Land and Housing Laws: Catalysts for Vietnam's Real Estate Boom

DNHN - The Land Law, the Real Estate Business Law, and the Housing Law will come into effect on August 1, creating a domino effect to resolve long-standing issues in the real estate market, fostering healthy market development...

The National Assembly has approved a resolution on the legislative program for 2025, adjusting the 2024 program to review the Land Law and three related laws: the Housing Law, the Real Estate Business Law, and the Law on Credit Institutions, which will take effect early from August 1st during the second session of the 7th meeting. Experts believe that these laws will stimulate the real estate market, especially the social housing (SH) and commercial housing segments.

Land Law benefits for both citizens and businesses

The government is eager to bring these three laws into effect soon. Currently, relevant ministries and departments are making all necessary preparations for the government to present to the National Assembly for implementation from August 1, five months earlier than the original date of January 1, 2025 as passed in the early session of the year.

The 2024 Land Law was approved by the National Assembly at the extraordinary 5th session on January 18 and is set to take effect on January 1, 2025; however, Articles 190 and 248 will take effect from April 1. If the National Assembly agrees to early enforcement from August 1, it is expected to have a significant impact on the country's socio-economic life.

According to the Ministry of Natural Resources and Environment, the proposal to bring the Land Law into early effect aims to promptly address and resolve existing land issues. This move is expected to boost the real estate market, maximizing the potential and efficiency of land resources. The new Land Law, with many favorable provisions for citizens and businesses, will remove difficulties in accessing land for production and business, attract investment, and contribute to achieving socio-economic goals, providing tangible benefits to citizens.

This represents a significant effort by the government and the National Assembly, aiming to bring beneficial laws into effect early to promote socio-economic development.

The 2024 Land Law includes many favorable provisions for land users, resolving land disputes, and creating a healthy and vibrant real estate market...

Regarding land acquisition cases, Article 79 of the new Land Law specifically outlines 36 "truly necessary" cases where the state acquires land for socio-economic development for national and public interests. These include projects for public construction; state agency offices, public service facilities, and other cases serving national defense...

Land acquisition cases will follow a simplified, democratic, objective, fair, transparent, and lawful process, ensuring community benefits.

For social housing projects, enterprises, investors, and even financially autonomous public institutions must negotiate with land users to acquire land based on market mechanisms.

A significant new point beneficial for land users is that the land price list will be issued annually instead of every five years as in the old law. The new law also refines the mechanism for determining land prices in the future, with methods based on market principles, addressing long-standing issues such as inconsistent land valuation and auctions, where land prices often fall below market value, disadvantaging land users.

The 2024 Land Law introduces four methods for land valuation, which are scientifically and practically significant and have been applied in many countries worldwide. The new law also eliminates the land price framework, establishing a mechanism and methods for determining land prices based on market principles. The annual land price list will be published publicly on January 1 every year, in line with market mechanisms, a critical regulation to protect land users.

The new law allows for the issuance of red books (land use rights certificates) for land without documents before July 1, 2014 (instead of July 1, 2004, as previously stipulated), provided there are no disputes. This applies to land use cases before December 18, 1980; from December 18, 1980 to before October 15, 1993; and from October 15, 1993 to before July 1, 2014.

The new law will also resolve land disputes. Prolonged disputes have often been related to compensation and site clearance, mainly due to inadequate compensation not reflecting market value. Similarly, resettlement often fails to provide equivalent living conditions. The new Land Law specifies clear and transparent compensation and resettlement mechanisms, requiring land valuations to closely match market prices. If the land price does not reflect market value, the annually published land price list, multiplied by a coefficient, will be used.

Thus, the new Land Law aims to protect land users whose land is acquired, ensuring they receive fair benefits.

Economic organizations and individuals not directly engaged in agricultural production will be allowed to transfer paddy land. This new regulation addresses previous issues where many non-farmers obtained certificates falsely claiming direct production to transfer agricultural land.

The revised Land Law improves mechanisms and policies for managing and using agricultural land by expanding the land transfer limit to no more than 15 times the local land allocation limit.

The new law allows agricultural land users to change crop and livestock structures and use a portion of the land to build facilities directly serving agricultural production.

With such liberal regulations, both enterprises and land users benefit significantly.

Stimulating the Real Estate Market

According to the Ministry of Construction, the 2023 Housing Law includes many groundbreaking provisions, contributing to the goal of perfecting the legal framework, enhancing management efficiency, and developing housing, particularly social housing, stimulating the otherwise sluggish real estate market.

A notable positive point of the 2023 Housing Law allows social housing investors to be exempt from procedures for determining land prices, land use fees, and rental fees, resolving issues for this segment.

If this law takes effect soon, it will remove bottlenecks where investors wanting to develop social housing must undergo lengthy procedures to determine land prices, land use fees, and rental fees to apply for exemptions.

Currently, social housing buyers must fall under the category of not paying regular income tax as per personal income tax law, i.e., not exceeding 11 million VND per month. Now, the Ministry of Construction has “relaxed conditions” for social housing buyers. The new regulation ensures that the average monthly income of the applicant and their spouse does not exceed 15 million VND per month, removing the condition of not paying regular income tax. Additionally, residency requirements are waived; only temporary residence registration is needed to purchase a house.

The Real Estate Business Law introduces 11 new points, particularly focusing on the public disclosure of real estate information before business transactions to ensure transparency and safety.

Notably, the new Real Estate Business Law stipulates that project investors can only collect deposits of up to 5% of the selling price of future real estate. The remaining funds must be sourced from available cash, bank loans, or bond issuance. This strict regulation reduces risks for buyers of future real estate.

This regulation promotes market transparency, eliminating many "phantom" projects that collect people's money but delay construction and miss deadlines, as has happened in recent years.

The determination to bring the three land and housing-related laws into early effect reflects the significant effort by the government and the National Assembly in perfecting the legal framework related to land and housing.

Implementing these laws in social life is not simple, especially with the Land Law. This law significantly impacts economic and social life, with the National Assembly and related ministries putting substantial effort into its development, including extensive public consultations and numerous meetings, finally passing it at the extraordinary session early in 2024. However, its implementation requires many decrees and guidelines related to various provisions.

Having laws is not enough, practical solutions must accompany them. Therefore, on May 17, Prime Minister Pham Minh Chinh chaired a meeting to address difficulties, promoting social housing development, with specific directives to boost this market. Given that the 120 trillion VND credit package for the social housing program has disbursed less than 1%, the government has instructed the Ministry of Planning and Investment to coordinate with the Ministry of Finance and the State Bank to urgently report to the Prime Minister on supplementing state budget funds for social housing loans through the Social Policy Bank for 2024-2025. The Ministry of Finance is studying the establishment of a Social Housing Fund, proposing it before June 30, 2024; building and guiding localities to issue bonds for social housing. The Prime Minister also instructed the development and provision of credit packages for home buyers with loan terms of 10 to 15 years, with preferential interest rates 3-5% lower than commercial loans.

These are strong and practical measures by the government to unlock land resources, stabilize, and clean up the housing market, including social housing, commercial housing, and land resources, protecting the legitimate rights of land users.

The new laws effective from August 1 are expected to create a "domino effect," resolving long-standing issues in the real estate market, and building a healthy, transparent market.

Vinh Hy