Expected increase in real estate supply when Land Law (amended) takes effect

The Land Law (amended) coming into effect will have positive impacts on the real estate market.

Mr. Dinh Minh Tuan - Director of Batdongsan.com.vn Southern Region commented that the Land Law (amended) will have positive impacts on the Vietnamese real estate market. Accordingly, it will contribute to increasing land prices in a sustainable manner, because this will promote land pricing close to the market price level and improve land use efficiency. Specifically, the Land Law (amended) will remove the land price framework, determine land prices according to the market mechanism. This ensures compensation rights for subjects whose land is subject to recovery; has regulations on land combined with multi-purpose use, conversion of agricultural land, contributing to land accumulation for production; the right to lease, joint venture and association for public service units; receive transfer of agricultural land for subjects who are not directly involved in agricultural production; expand cases of land use purpose conversion...

According to Mr. Tuan, all of the above regulations will improve the efficiency of land use, contributing to increasing the price of land from agricultural land, non-commercial land..., thereby increasing real estate prices in general. In addition, the supply of real estate will also be improved. One of the reasons why many projects are delayed for a long time is the difficulty in site clearance due to inadequate compensation. Therefore, the pricing mechanism based on market reality will support the land fund to be deployed faster.

According to Mr. Tuan, if previously land access was not clearly regulated, now there are specific regulations in the Land Law (amended), including: determining which type of land can be used for commerce; which type of land serves which needs must be through bidding and auction of land use rights. When real estate project investors have clearer methods and regulations to access land funds, the supply of products to the real estate market will no longer be as scarce as it is now.

The Land Law (amended) also has provisions to increase access to land for more people, more fully protecting their rights, including: expanding the scope of land use rights for Vietnamese citizens, including those residing abroad; land policies for ethnic minorities. At the same time, the Land Law (amended) also stipulates the rights and interests of people whose land is recovered, implementing land use planning; administrative procedures, granting certificates to people and businesses - for example, receiving transfers of real estate projects, automatic extension for agricultural land...

However, Mr. Tuan said that real estate businesses should not expect too much when the Land Law (amended) comes into effect, it will help the real estate market recover quickly because there will be a delay of about 8-12 months for this Law to be absorbed and implemented. That is also the reason why the National Assembly passed it early, so that from now until 2025, the parties participating in the real estate market can discuss, understand and prepare adaptation and application plans.

Sharing the same view, Mr. Vo Hong Thang - Director of Project Development DKRA Group said that if land prices follow the market, project costs will certainly increase, but the legal corridor will help businesses reduce financial expenses arising from prolonged project progress and other unnamed costs. "70% of the difficulties of real estate businesses are due to legal problems, including many problems with land valuation, compensation land price framework...; normally, developing a project, from the beginning of legal procedures to when it is eligible for sale, will take about 1-3 years" - Mr. Thang said.

However, in reality, many real estate projects have to take 5-7 years longer than expected to complete legal procedures, and if they are "stuck", they can be extended indefinitely. If the costs exceed the initial estimate, the investor will calculate them all into the selling price. This is the cause of supply congestion, cash flow loss, and rising housing prices over the years. Therefore, the Land Law (amended) will remove legal barriers that are considered to cause unnecessary costs for businesses.

Meanwhile, Mr. Nguyen Van Dinh - Chairman of the Vietnam Association of Real Estate Brokers (VARS) said that the newly passed (amended) Laws such as the Land Law, Housing Law, and Real Estate Business Law (amended) will not take effect until January 2025, which means that some legal problems will still persist. And the law is the issue that has the greatest impact on the development of real estate projects, including credit policies, bank loan interest rates, bonds, etc. Therefore, VARS recommends that the Government soon issue Decrees and Circulars detailing and guiding the implementation of the Land Law (amended), to ensure that the Land Law (amended) takes effect at the same time as the Housing Law and the Real Estate Business Law (amended)" - Mr. Dinh said.

Many real estate experts also predict that in the short term, the new land price list will have some impact on real estate businesses. However, in the long term, the Land Law, Housing Law and Real Estate Business Law (amended) coming into effect will resolve overlapping and inconsistent problems that have caused difficulties for investment and business activities of real estate businesses; real investors will also have easier access to land; project development costs will also have the opportunity to be reduced thanks to the shortened legal completion process; product prices will also be adjusted to a reasonable level.

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