New Government decree allows local provinces to lease commercial land directly to investors to implement commercial, service investment projects
On 12 June 2025, the Government issues Decree 151/2025/ND-CP providing for demarcation of authority of the 02-level local government, division of powers and delineating levels in land sector (“Decree 151”).
In particular, pursuant to Article 7.4(c) of Decree 151, the Prime Minister delegates his power to the provincial People’s Committees to decide to lease land directly to investors (i.e. without going through auction or project bidding) to implement an investment project.
The conditions for the provincial People’s Committee to make such a decision are as follows:
- the land parcel available for the direct land lease is currently managed by the State organizations and agencies;
- such a land parcel will be leased to the investor in the form of annual payment of land rental.
In the course of drafting Decree 151, the Ministry of Agriculture and Natural Resources explained that the new regulation is designed to “uniformly solves the cases where local authorities are facing difficulties in performing projects using land subject to State’s land lease with annual payment of land rental for which the land is currently managed by the State organizations.”
This is a significant development in the legal framework of leasing land by the State to the private sector to implement commercial, service investment projects.
The Land Law (2024), which came into force on 1 August 2024, has raised uncertainty regarding the authority of local governments to allocate vacant land parcels for the development of commercial, service investment projects – such as commercial centers and supermarkets.
According to Article 217.1(e) of the Land Law, “land recovered by the State and handed over to the land fund development center for its management” is classified as one of the land parcels managed by the State organizations and agencies.
According to Article 125.1(a) of the Land Law, the State will put land parcels from the land fund provided in Article 217.1 of the Land Law to auction with upfront payment of land rental (and not annual payment of land rental).
However, according to Article 120 of the Land Law, the State is not permitted to lease land with upfront payment of land rental to implement commercial, service projects (except where the project has tourism or office function).
As a result, local provinces have been stuck with selecting investors of a commercial, service investment project even if they had vacant land parcels for the project.
Decree 151, though not an ideal legal text to grant access to vacant land parcels to the private sector, offers a temporary solution (available until 1 March 2027) for domestic and foreign investors to apply for land lease from the State to implement commercial, service investment projects.
Disclaimer: This newsletter and its content are for informational purposes only and do not constitute legal advice. Readers should seek legal or professional advice before taking or refraining from any action.
