Revised laws to curb real estate speculation: experts

The revised Real Estate Trading Law prohibits the transfer of land use rights in property projects in large cities to individuals for house construction.

This is meant to stop developers from dividing land in property projects into smaller plots to sell them, a common practice that fuels land hoarding and speculation, according to the experts.

All real estate transactions need to be done through banks to prevent buyers and sellers from registering them at lower than the selling price to evade taxes.

Besides the obvious benefit to the government of increasing tax revenues, this also lays the groundwork for a national real estate data system that will enhance market transparency, reduce speculation and prevent price inflation, the experts said.

The law will hike taxes and land use fees for delayed and unoccupied real estate projects, and this is expected to expedite property development and discourage land hoarding practices, the experts said.

The new Land Law only allows certain types of land to be used for housing.

In the absence of restrictions now, property developers buy all types of land and change their use to allow housing development.

They often buy large plots of agricultural lands, which are usually much cheaper than residential lands, and seek to convert them. If they fail, they leave the land vacant, resulting in a wastage of resources.

Under the new provisions, a land plot must have at least one square meter approved for residential purposes for such projects to be undertaken.

Previously, for property projects, developers can build the rough infrastructure for utilities, like sewage system and electricity, on the land then divide them into smaller plots to sell them to individuals, instead of constructing the whole property.

The new regulations mean developers will have to focus on completing residential housing and construction projects, according to Nguyen Manh Ha, vice chairman of the Vietnam National Real Estate Association.

Under the current law, they can just develop rough infrastructure then sell the land instead of constructing properties. They can’t do that anymore with the new law, so they will have to finish building the properties.

"This helps optimize land usage and prevent speculation, delays and abandonment."

Nguyen Van Dinh, a construction and real estate expert, added that new regulations now prohibit businesses from directly selling commercial and service lands.

Instead, they can only make a profit by developing then selling or leasing properties on these types of land, Dinh explained.

Tran Thi Cam Tu, CEO of real estate firm EximRS, said while the minimum requirement of one square meter of residential land would filter out investors looking to buy cheap lands and reduce inefficient land usage, it is crucial to create more opportunities for developers to acquire residential lands through auctions.

A review of the law done by some government agencies also pointed this out, but it remains to be seen if there will be amendments.