Many obstacles in land valuation

>> The Government regulated four land valuation methods

The Government recently issued Government Decree No. 12/2024/ND-CP to amend and supplement a number of articles of Decree No. 44/2014/ND-CP dated May 15, 2014 of the Government regulating land prices, as well as Decree No. 10/2023/ND-CP dated April 3, 2023 amending and supplementing some articles of the decrees guiding the implementation of the Land Law.

Bottlenecks in land valuation

As a result, Decree No. 12/2024/ND-CP was aimed at eliminating the challenges and constraints that had previously hampered land valuation in provinces and cities, therefore encouraging land resources for economic and social development.

Although land valuation is regarded as an important issue by specialists, it is also the reason why few apartments and residences have been awarded certificates of land use rights, as well as ownership of houses and other land-related assets. Incorrect land valuation will have severe consequences for beneficiaries and regulators, as well as for society and the economy as a whole.

Land valuation is not only a tool for Government to establish land management mechanisms; it also serves as a foundation for the transfer of land use rights, as well as for individuals and organizations that use the land to meet their financial obligations and receive land compensation when the state recovers the land.

Mr. Le Hoang Chau, Chairman of the HoREA, stated that so far, over 58,000 apartments and residences without certificates of land use rights and ownership of dwellings and other land-attached assets have made people unhappy, resulting in project developers not receiving 5% of the remaining contract price. This reality makes property transfers difficult, and even encourages unlawful property transactions... At the same time, according to data from 2005 to the present, land-related state budget revenues (of which land usage is the most significant) accounted for 13.1% of total domestic budget income. This is a big figure, demonstrating the need of accurate and proper land appraisal.

In addition, Le Hoang Chau stated that land valuation is one of six reasons why certificates of land use rights and ownership of houses and other land-attached assets have not been issued. Decree No. 44/2014 established regulations for land evaluation methodologies. However, property valuation standards are stuck, mostly due to the extra land method, which causes problems.

Noting the Government's efforts in issuing Decree No. 12/2024 to revise and supplement several articles of Decree No. 44/2014, Le Hoang Chau stated that the major concerns suggested by the HoREA have not yet been included in the land evaluation. As a result, he advised that land evaluation be accurate, appropriate, equitable, and non-expendable. It means that if the State receives VND 10, it will only collect VND 9. The remaining VND 1 should be viewed as an investment stimulus. Therefore, more consumers would help drive economic development and increase State budget revenue.

>> A suitable residual method for valuing land with development potential

Risk of rising housing prices

Mr. Tran Quoc Dung, Deputy Director General of Hung Thinh Corporation, stated that the Central Government's current plan is to cut housing prices so that more people have access to affordable housing. However, the land use levy is an important component of the inventory for development projects.

As a result, charging too much for land usage will increase project development expenses, hence raising apartment prices. The buyer will ultimately be responsible for the damages. This fact will not boost the real estate market or social security in the long term. Specifically, the proposed rule on the cost of construction investment specifies the expenses of equipment, management, and construction but not the price shift of labor and reserve costs. In fact, project development is generally done over time, therefore, pricing changes are unavoidable.

"In 2020, the investment rate for buildings with 20 to 24 floors and no basement was VND 11.4 million per square meter. In 2021, this amount surpassed VND 12.4 million per square metre, a 106% increase over 2020. By 2022, it had risen to almost VND12.7 million per square metre, a 102% increase over 2021. "There is no reason not to incorporate this expense in building cost estimates," Tran Quoc Dung stated.

Consequently, many real estate companies want the land use levy to be in line with the interests of the State, businesses, and citizens. Specifically, the appropriate investment expenses of the enterprises must be recorded accurately and effectively.

In response to the enterprises' concerns, Mr. Nguyen Dac Nhan, Deputy Director of the Land Department under the Ministry of Natural Resources and Environment, stated that, during the process of amending Decree 44/2014 to Decree 10/2023, Decree 12/2024, and so far, when drafting the Decree on the price of land, the Ministry of Natural Resources and Environment has also tried to follow the facts to adjust, supplement the current regulations so as to conform to practice However, the Land Law has not fully addressed the barriers, so the restrictions remain inadequate.

"In the process of drafting the Decree regulating the price of land and guiding the implementation of the Land Law 2024, the Ministry of Natural Resources and Environment has worked closely with the ministries, sectors, such as Ministry of Finance, Ministry of Construction... to collect opinions from enterprises, experts, localities... to deal with existing problems," Nguyen Dac Nhan stated.