The 2024 Land Law, which officially takes effect on August 1, 2024, introduces several notable changes regarding land use rights auctions in Vietnam. This mechanism serves as a critical channel for foreign investors (FDI) to access land, especially in localities actively promoting investment.
In the context of increasingly stringent legal regulations, DNP Viet Nam Law Firm provides essential legal insights to help FDI investors participate in land use rights auctions effectively and safely.
1. Definition of auction and land use rights auction
Legal basis: Clause 2, Article 5 of the 2016 Law on Property Auction (amended by Point a, Clause 3, Article 1 of the 2024 Law on Property Auction).
- A property auction, in general, is a process through which two or more bidders offer or accept prices based on principles, procedures, and processes stipulated by law.
- Specifically, a land use rights auction refers to a process whereby the State allocates or leases land, with land use fees collected via an auction mechanism. In this case, two or more bidders participate by offering or accepting prices in accordance with legal procedures and principles.
2. Conditions for FDI investors to participate in land use rights auctions
2.1. General conditions for organizing land use rights auctions
Legal basis: Clause 2, Article 125 of the 2024 Land Law.
The land has been recovered and compensation completed, or compensation is not required;
- Firstly, the site is located in a project area with completed transportation infrastructure.
- Additionally, the district-level authorities must include the land in the annual land use plan approved for land use auction purposes.
- Moreover, the project developer must prepare and obtain approval for a 1/500 detailed construction plan from the competent authorities for housing development projects.
- Finally, the competent authorities must approve the land use rights auction plan.
2.2. Eligibility conditions for organizations participating in the auction
Legal basis: Article 55 of Decree 102/2024/ND-CP.
Organizations participating in land use rights auctions must satisfy all the following conditions:
- First, they must be eligible for land allocation or lease by the State in accordance with the 2024 Land Law.
- Second, they must demonstrate investment capacity as well as relevant project development experience.
- Third, they must not fall under any of the categories prohibited from participating in auctions.
- Moreover, they must fulfill specific requirements under the 2023 Law on Housing and the 2023 Law on Real Estate Business, provided that the project involves housing or real estate.
- In addition, in the case of corporate groups (e.g., parent and subsidiary companies), the organizers allow only one entity to participate.
- Finally, they must make a deposit equal to 20% of the starting price.
3. Restrictions on FDI participation in land use rights auctions
Legal basis: Article 124 and Clause 6, Article 125 of the 2024 Land Law; the 2016 Law on Property Auction (amended by the 2024 Law on Property Auction).
| Cases where land use rights auctions are unsuccessful | Cases where land use rights are allocated/leased without auction |
| – The registration deadline passes with no registrants or only one registrant; – Registered participants do not attend the auction session; – No bids or price acceptances are made; – The highest bid is lower than the starting price (in cases where the starting price is not disclosed and the ascending bid method is applied); – The highest bidder withdraws without a replacement bidder. | – Allocation/lease without land use fee or with land use fee exemptions under specific policies (detailed in Clause 3, Article 124 of the 2024 Land Law); – Projects funded by public investment or PPP; – Only one qualified investor expresses interest; – Two consecutive failed auctions (within 12 months) lead to allocation/lease without auction; – Foreign organizations acquiring real estate projects through transfers (no auction required under the Law on Real Estate Business). |
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