercial housing on agricultural land and non-agricultural land that is not residential land, according to the Ho Chi Minh City Real Estate Association, will facilitate investors to synchronously implement large-scale urban and housing projects with full technical infrastructure, traffic, social infrastructure for healthcare, green parks, and trade and services.

Land prices will be closer to the market

Professor Dang Hung Vo, former Deputy Minister of Natural Resources and Environment, said that allowing enterprises the right to negotiate the purchase of agricultural land and non-agricultural land that is not residential land in the residential land planning for commercial housing is the right mechanism. The State still manages land through annual land use planning and plans.

Land in the planning for commercial housing must be used for commercial housing, regardless of its current status. According to Mr. Vo, the law should not be built in the direction that only land of this type or that type can be converted to residential land, this is unreasonable.

After the pilot period of the self-negotiation mechanism, the law needs to be amended to ensure that the law is a unified block. "Why is it necessary to stipulate that projects with 1m2 of residential land can build houses? No other country does that. This regulation is one of the reasons for the decrease in housing supply in recent years," Mr. Vo emphasized.

Regarding concerns about loss of land assets if enterprises negotiate to receive land use rights from people, Professor Dang Hung Vo said that loss or no loss depends on land management, not a project formation mechanism that causes loss of land assets.

"Only when there are loopholes in management will land assets be lost. If land is properly valued and financial obligations for land are fully calculated, there can be no loss," Mr. Vo affirmed.

Meanwhile, Associate Professor Dr. Nguyen Quang Tuyen, Vice Chairman of the Board of Hanoi Law University, admitted that there are still many different opinions on allowing enterprises to negotiate and receive the transfer of land use rights from people to build commercial housing, so it is necessary to pilot and summarize to build appropriate mechanisms and policies.

According to Mr. Tuyen, the State should play a leading role in land management, because land is owned by the entire people, and the State represents and manages it uniformly. Furthermore, in the current conditions of limited land resources, if enterprises do it themselves, they can ensure business rights and market principles in transfer, but the price may be very high.

If the input land price is high, the selling price of commercial housing may be higher, making it difficult for salaried workers to access housing. Mr. Nguyen Chi Thanh, General Director of Ho Tay International Building Company, also said that the mechanism of self-negotiation to receive land use rights transfer is the desire of many people who own land.

He said: "But if we have piloted the transfer according to the planning and land use plans of each locality, we need to review the regulations limiting the percentage of transfer acceptance."

Need the regulatory role of the State, not let it float

Although he supports the mechanism of land use rights agreement as a measure to help enterprises create their own land fund to develop commercial housing, Mr. Thanh also pointed out the limitations of this policy. Accordingly, the self-negotiation mechanism also brings risks to enterprises. In fact, there is a case of a 100-hectare project but the enterprise only agreed to transfer 70 hectares, the remaining 30 hectares could not be agreed.

"Therefore, to operate this mechanism effectively, the State also needs to have policies to support enterprises receiving land transfers and needs to provide specific instructions on how to handle cases where agricultural land and non-agricultural land are in residential land use planning but people do not convert them so that the project does not remain unfinished," Mr. Thanh further proposed.

Sharing the same view, a real estate investment company in Hanoi also said that in the negotiation mechanism, the role of the State is still very important. When there is a plan to convert to residential land, the government should support the company in the conversion process. If the State does not play any role, it will be very difficult for the two parties to negotiate with each other.

Once there is a plan, the State needs to propagate and mobilize people to follow the plan. If it is left alone, it will be difficult for businesses to develop projects systematically, and there will certainly be a messy and sloppy situation.

Regarding the policy of allowing enterprises to build commercial housing projects on non-residential land, a real estate expert affirmed that it is completely consistent with market reality and should be stipulated in the law, not waiting for a resolution to be issued.

"Planning must be one step ahead. If residential land is planned, converting it into commercial land is inevitable. The responsibility of enterprises is to fully fulfill their financial obligations to the State. Up to now, agricultural land has been allowed to be converted into residential land according to planning, but the problem is whether enterprises have to wait for permission or not," he said.

Doing so will reduce land disputes.

The pilot mechanism for investors to negotiate with people and buy land from people to build commercial housing projects is still unclear whether it is a replacement for the method of compensation and resettlement when the State reclaims land or not, and whether it is placed in that overall scheme or not?

If it can be done, it will be very good, harmonizing interests because it will defuse the "conflict fuse" between investors and people for so long. The National Assembly has also pointed out that more than 70% of people's complaints are related to land, most of which stem from land acquisition.

The State’s desire is like that, but in practice, it is not easy to apply, because enterprises always tend to reclaim land at the cheapest price possible to maximize profits, while people tend to demand the highest price possible. If these two viewpoints meet, they will never find a common voice.

Also because we know in advance that implementation is not easy, we need time to pilot. After the pilot, we will have experience to come up with the best implementation plans, harmonizing the interests of people - businesses - the State.

Lawyer Truong Anh Tu (Hanoi Bar Association)

There must be a regularly updated land price framework.

To negotiate, there must be a ceiling price framework for land in that area and every year, every month, the fluctuations of each plot of land must be updated. If the State does not have a land price framework close to the market, it will be very difficult for enterprises to negotiate with people and it will also be difficult for people to price their land.

However, when the ceiling price is applied but some households still do not agree, the State also has regulations to impose fines or issue decisions to recover because not all people want to "hand over" to the enterprise the land they are living on. China has also applied the agreement between enterprises and people to take land to implement real estate projects.

They apply the agreement policy but if an individual intentionally does not hand over the land, causing loss to the state budget, the person causing the loss must be responsible for all costs incurred.

Mr. LVT (leader of a real estate company in Hanoi)

Will submit draft resolution as soon as possible

The draft mechanism for enterprises to negotiate the right to use non-residential land in the residential land planning is being drafted by the Ministry of Natural Resources and Environment, seeking opinions from localities. At the request of the Government, the Ministry will complete the draft as soon as possible, then the Government will submit it to the National Assembly for comments at the 7th session, term XV, next May.

The issuance of the pilot resolution partly comes from the petitions of many enterprises to remove obstacles for commercial housing projects on land not related to residential land.

Mr. Dao Trung Chinh (Director of the Department of Land Resources Planning and Development, Ministry of Natural Resources and Environment)

People have more rights when negotiating

The agreement is a market mechanism, everyone feels that they are participating in the land transfer process, no rights are distorted. Thus, people have more autonomy in the transfer of land assets.

With the mechanism of bidding for land use projects and auctioning land use rights, the management agency still has to take charge of land recovery and create a clean land fund. Other countries only auction land in cases where land has been lost and the State has to take it back and auction it.

The scope of auction is quite narrow and not every project can be auctioned. Bidding and auction will increase the land cost of commercial housing projects, pushing up house prices.

Professor Dang Hung Vo