Can banning subdivision and sale of land control the real estate market?

Experts say that in the short term, banning the subdivision and sale of land will cause a shortage of supply in the market, but will stabilize in the long term.

According to the new draft law passed by the National Assembly, the three laws related to the real estate market: the Land Law, the Housing Law and the Real Estate Business Law 2023 will take effect from August 1, 2024. This is 5 months earlier than the previously decided date of January 1, 2025. This is expected to become a "support" to promote the real estate market to stabilize and develop soon.

Accordingly, the 2023 Law on Real Estate Business prohibits the subdivision and sale of land in wards, districts, and cities of special-class, class I, II, and III urban areas. Thus, the new regulation will not allow the subdivision and sale of land in a total of 105 cities and towns nationwide; an increase of 81 cities and towns compared to the current regulation. This regulation only applies to real estate projects, not to individual or household land that needs to be divided into plots for the purpose of giving, inheriting, or transferring to others.

The 2023 Law on Real Estate Business prohibits the subdivision and sale of land in wards, districts, and cities of special-class, type I, II, and III urban areas. Photo: Le Toan

To put the 2024 Land Law into practice, from October 31, the Ho Chi Minh City People's Committee issued a decision on land division (Decision 100) allowing households and individuals with land that meets the conditions to divide the land. In addition, to realize the Law on Real Estate Business, the Ho Chi Minh City People's Committee has just issued Decision No. 83 on prohibiting real estate projects that have completed infrastructure investment from dividing and selling land plots.

Accordingly, the Ho Chi Minh City People's Committee decided to "ban the subdivision and sale of land plots throughout the area, including 5 suburban districts, except for land reserved for resettlement; for housing projects, investors must complete construction before being allowed to transfer."

Regarding this issue, there have been many opinions because they believe that such regulations are contrary to the 2023 Law on Real Estate Business and emphasize that the regulation prohibiting the subdivision and sale of land plots may bring long-term benefits, but at the present time it seems not really suitable when the market has just gone through a difficult period, people are less interested in land plots, so this market has stagnated.

However, some experts agree and say that the Ho Chi Minh City People's Committee's regulation prohibiting the subdivision and sale of land as above is appropriate and completely within its authority according to the provisions of the 2023 Law on Real Estate Business.

Sharing his views on this issue, lawyer Tran Xuan Tien, Head of Dong Doi Law Office, said that in fact, in recent times, many places have seen widespread land subdivision, leading to price inflation, land hoarding, and land abandonment. Many localities have banned this activity when they noticed unusual developments.

Accordingly, lawyer Tien said that Ho Chi Minh City's ban on subdivision and land sale projects may initially cause a shortage of land supply, but in the long term, the new regulation will help solve many problems related to the indiscriminate subdivision and separation of land plots, reduce the situation of people illegally constructing, and reduce legal risks when transacting this type of land.

Speaking with Cong Thuong Newspaper, Mr. Dang Hung Vo - former Deputy Minister of Natural Resources and Environment said that the decision of Ho Chi Minh City to ban the subdivision and sale of land plots throughout the city, except for resettlement projects using land plots, is a correct decision, consistent with improving the quality of urbanization and reducing the accumulation of idle money of people in land without housing.

According to experts, the demand for land is always very high but the market lacks supply from official projects. In addition, many speculators have taken advantage of the opportunity to compete to inflate prices, pushing up real estate prices, causing chaos in the market. At the same time, they collect land, divide it into plots, and even name it the same as official projects to attract buyers and sellers.

“Therefore, tightening the subdivision and sale of land is necessary to limit speculation because land must be built on before being opened for sale, so the total value of the product increases. In the long term, tightening the subdivision and sale of land will help the market develop in a transparent and sustainable direction, prevent speculation, and limit land waste,” said Mr. Vo.

Agreeing with the above viewpoint, Mr. Nguyen Van Dinh, Chairman of the Vietnam Real Estate Brokers Association, said that the new regulation will help eliminate investors who only request land for projects and then divide the land into plots for sale, which does not bring economic efficiency to the country.

"The new law has strictly regulated the division and sale of land plots for investors, but the activities of dividing land plots and inflating prices based on infrastructure still need stricter management regulations. Accordingly, the implementation of the 2024 Land Law and the 2023 Real Estate Business Law needs to be clearer and more detailed to eliminate the situation of inflating virtual land prices," Mr. Dinh noted.

Source: https://congthuong.vn/cam-phan-lo-ban-nen-co-kiem-soat-duoc-thi-truong-bat-dong-san-358831.html