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April 11, 2023

Vietnam: New Decree Addresses Existing Land-Related Problems Pending Issuance of New Land Law

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On April 3, 2023, the government of Vietnam issued Decree No. 10/2023/ND-CP (“Decree 10”) to resolve a number of existing land-related problems pending the expected promulgation of a new Land Law later this year. The changes under Decree 10, which will take effect on May 20, 2023, include the following:

New Regulations on Land Use Right Bidding

Decree 10 outlines the conditions for organizations and individuals to participate in the bidding process for land use rights, as well as the conditions that must be met for the land site to be eligible for bidding. Specifically, in addition to the conditions already stated in Article 58.3 of the Land Law 2013 and Articles 14.2 and 14.3 of Decree No. 43/2014/ND-CP, organizations seeking to participate in the land use rights bidding process must ensure that no more than one company with cross-ownership participates in the bidding. Furthermore, they must also submit a 20% deposit of the total value of the land site, which is the starting price for the bidding. After the announcement of the auction results, the down-payment and any interest earned will be converted into a security deposit to ensure the bidder’s financial obligations are met. If the winning bidder fails to pay the full amount for the land use rights, the security deposit will be forfeited.

In addition, a land site put up for bidding must satisfy certain conditions, such as having a starting price of bidding determined by the state authority and having an approved 1/500 detailed plan for the land used for investment and construction of residential buildings. The auction must be conducted on a plot-by-plot basis.

Certifying Ownership of Real Estate for Tourism Accommodation

Ownership of buildings on commercial and service land that are used for tourism accommodation purposes (such as condotels or other types of resort real estate) can now be granted in accordance with regulations applicable to other types of buildings constructed on commercial and service land. Decree 10 provides for the land use term and conditions to be satisfied in this case.

Conversion of Land Use Purpose to Implement Investment Project

Decree 10 allows land used for rice farming, protective forest, or special-use forest to be converted to land for other usage purposes upon satisfaction of certain conditions, such as having an investment project granted an in-principle investment approval or an investment registration certificate; complying with the district land-use plan and annual land-use plan which has been approved; providing a forest replacement plan or paying for forest planting as required by forestry laws (or having a plan to use the surface land and paying for land protection and development as required by the cultivation law); and conducting preliminary environmental impact assessments.

Other Changes

Decree 10 provides for the first time the land reclamation procedures in case of termination of investment projects. It also regulates certain critical matters such as the procedures for registering and issuing the certificate of land use rights and ownership of houses and other assets attached to land for the recipients of land use rights transfer and the purchasers of houses or buildings in residential development projects and non-residential real estate business projects. Procedures for land allocation or land lease in cases where investors are approved in accordance with Article 29.3 of the 2020 Investment Law are also provided.

Outlook

Decree 10 has effectively addressed certain longstanding issues related to land, which had been unclear and caused difficulties for real estate developers and investors involved in projects that require land usage. For example, owners of condotels or other types of resort real estate whose ownership had been unresolved for an extended period of time will now be granted ownership rights similar to those of other types of buildings on commercial and service land.

It is anticipated that Decree 10 will serve as a driving force for the real estate industry, particularly in light of the challenging economic fluctuations that have negatively impacted global recovery and growth, as well as the domestic economy.

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