I.          INTRODUCTION TO ARTICLE 31 OF THE LAW ON THE CAPITAL

Article 31 of the Law on the Capital stipulates the planning and development of urban transportation infrastructure, emphasizing the crucial role of the urban railway system in forming synchronized development areas. The goal is to develop Hanoi in a modern, sustainable direction with the capability of connecting different areas within the city conveniently and efficiently.

This regulation requires the construction of urban railway infrastructure linked with the development of surrounding real estate through Transit-Oriented Development (TOD) projects, aiming to optimize land value and resource utilization.

II.       LEGAL AND ADMINISTRATIVE CONDITIONS FOR IMPLEMENTING ARTICLE 31

1.        The Linkage Between Master Planning and Detailed Planning

Article 31 clearly states that the construction of real estate related to urban railways must be based on the city's overall development plan, especially transportation and public infrastructure planning.

This requires that detailed planning for related real estate projects must be synchronously developed with the planning of urban railway lines. Article 31 provides the legal basis for approving real estate projects located near train stations, creating favorable conditions for investment and development.

2.        Authority of the City Government:

The Law on the Capital grants authority to the People's Committee of Hanoi City in approving and adjusting land use planning and transportation infrastructure development, including urban railways. The People's Committee is responsible for ensuring that planning and development projects related to urban railways meet the requirements of the master plan.

This authority helps ensure consistency in implementing real estate projects associated with public transportation infrastructure, creating momentum for urban development.

III.     FEASIBILITY OF IMPLEMENTING URBAN RAILWAY REAL ESTATE PROJECTS UNDER ARTICLE 31

1.        Financial Capability:

To develop real estate related to urban railways under Article 31, active participation from both the public and private sectors is required through Public-Private Partnership (PPP) models. This ensures investment capital for both urban railway infrastructure and surrounding real estate.

Investment attraction policies in this field include incentives on taxes, fees, and financial support for real estate enterprises. This creates a solid legal foundation to mobilize capital from private investors.

2.        Ability to Mobilize Capital from Land Value:

One of the key factors in developing urban railway real estate is the ability to leverage land value around station areas and railway lines. Through the TOD model and Land Value Capture mechanisms, the state can benefit from increased land values near stations, while encouraging the development of housing, commercial, and service centers in these areas.

The Law on the Capital and Article 31 support methods such as transferring land use rights or leasing land for a fixed term, enhancing the sustainability of investment projects.

3.        Issues of Land Clearance and Resettlement:

One of the biggest challenges in implementing urban railway real estate projects is land clearance. According to Article 31, urban development projects related to urban railways must comply with land clearance and resettlement procedures as stipulated by land laws.

This includes clearly defining the rights of affected people, as well as compensation and resettlement plans, ensuring that projects can proceed smoothly without facing community backlash.

IV.     CHALLENGES IN IMPLEMENTING ARTICLE 31

1.        Ability to Coordinate Among Stakeholders:

A noteworthy issue is the coordination among state management agencies, investors, and local communities. Without close cooperation, the implementation of real estate projects related to urban railways can face difficulties, especially in administrative procedures and land clearance.

2.        Fluctuations in the Real Estate Market:

When urban railway projects come into operation, land prices in adjacent areas often increase rapidly. This can create real estate speculation, making it difficult to develop new projects. To address this issue, Article 31 needs to be implemented in conjunction with regulations on real estate market management, ensuring that land price increases do not negatively affect socio-economic development.

V.       CONCLUSION

Article 31 of the Law on the Capital creates an important legal framework for developing real estate related to urban railways, especially through models like Transit-Oriented Development (TOD). However, for successful implementation, close cooperation among the state, private sector, and local communities is needed, along with transparent and effective financial mechanisms. Challenges in land clearance, coordination among agencies, and market fluctuations need to be comprehensively addressed to ensure that urban railway real estate projects are implemented sustainably and bring maximum benefits to Hanoi.

To avoid challenges related to implementing Article 31 of the Law on the Capital in constructing real estate related to urban railways, specific measures are needed to ensure the feasibility and effectiveness of the projects. Below are some solutions that can be applied:

1.        Strengthening Coordination Among Stakeholders

-          Public-Private Partnership (PPP) Mechanism: The state needs to promote the PPP model in urban railway projects and related real estate. This model not only mobilizes capital from the private sector but also helps distribute risks among parties. A clear legal framework is needed regarding the rights and responsibilities of private investors in real estate projects associated with TOD.

-          Inter-agency Coordination Committee: Establish an inter-agency coordination committee with the participation of state management agencies, investors, and local communities to ensure decisions are implemented promptly, synchronously, and legally. This committee also helps resolve conflicts arising during project implementation.

2.        Improving Land Clearance and Resettlement Processes

-          Transparency of Information: Ensure that development plans, land use planning, and resettlement plans are publicly transparent so that people are aware of their rights and responsibilities. This helps reduce conflicts between authorities and residents during land clearance.

-          Financial and Legal Support for Residents: To avoid negative reactions from the people, reasonable financial support packages and legal services need to be provided so they can adapt to the resettlement process. Ensuring rights to housing and employment for affected people is very important.

3.        Controlling Real Estate Speculation

-          Anti-speculation Tax Tools: The state can apply financial tools such as progressive taxes or real estate transfer taxes to control speculation, especially in areas around urban railway lines and stations. This helps ensure that land prices do not spike, causing difficulties for project development.

-          Limits on Land Trading: Introduce regulations limiting the quantity and holding time of real estate in areas planned for urban railways to prevent land hoarding while waiting for price increases, thereby ensuring sustainable development.

4.        Enhancing Capital Mobilization and Ensuring Financial Feasibility

-          Mobilizing Capital through Bonds and Infrastructure Funds: The government can issue construction bonds or establish infrastructure investment funds to mobilize long-term capital for urban railway projects. This helps reduce the financial burden on the state budget.

-          TOD Financial Model: Investors can be encouraged to invest in real estate projects around urban railway stations by sharing benefits from increased land value or income from commercial exploitation. The TOD model helps create long-term revenue sources, thereby ensuring payment ability and capital recovery for contractors and investors.

5.        Utilizing Technology and Modern Planning

-          Applying GIS and BIM Technologies: Implement advanced technologies such as GIS (Geographic Information System) and BIM (Building Information Modeling) to optimize planning, design, and project management. Using these technologies helps improve transparency, predict, and better manage issues arising during project implementation.

-          Planning Towards Sustainable Development: Planning real estate areas and TOD should follow sustainable development criteria, with green spaces, environmentally friendly transportation, and public amenities to enhance attractiveness for investors and residents.

6.        Creating Conditions for Enterprises to Participate in TOD Real Estate Development

-          Tax and Policy Incentives: Offer tax incentives, land policies, and legal support for enterprises participating in developing real estate associated with TOD. This policy will encourage businesses to invest in complex projects, helping to mitigate the impact of land price increases.

-          Sharing Risks and Profits: The state needs to build a clear mechanism for sharing risks and profits with private investors participating in TOD real estate development. This ensures that projects can continue even when facing economic or financial fluctuations.

7.        Flexible Planning Adjustments

-          Regularly Updating Planning: To avoid planning inadequacies, authorities need to review and update planning regularly, ensuring that it is not outdated and suits the actual development situation. This helps quickly resolve arising issues, avoiding delays in project implementation.

-          Flexibility in Planning Adjustments: If necessary changes arise, there needs to be a flexible legal mechanism allowing for quick and effective planning adjustments while still ensuring compliance with laws and community benefits.

Conclusion: Implementing Article 31 of the Law on the Capital in developing real estate related to urban railways may face many challenges but can be addressed through policy improvements, strict management, technology application, and enhanced coordination among stakeholders. The government needs to continue creating conditions and support so that these projects not only bring economic benefits but also contribute to sustainable development for Hanoi.

This analysis focuses on examining the legal, financial, and social aspects of implementing real estate projects related to urban railways under the provisions of Article 31, while providing solutions to address current challenges.

Disclaimer: This Legal Update is intended to provide updates on the Laws for information purposes only, and should not be used or interpreted as our advice for business purposes. LNT & Partners shall not be liable for any use or application of the information for any business purpose. For further clarification or advice from the Legal Update, please consult our lawyers: Dr. Le Net at anhduyen.duong@lntpartners.com and Dr. Nguyen Van Tuan at vantuan.nguyen@lntpartners.com)