Amendment of Decree 103: A Chance to Ease Financial Burdens and Unleash the Real Estate Market

The Amendment Process: A Shift Towards Realism and Responsiveness

The Ministry of Finance has recently submitted a draft amendment to Decree 103/2024, aiming to reduce or eliminate the additional land use fee — a regulation that previously sparked heated debate among experts and real estate enterprises. The draft proposes three options:

• Option 1: Completely abolish the additional fee and wait for further adjustment under the revised Land Law.

• Option 2: Reduce the fee from 5.4% to 3.6% annually.

• Option 3: Maintain the 5.4% annual rate to ensure state budget responsibilities.

The first option is strongly supported by experts and business associations, as it is considered the most "reasonable and humane", reflecting legal fairness and practical realities.

Land Use Fees: A Heavy Burden on Households Converting Agricultural Land

For households converting agricultural land into residential use, the Ministry of Finance proposes to reduce land use fees by up to 70% for land within quota, and by 50% for land beyond the quota. This is seen as a significant move to relieve financial pressure on tens of thousands of families, especially in suburban areas of Ho Chi Minh City and neighboring provinces.

As cited by Dr. Pham Viet Thuan, a 91m² agricultural plot in Cu Chi District previously required a fee of VND 91 million. Under the new land price framework and the previous guidance of Decree 103, this fee skyrocketed to over VND 1.1 billion. However, under the new draft — which proposes a 30% collection rate — the cost would drop to just around VND 350 million, a 70% reduction.

HoREA’s View: Set Fixed Rates, Not Temporary Reductions

Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), argues that instead of using the term "reduction," the decree should set a fixed collection rate. He recommends:

• 20% for residential land within quota

• 30% for residential land beyond quota

According to him, most of the converted land is legally acquired or inherited from ancestors. Setting a reasonable fixed rate would alleviate the financial burden and encourage legal recognition of land ownership, especially given that Ho Chi Minh City still has over 11,000 plots yet to receive land use certificates (commonly known as “red books”).

The 3.6% Additional Fee Proposal: Legally and Morally Disputable

Both Mr. Chau and Mr. Tran Quoc Dung – Vice President of the Vietnam Real Estate Association – have strongly opposed the proposal to charge an additional 3.6% annually:

• No retroactivity in law: Collecting a fee from projects with land allocation decisions made before August 1, 2024 violates legal principles.

• Not the enterprises' fault: Delays in notifying financial obligations are the responsibility of the authorities, not the businesses.

• Inappropriate calculation basis: The formula using average interest rates, CPI, and inflation from 2014–2024 is irrelevant and unfounded.

Mr. Dung emphasized: “If the delay is on the part of the authorities, businesses shouldn't have to pay the price. Removing the additional fee is not just lawful — it's a necessary move to revitalize the market.”

Soaring Land Prices: A Domino Effect on Housing Affordability

The Ho Chi Minh City Department of Construction also issued a warning about the risks of removing the land price framework and moving to a market-based land valuation mechanism:

• Project input costs will rise, directly pushing housing prices up, especially in the affordable and social housing segments, which are already in short supply.

• Lack of reliable valuation databases may lead to manipulation, disputes, and lack of transparency.

• Discrepancies in land prices between localities may incentivize provincial authorities to raise prices to boost revenues or be influenced by speculation.

Toward a Fairer, More Flexible Land Policy

The draft amendment to Decree 103/2024 represents a step in the right direction, showing a willingness to listen and respond to real-world challenges. However, to truly achieve the goals of:

• Reducing financial pressure on households

• Unblocking the real estate market

• Ensuring stable and sustainable state revenues

... the following measures are recommended:

1. Completely remove the additional land use fee as outlined in Option 1.

2. Set fixed collection rates instead of vague, temporary reductions.

3. Reevaluate both agricultural and residential land price brackets to better align with real market conditions.

4. Ensure transparent, comprehensive land valuation databases, minimizing the risk of abuse and speculation.

Only through clear, fair, and practical policies can Vietnam’s real estate market grow sustainably and inclusively — benefiting both citizens and enterprises alike.