Converting Agricultural Land to Residential Land in 2026: Legal Conditions, Costs, and Key Changes

22-05-26 MTParners

From 31 January 2026, Decree 50/2026/ND-CP provides detailed guidance on land use fee calculation when changing land purpose — a significant opportunity, but one that comes with strict conditions.

Millions of households holding garden land, ponds, or agricultural land mixed with residential plots now face a rare opportunity: Resolution 254/2025/QH15 (effective 1 January 2026) and Decree 50/2026/ND-CP (effective 31 January 2026) introduce a policy of up to 70% reduction in land use fees when converting to residential land. However, this incentive applies only once, for one parcel of land. Understanding the legal conditions, cost structure, and legal pitfalls is essential before filing an application.

1. Conditions for Converting Agricultural Land to Residential Land

Under Articles 116 and 121 of the Land Law 2024 (Law No. 31/2024/QH15), households and individuals seeking to convert agricultural land to residential use must simultaneously satisfy the following conditions:

Land Use Planning: The conversion must be consistent with the district-level land use plan approved by the competent authority. This is a non-negotiable prerequisite — if the parcel falls outside the residential zone in the plan, conversion is not permitted under any circumstances.
Rice and Forest Land: For paddy rice land and forest land (protective, special-use, or production forests), a resolution of the Provincial People’s Council or a decision of the Provincial People’s Committee approving the conversion is additionally required.
State Authorisation Required: The land user must submit a formal application to the district-level People’s Committee (or the authorised body). Changing land use without a decision from the competent authority constitutes a violation subject to administrative penalties or even land recovery.
Road Access Requirement (new from 2026): The parcel or area subject to conversion must have access connecting to a public road, or the adjacent landowner must grant a right of way.

Important note: Obtaining approval for a change of land use purpose does not automatically result in the issuance of an updated Land Use Rights Certificate (the “Red Book”). Following the approval decision and payment of all financial obligations, the land user must separately file for registration of the change to update the Certificate.

2. Costs: Up to 70% Reduction — But with Conditions

This is the most significant update introduced by Resolution 254/2025/QH15 and Decree 50/2026/ND-CP. Previously, households and individuals were required to pay 100% of the difference between the residential and agricultural land prices per the local land price schedule. From 2026, the payable amount is tiered against the local residential land allocation limit:

Within the allocation limit: Only 30% of the price difference is payable (equivalent to a 70% reduction).
Exceeding the limit by up to one times: 50% of the price difference is payable.
Exceeding the limit by more than one times: 100% of the price difference is payable — no reduction applies.

Illustrative example: Mr A in Hanoi owns a 300 m² parcel (comprising residential and garden land). The local residential land allocation limit is 120 m². The residential land price at that location per the 2026 schedule is VND 30 million/m², and the agricultural land price is VND 2 million/m². The price difference is VND 28 million/m²:

First 120 m² (within the limit): 120 × VND 28 million × 30% = VND 1,008,000,000.
Next 120 m² (exceeding the limit by up to one times): 120 × VND 28 million × 50% = VND 1,680,000,000.
Remaining 60 m² (exceeding the limit by more than one times): 60 × VND 28 million × 100% = VND 1,680,000,000.
Total land use fee payable: approximately VND 4.368 billion (compared with VND 8.4 billion under the previous 100% formula).

The land prices applied are those in the local land price schedule in force at the time the competent authority issues the conversion decision — not market prices or negotiated prices. Since 1 January 2026, provincial land price schedules have been significantly revised upward, and land users should factor this in when estimating costs.

3. Eligibility Conditions and Legal Pitfalls to Avoid

The reduced land use fee policy does not apply to all conversion cases. Under Article 10(2) of Resolution 254/2025/QH15 and Article 6 of Decree 50/2026/ND-CP, the incentive applies only to:

Parcels that have been recognised as having mixed residential and garden/pond/agricultural land use within the same plot (not yet subdivided).
Garden or pond land attached to residential land that was subdivided into a separate parcel before 1 July 2014 (the date the Land Law 2013 took effect).

Key legal pitfalls to be aware of:

One-time only: Each household or individual may benefit from the incentive only once, for one chosen parcel. If multiple parcels are held across different provinces, only one may be selected. This commitment must be declared in the conversion application.
Consequences of non-compliance: If authorities discover that a household has already benefited from the incentive but subsequently applies again for another parcel, the file will be referred to the tax authority for recalculation at 100% of the price difference, and late payment interest will be charged from the date of the conversion decision to the date of discovery.
Effective date of the count: 1 August 2024: The number of prior conversion instances is counted from 1 August 2024, the date the Land Law 2024 came into effect. Any conversions since that date are recorded against the policy entitlement.
Note for enterprises: Enterprises that received exemptions or reductions in land use fees upon land allocation and subsequently transfer or contribute the land as capital must repay the full amount of the exemption or reduction, plus an additional surcharge calculated for the period during which the incentive was enjoyed (Article 7, Decree 50/2026/ND-CP).

4. Application Dossier and Procedure

Applications are submitted to the district-level People’s Committee (or the Land Registration Office as delegated by the locality). The basic dossier comprises:

Application for change of land use purpose (in the prescribed form), including a declaration regarding prior use of the incentive.
Original Land Use Rights Certificate (Red Book).
Cadastral map extract or current land use map of the parcel.
Identity document: National ID / Citizen Identification Card / Passport of the applicant.
Documents proving the personal relationship (if the applicant is not the registered land user on the Certificate).
Declaration confirming that the incentive has not previously been utilised (as required under Article 6, Decree 50/2026/ND-CP).

Processing time: the general statutory timeframe is no more than 15 working days from receipt of a complete and valid dossier. In practice, processing times at many localities may be longer given the surge in applications following the new policy. Land users are encouraged to apply early so that the conversion decision is issued at current land price schedule levels.

Practical Implications

The reduced land use fee policy represents a meaningful relief measure, particularly for households in peri-urban areas where the 2026 land price schedule has increased substantially, previously making conversion costs unaffordable for many families.

However, a dual effect requires attention: the 2026 land price schedules are calibrated much closer to market values — in many areas three to five times higher than the previous schedule. This means that 30% of the price difference under the new schedule may still exceed 100% of the price difference under the old schedule in certain localities. Careful cost calculations are therefore essential before filing.

For real estate developers, the obligation to repay exempted or reduced land use fees upon transfer or capital contribution of land use rights will directly affect M&A transaction costs and project capital structures, requiring more thorough legal due diligence in each deal.

Recommendations

For households and individuals:

Verify the district-level land use plan before planning a conversion — this is a condition that cannot be circumvented by any means.
Calculate the total cost using the 2026 local land price schedule rather than relying solely on the “70% reduction” figure, as scheduled land prices have risen significantly.
If you hold multiple parcels, select the one with the largest area within the residential allocation limit to maximise the benefit from the incentive.
Do not delegate the entire process to unverified brokers or services — a false declaration that the incentive has not been used previously is a personal legal liability of the applicant.

For enterprises:

Conduct a full review of all land holdings benefiting from land use fee exemptions or reductions before undertaking any transfer or capital contribution transactions, to anticipate repayment obligations under Decree 50/2026.
Incorporate provisions addressing land-related financial obligations into M&A contracts and capital contribution agreements to avoid disputes after closing.

MT & Partners Law Firm, with a team of experienced lawyers specialising in land law, real estate, and civil matters, is ready to assist clients with legal due diligence on land parcels, dossier preparation, and monitoring throughout the land use conversion process. Contact our hotline at 0987140772 or email info@mtpartners.vn for a free consultation.

(*) This article is for general reference only and does not constitute specific legal advice. Any decisions relating to land use rights should be made on the basis of advice from a qualified lawyer or legal expert.