The amended Real Estate Business Law will take effect from January 1, 2025 and prohibits the transfer of land use rights for individuals to build houses or divide and sell plots within special urban areas, type I, II and III.
In these areas, all businesses must create projects and obtain local approval. This regulation aims to end the situation of spontaneous land division and sales in recent years.
This means that in the future, divided land will become “rare”. The scarcity of supply will drive up land prices. Land that has been legally divided within projects will be the last remaining supply of residential land in urban areas.
According to lawyer Tran Manh Cuong, the Land Law 2003 previously prohibited land subdivision and sales in urban areas, and only allowed it in towns and rural areas. The Land Law 2013 then allowed subdivision and sales even in central areas. This has led to the strong development of land division and sales during this period. Even in Ho Chi Minh City, land subdivision projects have flourished, as they have met the housing needs of low-income people. Therefore, tightening land subdivision and plot division may reduce land sales activities in the near future. As a result, the prices of subdivided land plots with legal certificates will likely increase.
Sharing the same opinion, Mr. Dinh Minh Tuan, Director of Batdongsan in the South, stated that the reason land division has flourished in recent years is because the procedures are much easier than creating projects. Therefore, property businesses have favored the free buying and selling of land, with few officially approved projects. Buyers also prefer subdivided plots of land because of the diverse prices and easy transactions. Thus, when the amended Real Estate Business Law tightens land subdivision and sales in certain areas, the supply of this type of real estate in the market will be scarce and prices may rise. Demand may also decrease as people find it more difficult to access and search for such products.
Speaking at the seminar “Real Estate in the South West in 2024 – Embracing Opportunities in a New Era,” Mr. Duong Quoc Thuy, Chairman of the Real Estate Association of Can Tho City, also said that banning land division and sales in special urban areas, type I, type II, type III will significantly impact the segment of land plots. In the near future, the market will see clear differentiation in the land plot segment.
With the current legal corridor, it is very difficult to create a project that lasts from 3 to 5 years. Property developers will choose the solution of individual land subdivision (which is suitable, easy, and provides a larger supply) rather than creating projects with legal entities. Therefore, with the new regulation, the number of land plots resulting from subdivision in the coming period will decrease. The scarcity of supply will lead to an increase in land prices. However, in the long run, this will contribute to a healthier development of the market.
