The influence of tightening the regulations on land auctions on the investment environment in Vietnam

The situation from the auctions of Thu Thiem, Dong Anh, Hanoi new urban areas has set a request to strengthen the management and tightening of land auction activities to contribute to creating a transparent battle market price. However, if the law is too strict, the real estate business investment environment will be affected.

Tighten land auction management

On December 21, 2021, the Prime Minister issued 1767 Powers on the situation of the auction of land use rights in recent years. Electricity praised many localities for having land auctions achieve positive results. However, some cases of abnormal auction prices are many times higher than the starting price.

In the report submitted to the Prime Minister, the Ministry of Construction said the results of the unusually high land auction will affect and make it difficult for the real estate market. In addition, the Ministry of Construction also proposed the study of the amendment of the land law, especially the provisions related to the determination of land prices when auctioning land use rights, land leases, and allocation of land, land recovery in accordance with reality, ensuring revenue and avoiding the state budget loss.

The Law on Property Auction only stipulates the order and procedures for auctions implemented by property auction organizations, while the prerequisite factors that decide the success of the auction, such as price appraisal, price determination, starting, approving the auction plan, supervising the process of organizing the auction, paying the winning bidders… subject to the adjustment of specialized laws (Land Law, Law on Management of Public Property Management, etc.), under the management authority of many different state agencies.

The Ministry of Natural Resources and Environment has also proposed the case of the auction participant who arbitrarily spent the money in advance and refused to participate in the auction for 5 years, and thus will not be able to participate in the auction of land use rights.

The investment environment in Vietnam is being affected by tightening land auction activities

The winning of land use rights at high prices compared to the starting price has led to the result of the price increase of housing and real estate products, and the psychology of investors is also affected.

On the other hand, businesses or investors will not be able to have an effective investment and business plan when the land price increases too high. They will decide to restrict or not invest in land in the area. The accompanying effect leads to not attracting construction investment in the future, which will lead to a decline as well as limiting supply.

At the seminar “Auction of land use rights: Practice and solutions,” Mr. Phan Duc Hieu, Permanent Member of the National Assembly’s Economic Committee, said: “The more barriers, the lower the capacity. Competition can lose good investors, so they have to balance everything.”

Mr. Hieu added: “In addition, we need to see if there is any other mechanism better than the auction mechanism, such as the bidding mechanism. Secondary behavior is very important after the auction, such as managing cash flow, transparent information, and at the same time, there must be a reasonable tax policy mechanism.

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