Auction of Land Use Rights and Bidding to Select Investors under the 2024 Land Law: Distinguishing the Two Mechanisms for Accessing Land

One of the most fundamental changes brought by the 2024 Land Law (No. 31/2024/QH15, effective from 1 August 2024) is the significant narrowing of the cases in which land may be allocated or leased without competition, and the establishment of the auction of land use rights and the bidding to select investors as the two principal mechanisms by which enterprises access land for their projects. For domestic and FDI investors alike, understanding the difference between these two mechanisms carries strategic significance, because it determines the manner, the cost and the probability of accessing cleared land to carry out a project.

These two mechanisms are governed respectively by Article 125 on the auction of land use rights and Article 126 on the bidding to select investors to implement projects using land. Although both aim at transparency and the optimal use of land resources, they apply to different situations and impose different conditions. This article analyses the nature, the conditions and the strategic implications of each mechanism.

Mục 01Section 01Why the 2024 Land Law prioritises competitive mechanisms

Previously, a considerable portion of project land was allocated or leased on an appointment basis, giving rise to risks of under-valuation, loss of resources and a lack of transparency. The 2024 Land Law shifts the focus to competitive mechanisms, treating auction and bidding as the default method by which the State allocates land with collection of a land use levy, or leases land, for commercial purposes. The philosophy behind this is to let the market establish the true value of land use rights and to select the most capable investor, thereby both preventing budgetary losses and raising project quality.

The practical consequence is that enterprises can no longer readily obtain land through a proposal and a request for approval as before, but must take part in open competition. This requires investors to prepare thoroughly in terms of financial capacity, legal documentation and bidding strategy, and at the same time to assess correctly which mechanism will apply to the parcel of land they are targeting.

Mục 02Section 02Auction of land use rights under Article 125

The auction of land use rights applies where the State allocates land with collection of a land use levy, or leases land with a one-off payment, in respect of parcels that are already “clean” — meaning that compensation, support and resettlement have been completed, or that compensation is not required. Under Article 125, to be put up for auction a parcel must satisfy conditions such as having been recovered with compensation completed, being within the approved annual district-level land use plan for the purpose of auction, having an approved 1/500 detailed plan in the case of housing construction investment projects, and having an auction plan approved by the competent authority.

The defining feature of an auction is that competition is primarily on price: whoever bids the highest and meets the conditions wins. Because the land is already clean, the successful bidder can deploy quickly, but in return must prepare strong financial capacity to compete on price and to pay according to schedule. This mechanism is suited to parcels for which the State has proactively created the land fund.

Mục 03Section 03Bidding to select investors under Article 126

Unlike auction, the bidding to select investors under Article 126 applies to projects using land where, at the time of bidding, the land has not yet been cleared, falls within the cases of State land recovery, and has been resolved by the provincial People’s Council to be included in the bidding list. The conditions for organising a bid include the parcel being within the list of bidding projects resolved by the provincial People’s Council, having an approved detailed plan or a 1/2000 zoning plan, together with other conditions under the law on bidding.

The crucial point is that bidding competes not only on price but also on capacity and the project implementation plan. The successful bidder will be responsible for advancing capital and coordinating compensation and site clearance, so this mechanism demands higher overall capacity and a longer implementation timeline owing to the site-clearance stage. In return, bidding opens up access to large-scale parcels that the State is not yet able to clear on its own.

Mục 04Section 04An illustrative example of choosing the appropriate mechanism

Suppose an FDI enterprise wishes to develop an urban area. If the locality already has a clean parcel of about 5 hectares that is eligible and put up for auction, the enterprise need only prepare its financial capacity to compete on price and may receive the land for deployment immediately after winning. Conversely, if the target parcel is a large area of dozens of hectares still subject to site clearance and included by the province in the bidding list, the enterprise must take part in bidding with a capacity dossier and a well-structured investment plan, while preparing resources and a roadmap for the protracted compensation work. Identifying the applicable mechanism correctly from the outset helps the enterprise allocate resources and set realistic expectations as to timing.

Mục 05Section 05Counsel’s recommendations

HTIC Law Firm recommends that investors, and FDI enterprises in particular, study carefully the locality’s land use plan and its list of auction and bidding projects in order to plan land access proactively; and at the same time review the participation conditions and prepare capacity and financial dossiers appropriate to each mechanism. Because both mechanisms involve numerous procedural steps and cumulative conditions, seeking legal advice early helps avoid the risk of disqualification due to a non-compliant dossier. You may wish to refer to HTIC’s real estate lawyer services.

Mục 06Section 06Frequently asked questions

May FDI enterprises take part in the auction of land use rights? Foreign-invested economic organisations may take part in auctions and bidding to access land for projects, within the scope and conditions permitted by the law on land and on investment. However, the form of land use, and the rights and obligations, may differ from those of domestic investors, so careful assessment is needed before participating.

When does auction apply, and when does bidding apply? In short, auction applies to clean land and competes primarily on price; bidding applies to projects using land that has not yet been cleared, which has been included in the bidding list, and competes on both capacity and the implementation plan. Precise determination depends on the legal status of the parcel and the decision of the locality.

Fixed quotation per matter/project — Hotline +84 379 044 299. HTIC Law Firm advises on land access strategy and the preparation of auction and bidding dossiers for domestic and FDI enterprises.