Law revised to apply market-based approach in valuing land price (Photo: VNA) The change is expected to significantly help the development of the real estatemarket and the economy.
Currently the land price framework is promulgated by the Government every fiveyears. From this framework, local people’s committees set their own price listsfor calculating tax payments or calculating a land price for compensation forproject clearance.
However, as the latest revision of the law was made in 2013, the land pricebracket is currently too low when compared to the price traded directly on themarket between the seller and the buyer. The real market price is always muchhigher than the local People’s committees’ set-up prices.
According to Dr. Nguyen Dinh Tho, general director of the Institute of Strategyand Policy on Natural Resources and Environment, the 2013 Law on Landstipulates that the land price in the framework must be equal to the marketprice, but in fact, is much lower. The current land price framework of mostlocalities is 30-60% lower than market price.
Professor Dang Hung Vo, former Deputy Minister of Natural Resources andEnvironment, said the big gap between the two types of land prices causeddisputes, lawsuits, corruption and chaos in the real estate market.
The land market of Vietnam has long existed as a dual-price mechanism so therevised law is expected to remove the price gap.
To deal with shortcomings, the draft revised Law on Land removes the Government’sland price framework. It means the Government will no longer apply the minimumand maximum prices for each type of land. Instead, when issuing the land pricelist of each locality, the provincial People’s Committee will use methods ofland pricing, land prices, and standards, and the fluctuations in actual landprices in the market to build price list.
After completing the construction of the land price list, it will be submittedto the provincial People’s councils for approval.
Benefits
The most serious consequence of the gap between the two types of land priceswas corruption, Vo noted, adding it was one of the loopholes leading to theloss of State’s budget revenue. In addition, brokers used the adjustment of theland price framework to spread false information, inflate prices, and create avirtual fever. The removal of the land price framework would be a breakthroughto bring the price back to its real value, and prevent land corruption.
According to Troy Griffiths, Deputy General Director of Savills Vietnam, theLaw on Land is always a sensitive and complicated issue in the legal system ofany country in the world. This amendment is expected to change the landvaluation from using the out-of-date price bracket to another method in accordancewith market principles. The change is especially important as it will helpattract investors and develop the real estate market and the economy.
Prime Minister Pham Minh Chinh and General Secretary Nguyen Phu Trong have recently raised concerns about delays inthe development of public projects. In the post-COVID-19 period, infrastructurespending is needed to stimulate the recovery of the economy, but the work hasremained slow, mainly due to difficulties in land compensation and allocationin the wake of the large gap between the land market price and the Government’sland price framework. Amendments on property appraisal under the draft Law onLand is very important to speed up the work.
Griffiths said under the land allocation, the compensation process was simplycalculated based on the Government’s land price bracket, but the measuresometimes caused inadequate compensation and generated many additional costs,leading to delays in the project development plans.
Under the revised law, owners of acquired real estate will receive a morereasonable compensation value and closer to market price, which will help speedup the land compensation and allocation process to build new projects.
Griffiths hopes the amended Law on Land will help the real estate market becomemore transparent. All land that needs to be cleared or compensated will beappraised in line with market prices. The change will create more confidencefor investors and people besides helping the State have more revenue as theland is fully taxed.
Sharing the same view, Professor Tho said when opening the economy, oil and gaswas the financial source that brings stability to the State’s budget. In recentyears, revenue from annual land use had replaced oil and gas as the main sourceof income. Around 15-16% of the State budget came from the collection of landuse tax amounting to 12.9 billion USD.
But this number was still not significant compared to the ability that landresources could bring to the country and people. The conversion of land usepurposes from agriculture to non-agriculture, or other types of land toresidential land had brought great value. The land use tax difference would bereallocated to the State, people, and businesses, ensuring the harmony ofinterests between them. It could also create a balance between today’s andfuture generations, ensuring that future generations still have land to use.
According to ASL Law Firm, the change in the method of determining the landprice bracket will also help deal with the real estate crisis in Vietnam as itcan prevent or delay the possibility of a potential real estate bubble./.
VNA
