When investing in buying agricultural land to convert it into residential land, profit or loss depends on many factors such as: Ability to be allowed to convert it into residential land; Cost when converting it into residential land; Land purchase price and land sale price; Road or planning to become a residential area in the future; Information overload and high demand; Ability to push up prices and sell to people who lack information or like to invest risky, etc.
Below are two legal aspects to know when investing in buying agricultural land.
Ability to be allowed to convert to residential land
According to Point b, Clause 1, Article 121 of the 2024 Land Law, in case of changing the purpose of using agricultural land to non-agricultural land, permission must be obtained from a competent state agency.
However, not 100% of cases where people submit applications for land use purpose change are successful. Instead, the change depends on the district-level land use plan or the general plan or the zoning plan according to the provisions of the law on urban planning approved by the competent authority.
Accordingly, Clause 5, Article 116 of the 2024 Land Law stipulates the basis for allowing the conversion of agricultural land use purposes in residential areas, agricultural land in the same plot of land with residential land to residential land or conversion of non-agricultural land use purposes that are not residential land to residential land for households and individuals is the district-level land use planning or general planning or zoning planning according to the provisions of the law on urban planning approved by competent authorities.
Thus, if allowed to convert to residential land, it is likely that those who spend money to buy agricultural land will make a profit.
In fact, many people assume that 100% of agricultural land purchases will be converted to residential land and sold at residential land prices, so they will make a big profit. However, in reality, the possibility of being allowed to convert to residential land is generally not as easy as many people think.
Cost of converting agricultural land to residential land
The cost of converting agricultural land to residential land is mainly land use fee. Depending on each case, the land use fee to be paid can be up to billions of VND (commonly from 10 million VND to several hundred million VND).
Land law does not have specific cost figures when converting agricultural land to residential land, instead there are only regulations on how to calculate land use fees, specifically:
Pursuant to Clause 1 and Clause 2, Article 8 of Decree 103/2024/ND-CP:
When a competent state agency issues a decision allowing households and individuals to change the purpose of land use to residential land, the land use fee is calculated as follows:
To make a profit, the selling price must be greater than the purchase price and the cost of converting the land use purpose. It is impossible to confirm whether it is a profit or a loss when investing in buying agricultural land to convert it to residential land. However, reality shows that if allowed to convert it to residential land, in most cases there will be a profit; but this is a rather adventurous and risky investment channel.
