Resolution 98 has established a legal framework for Ho Chi Minh City to pilot Transit-Oriented Development (TOD), under which the city budget is entitled to retain 100% of revenues generated from the development of land in areas surrounding urban railway stations and interchanges connected to urban railway lines, for reinvestment in railway infrastructure. The shift from conventional project approvals toward mechanisms for allocating and capturing land value increments will not only affect public revenues but also reshape the cost structures and investment strategies of real estate companies over the next decade.
Table of Contents
1. Why is TOD becoming a focal point for the restructuring of Ho Chi Minh City’s urban space?
Ho Chi Minh City is entering a period of major urban spatial restructuring, with metro stations and public transport hubs serving as key focal points. Rather than allowing land value increments generated by infrastructure investment to accrue entirely to individual organizations or private parties, the emerging legal framework seeks to capture and regulate part of this value for reinvestment. Alongside the implementation of the 2024 Land Law, the 2023 Housing Law, and the 2023 Law on Real Estate Business, the market is shifting from a phase of outward expansion toward more intensive and controlled development, imposing higher standards on developers’ actual execution capabilities.
2. What figures illustrate the scale of the TOD opportunity?
Numerous TOD land parcels along Metro Line 1, Metro Line 2, and the Ring Roads are being reviewed for potential development and value capture.
Under the draft Resolution currently being circulated by Ho Chi Minh City for public consultation, five groups of charges and fees in TOD areas are being proposed: charges on additional gross floor area resulting from adjustments to planning parameters; charges based on the incremental value of land; revenues from the exploitation of railway infrastructure assets; public transport connection fees; and infrastructure improvement fees.
Projects involving large-scale development and high development density within TOD core areas will need to pay particular attention to traffic impact assessments (TIA), especially with regard to the capacity of transport infrastructure and connectivity.
3. How will development rights and planning parameters change the rules of the game?
One notable development is the proposal to pilot a mechanism for accounting for value increments arising from floor area ratio (FAR) and other planning parameters, drawing on the international Transfer of Development Rights (TDR) model. Under this approach, planning authorities could allocate additional development capacity to TOD core areas while regulating or limiting development density in areas designated for preservation or controlled growth. In Vietnam, TDR remains at the stage of policy research and proposals and has not yet been institutionalized as a tradable asset that can be freely valued and transferred. At the same time, the regulatory approach is increasingly focused on curbing speculation and price manipulation while strengthening the screening of developers’ financial and execution capabilities.
4. What changes will real estate developers have to face?
Market and Demand: The strong connectivity advantages of TOD projects can support high market absorption, particularly for commercial, service, and owner-occupied residential developments.
Planning and Infrastructure: Land around metro stations will face increasingly stringent requirements concerning underground connectivity, parking facilities, and water supply and drainage systems in order to prevent localized infrastructure overload.
Finance and Costs: The introduction of five value-capture charges and fees will increase development costs (compliance costs) as well as the costs associated with accessing land. Profit margins in the real estate sector are likely to become more standardized, moving closer to those of infrastructure development rather than relying on exceptionally high returns generated by passive land banking.
Legal and Risk: Equity capital and the ability to independently arrange financing will become critical factors. Mechanisms for dealing with and recovering land from projects that are delayed, non-compliant, or lack sufficient execution capacity demonstrate the significant risk of losing control over a project when developers accumulate land but lack the capacity to bring projects forward.
5. What are the key issues in capturing land value around TOD areas?
Nurturing revenue rather than extracting it excessively: Analysis published by Vietnamese media outlets such as Dân Trí and Tuổi Trẻ suggests that the core value of TOD lies in cultivating sustainable, long-term revenue streams through commercial and service activities. If land value-capture charges are set excessively high at the initial investment stage, product prices could exceed consumers’ ability to pay, undermining the social objectives of TOD and potentially reducing ridership on public transportation.
The potential emergence of a market for trading development rights (TDR): If a Transfer of Development Rights (TDR) mechanism is studied and piloted in the future, it could provide a basis for developing a mechanism to regulate and reallocate development rights among different areas. Developers with strong financial modeling and cash-flow management capabilities could potentially use such a mechanism to optimize investment efficiency, with development rights adjusted or reallocated in accordance with approved planning frameworks to create additional development capacity in TOD core areas.
An era of greater transparency and oversight: The scope for policy advocacy aimed at relaxing development standards is becoming narrower. The use of the VNeID digital identification platform for public consultation on legislation indicates a trend toward regulations more closely reflecting genuine housing demand while limiting undue influence from minority interest groups.
6. How will TOD differentiate real estate companies in the long term?
The real estate market is entering a cycle increasingly defined by fundamental value and execution capability. TOD is likely to create a clearer differentiation among companies in the sector. Over the next decade, competitive advantages will increasingly belong to developers with professional risk-management systems, transparent financial structures, and the ability to create integrated, mixed-use developments. At the same time, effective cash-flow management, control over legal and approval timelines, and the ability to execute projects in accordance with approved plans will become increasingly important determinants of developers’ competitiveness.
Conclusion: How will TOD reshape project development strategies?
The TOD and land-value-capture challenge around metro stations in Ho Chi Minh City is not merely an infrastructure-planning policy; it represents a demanding test of developers’ capabilities. Adapting to new cost structures and mechanisms for capturing incremental land value will require developers to move away from a passive land-banking mindset. The long-term viability of projects will increasingly be measured by their ability to generate sustainable cash flows and create genuinely livable spaces integrated with the public transport ecosystem.
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