What does the Ministry of Natural Resources and Environment say?

In this document, the Ministry of Natural Resources and Environment proposes to amend and supplement the land valuation method in the direction of regulating 3 land valuation methods, including: comparison method; income method; land price adjustment coefficient method. Thus, compared to Decree No. 44/2014/ND-CP, the draft Decree has reduced 2 land valuation methods.

According to the Ministry of Natural Resources and Environment, the regulation of 3 land valuation methods (comparison, income, land price adjustment coefficient) has ensured coverage of all land valuation cases serving state management of land.

Propose 3 methods to determine land price of natural resources and environment in picture 1 — According to the Ministry of Natural Resources and Environment, the regulation of three land valuation methods has ensured coverage of all land valuation cases serving state management of land. (Photo: DM)

Specifically, the deduction method is integrated into the comparison method because the deduction method is a step when applying the comparison method to land plots with assets attached to the land, applied to separate the value of assets attached to the land of the compared land plot.

At the same time, the Ministry of Natural Resources and Environment proposed in draft Decree 44 not to use the surplus method to value land.

Explaining why the surplus method is not used to value land, according to the draft submission to the Government, the Ministry of Natural Resources and Environment said that the surplus method is a method of valuing land by calculating the total assumed development revenue of the property minus the total assumed development cost.

Accordingly, the calculation of the total assumed development revenue of real estate must be based on the assumed factors of: transfer price, rental price, sales time, sales rate, trend and volatility of transfer price, future rental price, occupancy rate... and must discount the cash flow to the valuation time according to the bank's lending interest rate.

The calculation of the total assumed development cost of real estate, in addition to being based on the norms and unit prices issued by competent state agencies, also depends on the construction time, construction rate each year, contingency costs, interest costs, investor profits taking into account risk factors, advertising and sales costs, etc.

Calculating the assumed factors of total development revenue and total development costs mentioned above is very complicated, the valuation results are uncertain, inaccurate, and have large errors (for the same plot of land, just changing one indicator in the assumed factors will change the valuation results); it is easy to be exploited and causes risks for land valuation workers and people who decide specific land prices in localities.

This is the main cause of difficulties and delays in determining, appraising and deciding on specific land prices in recent times.

On the other hand, in real estate business, land always exists first, and its price is determined before the process of creating real estate. Assuming to estimate the value of real estate in the future, then determining the land price is not appropriate, causing the land price to depend on the real estate business method of the investor, not reflecting the true market value of the land.

In addition, the surplus method is often used by investors to calculate the benefits obtained by assuming revenue and estimating the costs incurred, thereby making a decision to invest or not to invest.

The Ministry of Natural Resources and Environment believes that, in the spirit of Resolution No. 18-NQ/TW, the method of determining land prices must ensure compliance with market principles. Therefore, the fact that draft Decree 44 does not apply the surplus method to determine land prices to calculate the financial obligations of land users and compensation when the State reclaims land is consistent with the Party's policy.

To overcome the limitations of not applying the surplus method, draft Decree 44 has amended and supplemented the content of the comparison method.

In particular, guidance on valuation of land plots and land areas that have not been invested in technical infrastructure is provided on the basis of combining deduction techniques to deduct technical infrastructure investment costs. At the same time, additional regulations are added that when determining land prices, the annual adjustment coefficient method must be applied for comparison and reconciliation to ensure the accuracy of land valuation results.

Source