On June 27, 2024, the Government issued the first decree to guide the implementation of the Land Law 2024, Decree 71/2024/ND-CP on land prices ("Decree 71"). Prior to the promulgation of Decree 71, the Government issued Decree 12/2024/ND-CP ("Decree 12") with regulations on land prices that are compatible with the provisions of the Land Law 2024 (although the basis for promulgating Decree 12 is the Land Law 2013) - this shows that the Government pays great attention to the issue of land prices. Decree 71, when it takes effect, will replace the "role" of Decree 12, thereby, ATA will analyze and evaluate the new points of Decree 71 compared to Decree 12 and a number of other provisions in other relevant documents.
1. Adjust the content of land valuation methods to ensure that the land price reflects more appropriately and reasonably the value of the land plot
Decree 71 has overcome a number of problems of Decree 12, thereby contributing to ensuring that land prices after being valued do not create excessive costs for land users and other beneficiaries, but still ensure that the state budget revenue is at a reasonable level. Here, ATA will analyze the adjustment content of each land valuation method under Decree 71 as follows:
- For Comparison Methods
First of all, it should be understood that the land valuation according to the comparative method is carried out on the basis of taking the value of the land use rights of the comparative land plot minus the value of the land-attached assets (if the comparative land plot has land-attached assets).
Decree 71 stipulates the basic and important contents: The value of the land-attached assets of the comparative land plot (if any) will be determined according to the price at the time the comparative land plot is transferred or auctioned instead of the price at the current time (the time the land plot is valued) as prescribed in Decree 12. If according to Decree 12, the value of land use rights is determined at the time of transfer or auction winning, but the value of assets attached to that land plot itself is determined at the time of valuation; In essence, it is clear that these are two different times, so the valuation by this method will not be appropriate and will not properly reflect the real value of land use rights. Accordingly, the valuation according to Decree 71 contributes to making the land valuation more objective and reasonable, reflecting more appropriately the real value of the comparative land plot.
In addition to the above issue, Decree 71 also guides the selection of land price information of comparable land plots to be carried out in order of priority, including:
+ The closest information to the time of land valuation.
+ Certain similarities in factors affecting land prices;
+ There is the closest distance to the land plot or land plot to be valued and is not limited by the administrative boundaries of commune-level and district-level administrative units in the provincial-level administrative area.
- For Collection Methods
Basically, Decree 71 inherits and retains the provisions of Decree 12. However, compared to Decree 12, Decree 71 supplements an important provision that tax expenses related to land use (including non-agricultural agricultural land) are reasonable costs that are included in the average cost to determine land prices. Accordingly, Decree 71 clearly stipulates information on the cost of the land plot and land plot to be valued as information on:
+ For non-agricultural land: means expenses for operation, maintenance and maintenance of construction works attached to land, production costs determined according to norms and unit prices promulgated by competent state agencies; taxes related to land use.
+ For agricultural land: including taxes related to land use and production costs based on norms and unit prices promulgated by competent state agencies at statistical agencies, tax offices, agriculture and rural development agencies.
Thus, the provisions of Decree 71 contribute to ensuring that land pricing is more in line with reality, helping land prices reflect reality more objectively.
- For the Surplus Method
In order to overcome some inadequacies of Decree 12, Decree 71 supplements a number of notable regulations as follows:
+ Allow the application of product and service business prices to calculate income in case of failure to collect transfer prices, land rents, and ground rents.
+ Specific guidance on the determination of fluctuations in transfer prices, land rents, ground rents, and business prices of products and services in case there are no data from statistical agencies or real estate market management agencies: accordingly, it can be based on the average consumer price index of housing and building materials for 03 consecutive years immediately before the time of land valuation or the consumer price index of the housing and building materials group, it shall be taken according to the consumer price index of the housing and building materials group of the whole country (applicable to the case of determining the fluctuation of the transfer price); based on the fluctuations shown in land lease and ground lease contracts (applicable to cases of determination of fluctuations in land rents and ground rents).
+ Clearly affirming the sales rate, the occupancy rate is one of the factors to determine revenue; at the same time, the mechanism for determining the sales rate and occupancy rate is stipulated by the provincial People's Committee to be applied no later than January 1, 2025. During the period when the provincial-level People's Committee has not stipulated the sales rate and occupancy rate, the land valuation shall be organized based on the actual data of 03 investment projects with the same main land use purpose with the closest distance to the land plot or land plot to be valued.
+ Previously, Decree 12 only generally stipulated the cost of loans; Decree 71 stipulates more clearly and specifically that financial costs such as loan interest, investors' profits taking into account equity, risks in business and the value of land use rights of land parcels and land plots to be valued are included in the total development costs of land parcels, land (will be deducted when valuing the land). With this supplemented regulation, Decree 71 continues to improve and ensure that land prices are more in line with reality, better ensuring the interests of people with financial obligations to the state. Also related to this issue, it should be noted that the percentages for determining business expenses, interest expenses, investors' profits taking into account equity and business risks for project groups will be specified by the provincial-level People's Committee on the basis of the proposal of the Department of Natural Resources and Environment.
+ It is more clearly stipulated that the total development cost of the land plot and land plot does not include compensation, support and resettlement funds according to the plan approved by the competent authority because the compensation, support and resettlement funds that the investor has voluntarily advanced will be refunded in accordance with the relevant provisions of the Land Law 2024.
Regarding investors' profits, Decree 71 has an important adjustment that the profit will be calculated according to the percentage multiplied by the total cost instead of only the construction investment cost as in Decree 12. Accordingly, this calculation method has taken into account the reasonable interests of investors, is in line with reality, helps land prices to be "closer" and reflect the nature of the market more accurately.
Decree 71 supplements guidance for cases where land plots or land plots that need to be valued are allocated or leased land by competent state agencies for the implementation of investment projects under multiple decisions, they shall be implemented in the following directions:
a) In case there are sufficient conditions for calculation of development turnover and development expenses of a land plot or land plot, the estimated development turnover and estimated development expense shall be determined according to the land allocation or land lease area of such decision;
b) In case it is not possible to fully estimate the development turnover of the land plot or land plot or the estimated development cost is greater than the estimated development turnover for the area to be priced, the determination of the estimated development turnover and estimated development cost shall be carried out for the whole project according to the detailed construction planning or planning the total ground plan approved by the competent authority.
Other contents of Decree 71 continue to inherit and remain the same as prescribed in Decree 12.
- Land price adjustment coefficient method
Basically, Decree 71 inherits and retains the provisions of Decree 12. However, Decree 71 has a notable addition that if there is a case where the land price is too high or too low compared to the common ground, this land price information will be removed before determining the market land price (however, Decree 71 does not specify how the land price is too high or too low compared to the common ground to be determined)
2. The land price list is determined according to the location and arrival of each land plot on the basis of the value area and standard land plot
According to the Land Law 2024, the Land Price List plays an important role, so Decree 71 has added many new regulations to ensure that the Land Price List fully promotes its role.
- Some basic adjustments
Decree 71 classifies land prices according to each type of land in line with the reality in Vietnam. Accordingly, Decree 71 supplements a number of types of land included in the land price list, including land for industrial clusters, land for high-tech parks, land for mineral activities, etc., which are all types of land associated with production and business activities of enterprises; thereby, the land price lists under Decree 71 ensure that they are closer to the purpose of land use, reflecting the value of the land plot more accurately.
Decree 71 stipulates that the land price in the land price list for land used for a definite term shall be calculated corresponding to the land use term of 70 years, except for agricultural land allocated by the State to households and individuals according to the agricultural land allocation quota, agricultural land within the quota for receiving the transfer of rights, which shall not be based on the land use term.
Decree 71 stipulates that the appraisal dossier of the land price list construction project must be developed for approval before officially building the land price list (Decree 12 does not stipulate this issue because the Land Law 2013 stipulates that the land price list is built on the basis of the land price bracket).
In addition, Decree 71 stipulates that the selection of land valuation organizations to develop land price lists is carried out through the bidding method. In case at the time of bid closing, no contractor participates, it shall be extended 01 time. After the extension but the contractor cannot be selected, the Department of Natural Resources and Environment shall assign the task to the public non-business unit that is eligible for land price determination consultancy activities.
- Land price list determined by location
Accordingly, Decree 71 supplements a number of notable regulations as follows: Areas in the formulation of land price lists are determined according to each commune-level administrative unit and based on:
+ Productivity, crops, livestock, distance to the place of production and consumption of products, traffic conditions for production and consumption of products (for agricultural land);
+ Conditions of technical infrastructure, social infrastructure, advantages for production and business; distances to political, economic and commercial centers in the region (for residential land in rural areas; commercial and service land in rural areas; non-agricultural production and business land other than commercial and service land in rural areas; land for construction of agency offices, land for construction of non-business works, land used for public purposes and other non-agricultural land in rural areas).
- Land price list to each land plot on the basis of the value area, standard land plot
Accordingly, Decree 71 stipulates that the area for building the land price list to each land plot on the basis of the value area and standard land plot must meet the following conditions:
+ There are digital cadastral maps that are adjusted and updated when there are changes in the shape, size, area of land plots and other factors related to the contents of cadastral maps and at the same time are updated in the national land database in accordance with the law on cadastral maps.
+ There is a land price database, including: land prices inscribed in land use right transfer contracts; the winning price of the land use right auction after the fulfillment of financial obligations; land price information collected through investigation and survey for a period of 24 months from the time of land valuation onwards.
In addition to the Land Price List, Decree 71 also stipulates the specific land valuation; however, the specific regulations on land valuation are basically inheriting all the provisions of Decree 12.
3. Individuals practicing land price determination consultancy must have an actual working time of 36 months or more
Decree 12 stipulates that individuals may practice land price determination consultancy in organizations with the function of land price determination consultancy on the basis of having one of the following two certificates (without stipulating the actual experience time):
+ Land valuation certificates issued in accordance with the land law;
+ The price appraiser card shall be issued in accordance with the provisions of the law on prices.
Decree 71 adjusts in the direction of regulations in the direction that individuals practicing land price determination consultancy (in addition to the necessary certificates) must have actual working time (experience), specifically as follows:
+ Have a university diploma or higher in any discipline or specialization in land management, cadastral, real estate, price appraisal, economics, finance, accounting, auditing, banking;
+ Having a practical working time of 36 months or more in each discipline or training major after obtaining a diploma in the discipline or specialty specified at Point a of this Clause as of the date of registration of the list of valuers, change or supplementation of the list of valuers;
+ Having a certificate of completion of the professional training and retraining course on land price issued by the professional training and retraining institution on land price.
Decree 71 takes effect from the effective date of the Land Law 2024, the regulations on determining land prices by the surplus method take effect from June 27, 2024./.
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