New Regulations on Auctions of Land Allocations and Land Leases in Hanoi

On 14 September 2011 the People's Committee of Hanoi issued Decision 29/2011/QD-UBND ("Decision 29") regulating the auction of allocations of land use rights, land leases and the transfer of state-owned land/houses located in Hanoi.

The key provisions of Decision 29 are presented below.

Scope of Decision 29

Auctions may be held for:

• allocations of land use rights, with collection of land use fees, for projects including residential projects, infrastructure projects, commercial and industrial projects, agricultural, forestry and aquacultural cultivation projects; and
  
  
• land leases for projects including commercial and industrial projects and agricultural, forestry and aquacultural cultivation projects involving the use of communal land.
  Tender processes to choose investors for projects involving land use rights are not subject to these regulations

Tender processes to choose investors for projects involving land use rights are not subject to these regulations

Duration of Land Use Rights

Decision 29 stipulates the duration of the land use right granted to each category of investor pursuant to an auction:

• residential and mixed-used projects:
  
  
  • stable and long term use for Vietnamese individuals/organisations and overseas Vietnamese who are investors or regular contributors in the sphere of science/culture in Vietnam or who reside permanently in Vietnam; and
  • maximum 50 year lease in the case of residential projects for sale (with a one-off lump sum advance rental payment) for overseas Vietnamese who reside abroad or foreign individuals/organisations,
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• commercial projects, maximum 50 year land allocation or lease; and
  
  
• agricultural, forestry, aquaculture and salt cultivation projects:
  
  
  • maximum 20 year land allocation or lease for households and individuals cultivating annual crops or engaged in aquaculture and salt production; and
  • maximum 50 year land allocation or lease for households and individuals cultivating perennial trees or engaged in production forestry or for organisations using land for agricultural, forestry, aquaculture or salt cultivation projects.

Criteria for Bidders

In order to be eligible to participate in auctions bidders must not be using state funds for the auction and must be financially independent, i.e. bidders must not be subsidiaries of the same parent company or be joint venture partners. Decision 29 sets out the minimum number of bidders in each type of auction:

• auctions of projects with developed villas, garden houses and semi-detached houses:
  
  
  • in the case of a separate auction for each land plot, a minimum of five bidders; and
  • in the case of a one-off auction for a number of land plots, or group of land plots (there not being less than 10 land plots per group and each with the same starting price), a minimum number of bidders which is double the number of land plots being auctioned,
    
    
• auctions of projects for the development of residential housing for sale (including multi-storey buildings, mixed-used buildings, villas, garden houses, semi-detached houses), a minimum of five bidders for each land plot; and
  
  
• auctions of land to be used for industrial, commercial and service purposes, a minimum of five bidders for each land plot.

Pricing & Payments

The starting auction price must be close to the 'actual' transfer/lease price and must not be lower than the current list price published by the Peoples' Committee.

In the case of land leases, the payment to be made by the winning bidder must also include additional amounts for the development of the land and for any benefits attached to the land as a result of its location, as shall be determined by the authorities prior to the auction and disclosed in the auction prospectus.

Effective Date

Decision 29 took effect on 24 September 2011.

For inquiries related to this Legal Update, please contact David Lim, Eddie O'Shea, or your usual contacts with our firm.

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