CBRE Vietnam

July 2014 Global Research and Consulting

CBRE Ltd. 2014
SUMMARY: Law No. 45/2013/QH13 on land (the Land Law 2013) ratified on 29 Nov 2013 came into force on 1
July 2014. This Law repealed the Land Law of 2003 (effective from 2004 to June 30, 2014) with a number of
improvements that place local and foreign investors on an equal footing in terms of land acquisition and land prices.
The revised Land Law will ensure more transparent and
equitable treatment for all land users.
Thanh Pham, Senior Analyst, CBRE Research and Consulting

MORE DETAILED AND LIBERAL LAND LAW
The New Land Law is a major development, and is the fourth law governing land in Vietnamese regulatory history
(previous legislation was passed in 1987, 1993 and 2003). It was passed after a consultation process which
generated over six million responses with comments and feedback from the public.
Although the New Land Law has not completely satisfied all involved parties, it generally helps to improve the
legal framework as well as simplifying complex and lengthy procedures. Some notable changes address issues of
landed property and land recovery an origin of dispute in the last decade, including 1) Land Ownership (Land
Allocation and Land Lease), 2) Land Recovery, 3) Land Use Rights and 4) Land Price.
Land Ownership
Land Law 2003
Land allocation
Local companies only
Land lease (annual rent or lump sum rent)
Local companies: land lease with yearly payment of the
rentals;
FIE: land lease either on the basis of yearly payment or
upfront payment for the whole lease term.
Land Law 2013
Land allocation
Local companies;
Foreign invested enterprises (FIE) to implement
investment projects for the construction of houses for
sale or for a combination of sale and lease.
Land lease (annual rent or lump sum rent)
Local companies and FIE: land lease either on the basis
of yearly payment or upfront payment for the whole
lease term; Land ownership still remains with the Vietnamese
people, represented and managed by the State of
Vietnam. However, foreign investors are now able to
undertake transactions involving land on an equal
basis with domestic investors. Under the new law,
overseas Vietnamese and foreign-invested enterprises
can be allocated land to implement investment projects
for the construction of houses for sale or for a
combination of sale and lease. Those who lease land
with a full one-off rental payment prior to the effective
date of this Law, may continue using the land for the
remaining land use term, or may optionally change to
land allocation with a land use levy.
By enabling land allocation to foreign investors, a
more competitive business environment is
expected, which will help to ensure more efficient
land usage.
While the draft amendments to the Housing Law
will allow foreign investors, particularly overseas
Vietnamese, to buy and own houses, the New
Land Law does not mention benefits for foreign
individuals.
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Land Recovery
Land Law 2003
Allowed for the purpose of
National defense and security;
National interest and public interest;
Economic development (including wholly FIE).
Land recovered
Where not used for consecutive 12 months; OR
The implementation schedule was delayed 24
months.
The State shall compensate for project costs invested
in the land (e.g. assets, land use fees, land rent)
Land Law 2013
Allowed for the purpose of
National defense and security;
Socio-economic development in the national
interest and public interest;
Wholly FIE can no longer benefit from State land
recovery.
Land recovered
Same condition;
Land use may be extended by the developer for up
to 24 months for remedy with additional payment
of land rentals/land use fee for the delayed period.
After the 24-month grace period, land and assets
are withdrawn without any payment except for
force majeure events.
Unlike the Land Law of 2003 which includes very
broad terms such as economic development
purposes, the New Land Law provides more detailed
and restricted definitions in terms of land recovery of
agricultural land for commercial projects. Accordingly,
land withdrawal of agricultural land applies only to
projects for the construction of new townships or the
improvement of existing urban areas. These must have
prior approval from the relevant provincial Peoples
Council.
The New Land Law retains definition for late running
projects, i.e investment projects inactive for 12
consecutive months, or where the land use schedule is
24 months late compared to the schedule stated in
the project documents.
However, the law states that in the case of a breach,
developers will be given a 24-month period to remedy
the situation instead of 12 month period as in the old
law. After the 24-month grace period, land and assets
will be withdrawn without any compensation except for
force majeure events while in the old law, the State
shall compensate for costs invested in the land (e.g.
assets, land use fees, land rent).
It is expected that this will help to re-distribute
the land bank to more efficient and financially
capable investors, especially for pending
golden sites which have been cleared where
there has been no further construction activity.
The government will be more active in
redressing unequal land distribution.
This will narrow the scope of land recovery by
the government, which will consequently affect
primary land supply.
What the government plans to do with
recovered projects or who they will be
transferred to still remains in doubt. Finding
better investors who have a strong financial
position as well as proven track records and
commitment may not be an easy task.
FACTS AND FIGURES
The New Land Law 2013 is the fourth land law in Vietnam legislation.
According to a study by World Bank in 2011, Compulsory Land Acquisition and Voluntary land
Conversion in Vietnam, opinions of investors were collected from various meetings that have been
held between investors and government. The results showed that problems were at a peak between
2002 and 2004 prior to introduction of the Land Law 2003. The Ministry of Natural Resources and
Environment recorded more than 30,000 petitions of land disputes, complaints, and
denouncements sent to them between 2003 and 2006. Most of the issues raised were related to
land administration procedures especially land access and the land rights of enterprises.
Problems with land administration procedures reduced for a while but increased again since 2007.
According to the Government Inspectorate of Vietnam, there were 700,000 lawsuits and complains
of land dispute in the last three years. 70% of the lawsuits was related to the value of land
compensation, financial support and resettlement.
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The two concepts (1) & (2) will help to narrow
the discrepancy between the price regulated by
the government and the market price.
The process of land valuation helps to separate
the right to impose a land price and the right to
decide land recovery by the State.
The land price will be decided finally by an
independent organisation or council, which is
separate from the provincial peoples
committees who would only have the right to
decide on repossession and land use.
The change in land price valuation highlights the
need for more carefully planned pre-feasibility
studies.
How the new land price calculation will work
remains to be seen but the land price for
commercial projects may become more
unpredictable.
The revised law also to prescribes in great detail the
setting of land prices with two concepts: (1) a land
price table and (2) the particular land price will be
determined on a case-by-case basis, by a land
valuation committee based on the land price table
and market price. While the land price table is used
to calculate land compensation and land use fees
for individuals or households, the particular land
price is used for economic organisations or foreign-
invested enterprises.
The land price table will be published every five
years and shall be adjusted if the popular price in
the market deviates by more than 20% from the
maximum/minimum price in land price frames.
The land valuation must be based on market value
with suitable valuation methods by professional
organisations. Based on the consultation on land
price, the provincial-level land administration
agency shall submit the specific land price to the
land price appraisal council for consideration
before submitting it to the Peoples Council of the
same level for decision.
Land Prices List
Land Law 2003
Published annually;
Calculation of land use fees, land rental and
compensation for a specific project if land price of this
project is not equal to the market price.
Land Law 2013
Published every 5 years;
Calculation of land use fees, land rental and
compensation for each specific project.
Transferring Land Use Rights (Residential Project)
Land Law 2003
Permitted when infrastructure completed.
Projects developed in cities, towns or new urban zones
planned for development into cities and towns are not
allowed to transfer land use rights under the form of sale
of land lots.
For other areas: can transfer the land use rights under
the form of sale of land lots if the developers financial
obligations and the infrastructure have been completed.
Land Law 2013
Can transfer the land use rights attached to a part or
entire project together with land subject with
complete infrastructure.
The developer may transfer plots of land in the
project to buyers upon satisfaction of the following
conditions: full payment of land price to the local
government, completion of infrastructure and not
located in the central districts of the city or province.
The New Land Law is more detailed in regulating
who is eligible to transfer, what to transfer and
whom to transfer to.
It provides a stronger legal base for the merge
and acquisition activities, which are increasingly
common in the market.
It is still unclear about the procedures and
documentation for the transfer.
Transferring a part of project is no longer a new
concept in the market, especially in current negative
economic condition although this was not regulated
in the old law. Merge and acquisition should be
considered as a investment activity instead of final
exit solution to investor. With the allowance to
transfer a part of a residential project, the New
Land Law opens a knot in the market.
Moreover, the New Land Law also prescribes more
detailed on the condition of transferring plots of
land in a project and required conditions.
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Table 1: Land Acquisition in Vietnam by Land User Category, Land Law 2013
Yellow bolded: new changes in Land Law 2013 compared to old Land Law 2003
(*) Only in industrial zones, economic zones, export-processing zones, hi-tech zones, and in residential housing project in accordance with Law on Housing (New Land
Law- Article No. 169.1 (b) and (dd)).
(**) Only in the form of investment capital. Specifically: FDI enterprises purchase investment capital being the Land Use Right value in accordance with the
Governments provisions (New Land Law- Article No. 169.1 (b)).
(***) Only for implementing residential house projects for sale or for sale and for lease.
Source: Baker & McKenzie (Vietnam) Limited, Q2 2014.
CONCLUSION
Looking back at Vietnamese regulatory history,
prior to 1998 foreign investors werent allowed to
enter the domestic property market. Phu My Hung
in Ho Chi Minh City and Ciputra in Hanoi are the
first two large housing projects with foreign invested
capital in Vietnam. With legislation gradually
opening the market to foreign investors, real estate
has gained second position after the manufacturing
sector in terms of foreign direct investment (FDI)
value, accounting for 16% of Vietnams total FDI;
from 423 projects, as of Q2 2014. This proves the
attractiveness of the local real estate market and
the positive correlation between government
legislation and foreign investment. The New Land Law
mostly focuses on residential land and residential
projects in an effort to improve the local land market
and the real estate development sector. Revisions of
the New Land Law could well reflect the Vietnamese
governments realization that serious changes have to
be made to ensure that the country remains on its
positive growth track. Although the New Land Law
offers investors greater clarity, many foreign analyst
still question its long term feasibility. Law enforcement
and implementation which are consistent and clear in
language and objectives will be key in determining the
success of the New Land Law.
Eligible land acquisition forms
Land users
Domestic
organisation
Domestic
individuals,
household
Vietnamese
community
Religious
organisation
Foreign
diplomatic
organisation
Overseas
Vietnamese
individuals
FIE
Received LUR from an
exchange of agricultural LUR

Purchase LUR * **
Received LUR as gift
Inherited LUR
Received LUR from purchase,
purchase-lease, inherit, or
receive as a gift, a residential
house attached to land

Received LUR as capital
contribution

Allocated LUR from the State ***
Lease LUR from the State
Granted LUR by the State
Received LUR as a result
from:
Dispute settlement settled
or recognized by
competent authorities or
courts;
Realization of mortgaged
properties;
Bidding;
LUR separation.

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Thanh Pham
Senior Analyst
CBRE
Unit 1201, Melinh Point Tower,
2 Ngo Duc Ke Street, District 1, HCMC, Vietnam
e: thanh.pham@cbre.com
Global Research and Consulting
This report was prepared by the CBRE Vietnam Research Team which forms part of CBRE Global Research and Consulting
a network of preeminent researchers and consultants who collaborate to provide real estate market research,
econometric forecasting and consulting solutions to real estate investors and occupiers around the globe.
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Duong Thuy Dung
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