Appropriate land valuation to clear the project

At the scientific workshop "Appropriate land valuation to unblock projects" organized by Investment Newspaper on July 27, 2023, real estate experts and businesses said: If there is a correct method, the project will be implemented smoothly, otherwise it will be a major barrier slowing down the circulation of social resources, hindering economic development.

Conference scene.

The Prime Minister has issued Official Dispatch No. 634/CD-TTg to the Minister of Natural Resources and Environment and Chairmen of People's Committees of provinces and centrally-run cities requesting urgent removal of difficulties and obstacles in land valuation.

The dispatch requires that, before July 31, 2023, the Ministry of Natural Resources and Environment must submit to the Government for consideration and promulgation a Decree amending and supplementing Decree No. 44/2014/ND-CP dated May 15, 2014 regulating land prices; at the same time amending and supplementing Circular No. 36/2014/TT-BTNMT dated June 30, 2014 on detailed regulations on land valuation methods, construction and adjustment of land price tables, specific land valuation and land price determination consultancy.

Currently, the draft amendments to Decree 44 and Circular 36 are being consulted by the Ministry of Natural Resources and Environment from relevant ministries, branches and agencies. There are many different opinions revolving around the current land valuation methods that the drafting agency proposes to amend, especially the elimination of the “surplus” method which is causing the most debate.

The recommendation to remove the surplus method as proposed by the drafting agency in the draft law could have a huge impact and cause land valuation to return to the period before 2007, increasing the difficulty of this already difficult task, Dr. Tran Xuan Luong, Real Estate major, National Economics University said: "The foreseeable consequence is that many segments of the real estate market will therefore not be priced appropriately, causing market congestion in the context that Vietnam has a huge demand for project development."

“The surplus method of land valuation is scientific and recognized by the world. This method has been developed by countries around the world into International Valuation Standards or valuation standards of each country based on combining approaches from the market, costs, income and widely applied to the practice of land and asset valuation of countries. It is necessary to maintain this method because it is reasonable to avoid losing state budget revenue and support businesses to implement projects faster,” affirmed Dr. Tran Xuan Luong.

However, Dr. Luong noted that all land valuation methods, if calculated accurately, still need to depend on market data and this is a fundamental issue that needs to be resolved if future Decrees and Circulars do not have to be "raised and put down" again to add or remove valuation methods as appropriate.

“The surplus method is a scientific method that cannot be abandoned, and the basis for the proposed abandonment still needs to be considered more carefully. On the other hand, for projects (many plots of land - many products; with potential for development according to land use planning, construction planning; real estate business; land area scale), only this method can correctly determine land prices,” analyzed lawyer Tran Duc Phuong - Ho Chi Minh City Bar Association. According to Mr. Phuong: “The Ministry of Natural Resources and Environment needs to consider in the draft of the revised Decree that it is necessary to continue to maintain the two methods: “surplus method”, “subtraction method”, and at the same time, it is necessary to add more detailed and complete regulations for easy implementation in current practice”.

According to Ms. Nguyen Thi Dieu Hong, Legal Department of VCCI, the surplus method determines land price based on the purpose of use with potential for future development, not the current purpose of use like the comparison method or income method. Currently, the land database of our country does not really reflect the reality of the market. Therefore, if only 3 valuation methods as in the draft are applied, it may cause difficulties in the implementation process.

Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, said that the surplus method is applied in 87.5% of real estate projects in Ho Chi Minh City. This is the main method of land valuation for over 8 years, since Decree 44 took effect. The reason comes from the fact that it is very difficult to apply other methods.

Mr. Nguyen Chi Thanh, Permanent Vice President of the Vietnam Association of Realtors (VARS), said that businesses often apply the surplus method because it can calculate the efficiency when implementing the project. If it is not effective, no investor will do it. This is also the method used by many countries in the world, because the remaining methods do not solve practical problems.

“We are amending the Land Law to follow market pricing, with prices going up and down, but the three current methods all determine prices only going up, not down, because new projects must always have prices equal to or higher than comparable projects. This pushes land prices up, affecting people’s ability to own houses. We propose that land pricing follow market prices, with prices going up and down, so that people are the ones who decide the price of real estate products. If pricing is done to maximize profits and keep prices always higher, then we need to change our thinking,” Mr. Thanh suggested.

From the perspective of a state management agency, Mr. Dao Trung Chinh, Director of the Department of Planning and Land Resources Development (Ministry of Natural Resources and Environment) shared that if the surplus method is not used strictly, the subjective will of the appraiser, the appraiser, and local leaders will greatly affect the valuation results. Not to mention that it also depends on the rate of increase in real estate prices, while we do not have a monitoring agency and do not have enough information.

Mr. Chinh also said that the Department will continue to listen to opinions from the market and synthesize them to submit to the leaders of the Ministry of Natural Resources and Environment and the Government to suit market developments.

Thanh Bui