VCCI: Should maintain the surplus method in land valuation

ANTD.VN - The Vietnam Federation of Commerce and Industry (VCCI) believes that it is necessary to consider removing the surplus method from land valuation methods.

Should maintain the surplus method in land valuation?

In the draft Decree amending and supplementing Decree 44/2014/ND-CP regulating land prices and the draft Circular amending and supplementing a number of articles of Circular 36/2014/TT-BTNMT detailing land valuation methods; developing and adjusting land price lists; specific land valuation and consulting on land price determination, the Ministry of Natural Resources and Environment (TN-MT) proposed to remove the method of calculating surplus land prices.

However, VCCI believes that eliminating the surplus method will cause difficulties in the process of land valuation.

The surplus method is a method of determining land prices based on the purpose of use with potential for future development. This type of land with potential for development is common and does not have similar or similar assets that have been successfully traded on the market to apply the comparison method (with the condition that there are at least 03 comparable land plots that have been transferred on the market, winning the auction for land use rights);

Comparing with land valuation methods based on current usage purposes such as comparison method and income method, we will clearly see the advantages and disadvantages of each method.

According to VCCI, the comparison method has limitations in terms of comparative data because transaction information is often difficult to match with the real estate to be valued; there needs to be a lot of clear and accurate transaction information while in reality, in many cases the transaction price on paper and the actual transaction price are different;

Meanwhile, the land price adjustment coefficient method is implemented by multiplying the land price in the land price table by the land price adjustment coefficient, which also has limitations. The land price adjustment coefficient is issued by the provincial People's Committee through analyzing and comparing the land price in the land price table with the common land price on the market.

Thus, determining the adjustment coefficient is also based on comparative data, so it also encounters shortcomings in terms of information and input data like the comparison method.

According to VCCI, the current land database of our country does not truly reflect the reality of the market. Therefore, applying only 3 valuation methods as in the draft may cause difficulties in the implementation process due to the above-mentioned shortcomings.

On the other hand, the residual method is based on the following rationale: the present value of an asset is the residual value obtained from the estimate of the assumed development minus all costs incurred to create that development.

The essence of this method is to calculate land value in a backward manner, that is, starting from the sale price of completed future development products and deducting the necessary development costs to invest in creating that product. Land with development potential is valued by this method, which other valuation methods are not eligible to apply.

VCCI also believes that the surplus method is a real estate valuation method applied by professional valuation organizations and is considered one of the valuation methods applied when valuing real estate with development potential (undeveloped vacant land or land with constructions on the land that can be renovated or demolished to build new constructions on the land for the best and most effective use).

The surplus method has been prescribed in Vietnam Valuation Standard No. 11 issued with Circular 145/2016/TT-BTC.

The case of the Draft removing the surplus method in land valuation causes the regulations on real estate valuation to be inconsistent among relevant legal documents.

Regarding the state management goal, one of the reasons for removing the surplus method from the land valuation method is because "this is a real estate valuation method that serves administrators to calculate to decide on investment (the land price should be available in advance), not suitable for the task of land valuation to serve state management of land".

VCCI's view is that if this method is considered to be used only to calculate investment efficiency, it means that land value has been calculated to achieve the best and most effective use, and this land price is consistent with market principles.

Thus, the State uses this valuation method to determine the types of land with development potential to determine land prices consistent with market prices, thereby determining the financial obligations that investors must fulfill to the State.

Therefore, VCCI recommends that the drafting committee consider not removing the surplus method in land valuation methods.

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