Adjusting policy will bring land prices closer to the market

	Many localities delay approving land use plans for agricultural and forestry companies
	Shortcomings in completing land market
	Need to fundamentally renovate mechanism of land transfer for profit-making purposes

Land pricing mechanisms need to be improved to ensure transparency, be in line with market prices, and clearly define responsibilities of relevant agencies. Photo: ST

Inadequacies in adjusting framework every five years

Reports from 57 localities to the Ministry of Finance showed that the state budget revenue for urban land increased annually in the 2014-2018 period, with total state budget revenue of more than 372,516 billion VND. Revenue from land accounted for a high proportion in the structure of state budget revenues in many localities. Land revenues including land use fees, land rents, taxes, fees and charges had been collected fully and promptly with increasing levels, the following year was higher than the previous year.

Regarding land prices, the 2013 Land Law has an article to regulate the land price framework. Then, in 2014, the Government issued Decree No. 104/2014/ND-CP stipulating the land price framework. The Government issued the five-year land price framework for each type of land in each region. During the implementation of the land price framework, if the prevailing market price increases by 20% or more compared to the maximum price, or decreases by 20% or more compared to the minimum price in the land price framework, the Government will adjust the land price framework accordingly.

All 63 provinces and cities have developed, issued and publicized land price tables as prescribed. The land price table of localities specifies the price of residential land in urban areas, non-agricultural production and business land that is not commercial or service land in urban areas; commercial or service land in urban areas and agricultural land. Some localities have developed their land price table attached to cadastral records to each parcel of land. The determination of land prices has been conducted by provinces and cities according to a strict process (through provincial-level land price appraisal boards before submitting to the People's Committees to decide the land prices). The determination of land prices is done mostly by hiring organizations with consultancy on land price determination, which creates objectivity in land valuation. The land price table and specific land price set by the provincial People's Committees are more suitable to the common land price in the market compared to the past, creating high revenue for the State Budget; and better ensuring the rights of land users, the State’s and investors’ interests.

However, many inadequacies have arisen. Le Hoang Chau, Chairman of Ho Chi Minh City Real Estate Association, said the above regulation was "in conflict” and not suitable to the actual situation of localities and not feasible in reality. This is because the common "land price table" of localities was only about 30-50% of the market price. This provision limited the activeness, initiative, and accountability of the provinces and cities directly under the Central Government. Agreeing with this view, Assoc. Nguyen Van Xa, former Head of the Public asset management department under the Ministry of Finance, said the land price table set by localities was too low compared to the common market price, and it is largely priced according to the land price adjustment coefficient method resulting in long-standing complaints.

In addition, some investment projects have been allocated or leased land by the State but have not been put into use or delayed, causing land wastage. The review and approval of the plan, and determination of land-use rights value when equitizing state-owned enterprises have not yet been transparent in some places, causing losses to the state budget. The determination of land prices in some specific cases is still slow, failing to promptly meet the land use levy collection schedule, land rent and compensation when the State recovers land.

Sanctions at the stage of price valuation are necessary

To overcome the aforementioned shortcomings, improving the legal provisions on land is essential. According to the legislative program of the National Assembly, in the 9th session, the National Assembly will give comments on the draft Law amending and supplementing a number of articles of the Land Law. Participating in this amendment, many said it was necessary to clarify what the "market price" was and how it is determined. Mr. Le Hoang Chau proposed abolishing the regulation "Government promulgates land price framework once every 5 years" in Article 113 and delegating the power to the People's Councils and Provincial People's Committees to issue land price tables and determine specific land prices. This ensures the land price principle is in line with the prevailing land prices in the market and in accordance with the local situation.

Many said because the State regulates the land price – which is too low compared to the common price in the market – many businesses using the leased land of the State wanted to change the purpose of use to residential land for profiteering. In order to improve the efficiency of land management and use, according to Nguyen Van Xa, in addition to redefining land prices, sanctions must be imposed on organizations and individuals that conduct land pricing (including preliminary valuation for land auctions) in case the valuation consultancy results are 20% lower than the prevailing market price of the same type of land with comparable factors.

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According to Dang Hung Vo, Former Deputy Minister of Natural Resources and Environment, during the time when the Land Law and other relevant laws have not yet been amended, the National Assembly should issue a pilot resolution to handle a number of issues related to land management and urban planning, such as: land accumulation and concentration to develop agriculture and services in rural area and on a large scale; and land valuation based on the value zone. According to Vo, it is necessary to improve the land pricing mechanism to ensure transparency, in accordance with market prices, and clearly define responsibilities of relevant agencies in the future. In addition, it is necessary to develop a mechanism and roadmap for land lease under the form of annual payment, consistent with the purpose of land use, ensuring stable revenue and avoiding losses for the state budget.