Riot police were seen at a roadblock leading to the site down a narrow street near the Thai Ha Redemptorist parish church in central Hanoi.

Father Matthew Phung said up to 300 people held a prayer vigil Wednesday night inside the church grounds as authorities began work on the reservoir to service a public hospital in what, years ago, was a monastery.

Officials began seizing property from Vietnamese churches more than 50 years ago when the communists took power in what was then North Vietnam, after the defeat of French colonisers.

The church says the authorities took over the three-storey monastery building almost 40 years ago and the reservoir project is just the latest example of the state whittling away their land.

Phung told AFP tensions were at their highest since 2008 when Thai Ha parishioners held a series of rallies calling for the return of other church property seized by the state.

He said up to 20,000 worshippers crowd into what is left of the church compound for services every weekend, so they would like their monastery back to give them more space.

"We have nothing against it except it is our property," said Phung, the monastery rector.

The rallies in 2008 led to the court conviction of eight people for property damage and disturbing public order, but in the latest incident Phung said parishioners would only react with prayer.

Vietnam has Southeast Asia's second-largest Roman Catholic community after the Philippines, with at least six million followers.

The Vatican and Vietnam do not have diplomatic relations but in recent years have begun a reconciliation, although the land issue remains a point of contention.

Religious activity remains under state control in Vietnam but the government says it always respects the freedom of belief and religion.

Officials could not immediately comment on the Thai Ha dispute.

Agence France Presse - November 17, 2011