On 26 March 2021, the government promulgated the final Decree No. 30/2021/ND-CP (“Decree 30”) to amend Decree No. 99/2015/ND-CP, implementing the Law on Housing (2014). Not long after, Decree No. 49/2021/ND-CP was issued to amend Decree 100/2015/ND-CP on the development and management of social housing (“Decree 49”).
In tandem with the new investment regulation regime introduced by the 2020 Investment Law at the beginning of 2021, Decree 30 cemented the following important changes to the field of residential development:
- A residential project will no longer be subject to its own investment policy procedure (separate from the investment laws), as opposed to the previous regulation under Decree No. 99/2015/ND-CP. Aside from the additional step of obtaining opinions from the construction authorities, the 2020 Investment Law (and its guiding legislations) shall be the main governing law.
- The selection of the developer for a residential project was clarified. The three main cases to be selected as the developer are land auction, competitive bidding, or when such developer has already acquired land use rights (including through receipt of land transfer or land use purpose conversion).
At the same time, more developers may be obligated to reserve 20% of residential land within their projects to construct social housing. Decree 49 imposes this obligation on any commercial residential project or township project with a scale of at least two hectares (within special-grade or grade I urban areas) or at least five hectares (within grade II or grade III urban areas).
In more detail
1. Simplifying investment policy procedure for residential projects
Decree 30 removed Articles 10 and 11 of Decree 99/2015/ND-CP concerning the dossier and procedure to obtain the approval of the investment policy for residential projects. Simply put, all types of residential projects will now be subject to the investment policy approval only under the investment regulations. The only difference is that in this process, the opinions of the local Department of Construction, or if necessary the Ministry of Construction, must be obtained.
This change was made in order to be consistent with the new Investment Law. Particularly, Article 75.1(d) of the 2020 Investment Law states that residential projects (not from public funds) will be subject to the investment policy procedure in the Investment Law. Depending on the scale and nature of the project, this approval shall be granted by the Prime Minister or (in most cases) the provincial People’s Committee.1
2. Selection of developer for residential projects
Previously, Article 18 of Decree 99/2015/ND-CP provided the following:
- If all compensation / land clearance has already been completed, the developer shall be selected through land auction.
- If the compensation / land clearance has not been completed, then the developer shall be selected by competitive bidding. If there's only one bidder, then such bidder shall be designated to be the investor.
Decree 30 completely removed this guidance. It now simply provides that a developer shall be selected to carry out a residential project provided that it has the requisite real estate business line and financial capabilities. The selection could be conducted through following means:2
(i) Land auction in accordance with the land law
(ii) Bidding under the laws on competitive bidding
(iii) The developer has acquired valid land use rights in the following situations:
- The developer has acquired land use rights to residential land.
- The developer has acquired land use rights to residential land as well as other types of land which are permitted to be converted into residential land.
- The developer has received the land use rights from somebody else to carry out its residential project in accordance with the land law.
With regard to (iii), one important change is that it will no longer be necessary for a developer to own only "residential land" to be approved to carry out a residential project. This previous requirement prevented many applications from investing in residential development. It is now sufficient to own "other types of land which are permitted to be converted into residential land".
Once again, the changes above are consistent with the new Investment Law. In addition, Article 29 of the 2020 Investment Law provides for certain cases where an investor can be selected, including the following:
- There is only one participant in the land auction or the land auction fails.
- There is only one registered bidder.
- The investor received transfer, capital contribution or rented agricultural land to carry out non-agricultural project.
- The project is carried out in an industrial zone or hi-tech zone.
- Other cases not pertaining to land auction or bidding
3. Social housing obligations
Under the previous regulation,3 all commercial residential projects and township projects had to reserve 20% of their total residential land area for the construction of social housing (with adequate infrastructure systems) in accordance with the approved master plans. The developer could directly carry out the construction or give up this portion of land to the local authorities for this purpose.
One noteworthy exception to this rule was that where the relevant project’s land is less than 10 hectares, the developer could undertake any of the following:
- Reserve 20% of the land for social housing as mentioned above
- Turn over a portion of the developer’s residential property equal to the value of the 20% residential land under option (i) for the purpose of using them as social housing
- Contribute funding equivalent to the value of such 20% residential land to the local authorities
Under the old regulations, there was confusion in determining a developer’s compliance with its social housing obligations, such as whether a developer would still have to contribute funding under the third option if it (or a previous developer) has already paid the relevant land use fees to the state.
However, as of 1 April 2021, Decree 49 has introduced a new regime of social housing obligations. As such, a developer will no longer have the options above but instead are subject to the following regulations:
- Where the project area is at least two hectares (within special grade or grade I urban areas)4 or at least five hectares or at least five hectares (within grade II or grade III urban areas),5 20% of the total residential land area must be used to construct social housing;
- In other cases, particularly where the project area is under two hectares (within special grade or grade I urban areas) or under five hectares (within grade II or grade III urban areas), the developer is not required to reserve land for social housing but must still pay the land use fees to the state.
Although this system is seemingly more straightforward, the threshold to be subject to social housing requirements has been considerably lowered due to rising housing demands. Since Decree 49 has only been promulgated very recently, we will have to see how the new regime will be implemented in practice.