At the end of August 2022, the People’s Committee of Ho Chi Minh City issued new legislation to remove stipulated land pricing. Savills experts believe that the new pricing arrangements will reduce clearance and compensation issues, which hinder development significantly.
Problems with the Current Land Price Model
As detailed in Article 113 of the 2013 Land Law, the land price bracket is the fixed price for land, which is determined by the State and revised every five years. The structure meant that the government could manage land prices and determine the financial obligations the landowners or users had. However, this model is ineffective and has caused enormous development delays, largely due to issues with site clearance.
The obvious shortcomings resulted in the Ministry of Natural Resources and Environment (MONRE) issuing a draft amendment to the 2013 Land Law, which details that land prices should be assessed according to market value rather than the stipulated price. MONRE believes that the removal of fixed land prices must be prioritised and executed quickly to overcome the limitations of the current law.
While the current system determines prices by group and location, the new framework will allow for market-based prices, which are subject to market fluctuations and will result in fairer compensation.
Accelerating Infrastructure Development
According to Mr Troy Griffiths, Deputy Managing Director of Savills Viet Nam, land laws present complications for any legal system. The recent amendment will change how the government will evaluate land prices in the future. Troy highlighted that the changes are essential to boosting real estate and infrastructure development, which will attract investors and stimulate economic growth.
.jpg "Mr Troy Griffiths, Deputy Managing Director of Savills Viet Nam")
The Prime Minister and Party Secretary have commented on the delays in public expenditure and infrastructure. Coming out of Covid, we need infrastructure spending to stimulate the economy, but it has been very slow, mainly due to complications in compensation and land allocation. The new amendment will be decisive for asset and property valuation,’’ Troy added.
When discussing the outdated pricing model, Troy stated that in theory, it could have simplified procedures because of the fixed price. However, in reality, the model caused inadequate compensation, which generated additional costs and caused significant delays. With the revised laws, landowners would receive fairer compensation (based on market prices), which would speed up processes and development.
“The amendments will make the market more transparent. Land in need of compensation will be valued according to the market, which will instil greater confidence in investors and residents. It will also create a foundation for proper land taxation, something the government has been missing out on. Similar regulations are used in many countries, and Viet Nam is well positioned to benefit from them,’’ Troy concluded.
Conclusion
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