Ministry of Natural Resources and Environment proposes 4 land valuation methods in new draft

The Ministry of Natural Resources and Environment is drafting a Decree amending and supplementing several articles of Government Decree No. 44/2014/ND-CP dated May 15, 2014, regulating land prices, and Government Decree No. 10/2023/ND-CP dated April 3, 2023, amending and supplementing several articles of the Decrees guiding the implementation of the Land Law.

Currently, according to Decree No. 44/2014/ND-CP, there are five methods for land valuation: the direct comparison method; the deduction method; the income method; the surplus method; and the land price adjustment coefficient method.

However, in the draft, the Ministry of Natural Resources and Environment proposes four methods for land valuation.

Firstly, the comparative method is implemented by adjusting the prices of land parcels with the same land use purpose that have been successfully transferred on the market or won through land use rights auctions (comparative land parcels) by analyzing and comparing factors affecting land prices after excluding the value of assets attached to the land (if any) to determine the price of the land parcel to be valued.

Secondly, the income method is calculated by dividing the average annual net income per land area by the average savings deposit interest rate (r) of 12-month Vietnamese Dong (VND) deposits at commercial banks with over 50% state ownership in the province for three consecutive years (calculated from January 1st to December 31st) before the valuation date.

Thirdly, the surplus method is implemented by subtracting the total estimated development costs of the land plot or area from the total estimated development revenue, based on the most efficient land use (land use coefficient, building density, maximum number of floors of the building) according to the land use plan and detailed construction plan approved by the competent state agency.

Fourth, the land price adjustment coefficient method is implemented by multiplying the land price in the land price table by the land price adjustment coefficient. The land price adjustment coefficient is issued by the People's Committee of the province or centrally-governed city (provincial-level People's Committee) by comparing the land price in the land price table with the prevailing market land price.

Conditions for applying land valuation methods

For the comparative method applied to land valuation, there must be at least 3 comparable land parcels that have been transferred on the market or won through land use right auctions, except for the cases specified in clauses 2, 3 and points a, b, c and d of clause 4, Article 5.

The income method is applied to land valuation when the income and expenses from land use are determined, except as stipulated in clauses 1, 3 and points a, b, c and d of clause 4, Article 5.

The residual method is applied to value land parcels and areas with development potential due to changes in land use or planning when the total development revenue and total development costs can be determined, except as stipulated in clauses 1, 2 and points a, b, c and d of clause 4, Article 5.

The land price adjustment coefficient method is applied to determine the price of land parcels and areas in the following cases: Cases stipulated in point a, clause 4, Article 114 and clause 3, Article 189 of the Land Law; Calculating annual land rent for cases where the State leases land without auctioning the land use rights; Starting price for auctioning land use rights when the State allocates or leases land in cases where the land parcel or area has already had technical infrastructure invested according to the detailed construction plan. With this regulation, the Ministry of Natural Resources and Environment proposes two options:

Option 1: Determine the land price of the land parcel or area to be valued if the total value, calculated according to the land price table for the area subject to land use fees and land lease fees, is less than 90 billion VND for centrally-administered cities, less than 30 billion VND for mountainous and highland provinces, and less than 60 billion VND for other provinces in the cases stipulated in points b and d of Clause 4, Article 114, Clause 2, Article 172 of the Land Law, and in the case of calculating land lease fees paid in a lump sum for the entire lease period when the State leases land without auctioning the land use rights;

Option 2: Determine the land price of the land parcel or area to be valued for calculating land use fees and land lease fees for households and individuals in the cases stipulated in points b, clause 4, Article 114; clause 2, Article 172 of the Land Law and in cases where land lease fees are paid in a lump sum for the entire lease period when the State leases land without auctioning the land use rights.

Determining the specific land price for calculating compensation when the State reclaims land in cases where compensation is provided according to the provisions of the Land Law but the conditions for applying the land valuation method specified in Clause 1, Article 5 are not met.

Tue Minh

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