HCMC to re-auction abandoned land plot in Thu Thiem new urban area

Ho Chi Minh City will soon re-auction a land plot in the Thu Thiem New Urban Area after the winning bidder abandoned their deposit in the previous auction in 2021.

This plot is one of three in the area that will be put up for auction.

At a press meeting on the city’s socio-economic situation in February, Nguyen Toan Thang, director of the city's Department of Natural Resources and Environment, announced that the city would select three plots of land in the Thu Thiem New Urban Area, Thu Duc city for upcoming auctions.

By the second quarter of this year, the city expects to complete the procedures necessary to organize the auctions.

The three plots, labeled 1.2, 1.3, and 3.5, are anticipated to use the new land price list, meaning the starting prices will exceed VND5,000 billion ($195.65 million).

In December 2021, HCMC auctioned off a plot of land in the functional area No. 3, including Lot 3-5, which covers 6,446 square meters. This lot was sold for VND3,820 billion ($149.48 million), which was 6.6 times higher than the starting price, after 130 bids from 21 participants.

Dream Republic JSC won the bid. However, in May 2022, the HCMC Tax Department seized the company’s account due to late payment of the auction winning amount, which was overdue by more than 90 days. As a result, the auction result was canceled.

Dream Republic is closely tied to the scandal-ridden Van Thinh Phat Group.

To prevent a repeat of the previous auction’s issues, experts from Savills Vietnam emphasized the importance of clearly defining the criteria for selecting investors with both potential and genuine interest.

Key factors should include the investor’s business performance in most recent years, the number of years of operation, total capital, and the number of completed projects.

Additionally, the review process could consider the investor’s development plan for the land, the company's ownership capital, capital arrangement for land use payment, ability to mobilize funds for project development, and feasibility of the development plan.

Regarding the starting price for land, Savills experts noted that for large-scale or long-term development projects with approved detailed planning, the starting price is often set using the surplus method. This method estimates total development costs based on land use coefficients, construction density, and the maximum number of building floors allowed according to the approved plan.

However, this approach may not always yield the most market-appropriate pricing, particularly in areas where the approved plan isn’t aligned with the most suitable land use.

For example, in locations where commercial office or hotel spaces aren’t in demand, starting prices based on those types of developments could be too high. This mismatch may result in an auction failure, as the starting price may not attract potential investors.

In terms of auction formats, there are two main types: direct and indirect auctions.

As for deposits, Savills experts suggested raising the minimum deposit to 10% instead of the current 5% to help prevent market manipulation and ensure bidders are serious. There should also be stricter penalties for those who win an auction but abandon their deposit.