Vietnam’s Land Law 2024: A New Era for Foreign Investment

On January 15, 2024, Vietnam’s 15th National Assembly enacted the revised Land Law 2024, a legislative overhaul poised to reshape the nation’s land management landscape. Effective from August 1, 2024, this comprehensive reform introduces significant changes with far-reaching implications for the manufacturing sector and foreign investors.

Limits on Agricultural Land Transfers

The amended Land Law introduces a restriction on the transfer of agricultural land usage rights, capping transfers at 15 times the original allocation. This new cap is designed to stabilize land availability and curb speculative practices. For foreign investors involved in agribusiness, this change offers a more predictable environment, reducing the risk of land speculation and encouraging long-term investment in sustainable agricultural practices.

However, investors must navigate these new limitations with care. The restriction necessitates careful strategic planning regarding land use and allocation. Foreign firms with ambitions for large-scale agricultural projects will need to consider this limitation as a crucial factor in their expansion plans to ensure that land acquisition aligns with the law’s constraints.

Enhanced Transparency in State Land Reclamation

Another key feature of the revised law is the increased transparency in State land reclamation processes. The legislation specifies 31 distinct cases for land reclamation by the State, providing a clearer framework for how land can be reclaimed. This change aims to enhance fairness and reduce disputes, offering foreign investors a more predictable and transparent process for land acquisition.

With these new guidelines, investors can approach land acquisition with greater confidence, knowing that the process is governed by explicit criteria. This clarity is expected to minimize uncertainties and facilitate smoother project development, whether for industrial zones, tourism ventures, or infrastructure projects. Despite these improvements, thorough due diligence remains essential to navigate any remaining complexities and mitigate potential risks.

Market-Driven Land Prices

The updated Land Law also shifts land pricing from fixed annual lists to a market-driven approach. Land prices will now fluctuate based on demand, location, and broader economic conditions. This change aligns land prices with real market values, but it also introduces a degree of volatility.

Foreign investors will need to adapt to these market dynamics and plan investments with an eye on price fluctuations. Strategic timing becomes crucial; entering the market during favorable price cycles can enhance returns, while being prepared for potential price shifts remains equally important. Collaborating with local experts who understand market trends will be vital for navigating this new pricing environment effectively.

Compensation and Resettlement Obligations

The law also addresses compensation and resettlement requirements for investors acquiring land through auctions or selection bidding. Investors are now required to fulfill obligations related to compensating affected communities and managing resettlement processes. This responsibility includes ensuring fair compensation and adhering to timely resettlement schedules, which are critical for maintaining positive relationships with local communities and avoiding project delays.

Timely and fair handling of compensation and resettlement will be essential for foreign investors to build trust and facilitate smooth project execution. Early engagement with local stakeholders and transparent communication can help mitigate potential conflicts and support successful project outcomes.

Liberalization of Land Usage for Socio-Economic Projects

A notable aspect of the revised law is the liberalization of land usage for a variety of socio-economic projects. The new legislation supports a broad range of developments, including industrial parks, economic zones, and social housing projects. This flexibility opens up new avenues for foreign investors to explore diverse investment opportunities.

Whether setting up manufacturing facilities, logistics hubs, or affordable housing, the updated law provides investors with greater freedom to pursue projects that contribute to Vietnam’s economic growth. This expanded scope not only offers opportunities for diversification but also aligns with Vietnam’s broader economic development goals.

Vietnam’s Land Law 2024 marks a significant shift in the country’s land management approach, creating a more structured and transparent environment for foreign investment. While the new regulations present challenges, they also offer strategic opportunities for those who understand and adapt to the changes. By aligning with the new provisions and working closely with local partners, foreign investors can leverage Vietnam’s evolving real estate landscape and capitalize on emerging growth opportunities.

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Authored by

Duc Le is Vietnam’s Country Manager at Tractus.