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PROPERTY

Great expectations

The overall impact of the recently-approved amended
Land Law on real estate businesses is believed to be positive.

| By HOANG TU

PHOTO: SAVILLS
uring its fifth extra-ordinary session guiding circular for the law when regulating Notably, the new Law provides a new
on January 18, 2024, the 15th the adjustment coefficient for each region definition of the term “foreign-invested eco-
D National Assembly (NA) formally and the level of land price adjustment in nomic organization” (FIEO), which replaces
passed the amended Land Law, which is localities. In addition, regulations on land the concept of “foreign-invested enterprise”
scheduled to take effect on January 1, 2025 price framework and compensation prices (FIE) under the current Land Law, according
and formally supersede the 2013 version close to the expected market price will to KPMG. Specifically, an FIEO is defined
known as Land Law No. 45/2013/QH13. help with compensation and site clearance as economic organizations subject to invest-
“All economic sectors are closely related issues for current projects.” ment procedures applicable to foreign
to real estate,” said Mr. Nguyen Quoc Hiep, Accordingly, some projects can escape investors in the Law on Investment (LoI)
Chairman of the Vietnam Association of problems, such as the Tan Tao Urban Area, when implementing projects using land.
Construction Contractors (VACC). “Real the Long Tan Urban Area, Izumi City, and The Law introduces the principle that
estate plays an important role in the economy Gem Riverside. Certain industrial parks land valuation must be determined according
as a whole, so the Land Law is a key legal may also benefit, such as Dong Phu Indus- to the legal land use purpose at the time of
instrument and businesses therefore have trial Park and Tan Lap Industrial Park. the valuation, according to the land use
great expectations over its effectiveness.” In addition, significant changes are term, by the prevailing land prices on the
being introduced in the Law regarding the market for land with the same use purpose.
BUSINESS IMPACT payment of land rents. The Law now allows Experts believe that this will also assure
In perfecting the financial policy on economic organizations, individuals, Viet- foreign investors of market stability, create
land, with mechanisms for determining namese expatriates, and economic organ- a fairer environment for foreign investors
land prices under market principles and izations with foreign investment capital to to use real estate, and make Vietnam an
inspection and supervision mechanisms opt for annual land rental payments. attractive destination for foreign investors.
from the central government and local The new Law will also create conditions The Land Law has been amended by
People’s Councils on building land price for businesses to reduce capital pressure the NA, which has unified policy options on
lists, Mr. Le Van Binh, Deputy Director of through plans to pay land rents annually 18 issues from the draft. One of the most
the Land Department at the Ministry of instead of at one-time, as previously, which important provisions is the regulation of
Natural Resources and Environment will help industrial park real estate busi- land recovery for projects approved by the
(MoNRE), said the amended Land Law nesses balance their financial resources, Prime Minister and the NA according to
has abolished government regulations on according to MBS Research. investment policies. This provision has
land price frameworks and specifies prin- At the “Land Law 2024: Legal Founda- attracted the attention of many FIEOs in
ciples and methods for land valuation. tion for the New Development Phase of Vietnam.
Authors of a recent report from MBS the Real Estate Market” seminar, held by According to analysis from VnDirect,
Research believe that the amended Land Tap chi kinh te Viet Nam / VnEconomy / access to land for foreign businesses is
Law will have a positive impact on real VET in cooperation with the Center for now more open. Foreign investors could
estate supply in the mid and long terms Natural Resources and Environment Com- previously only indirectly invest through
thanks to resolving issues in land valuations munications at MoNRE on January 31, joint ventures with Vietnamese companies.
and adjusting the land price framework to experts added that the amended Land Law However, under the new Law, FIEOs are
match market prices. will contribute to promoting resources allowed to invest directly in projects without
“Adjusting the land price framework from land funds. Businesses can increase a Vietnamese partner.
will also increase the land use costs of the efficiency of land use, and clear mech- In addition, under the Land Law 2013,
businesses when implementing projects, anisms and policies will provide encour- both domestic and foreign-invested enter-
because the land price list aims to be con- agement. As users, enterprises can also prises who leased land from the State with
sistent with market prices,” the report increase the efficiency of land use, and upfront rental payments for the entire lease
noted. “The increase will depend on the mechanisms and policies must be clearer. term and were allocated land by the State

36 | VIETNAM ECONOMIC TIMES | MARCH 2024 en.vneconomy.vn