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THE MINISTRY OF
FINANCE
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SOCIALIST REPUBLIC OF VIET NAM
Independence - Freedom - Happiness
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No. 145/2007/TT-BTC
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Hanoi, December 6, 2007
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CIRCULAR
PROVIDING
GUIDELINES FOR IMPLEMENTATION OF DECREE 188/2004/ND-CP OF THE GOVERNMENT DATED 16
NOVEMBER 2004 (AS AMENDED BY DECREE 123 DATED 27 JULY 2007) ON LAND PRICE
DETERMINATION METHODS AND PRICE FRAMEWORKS FOR ALL TYPES OF LAND
THE MINISTER OF FINANCE
Pursuant to Decree 77/2003/ND-CP of the
Government dated 1 July 2003 on the functions, duties, powers and
organizational structure of the Ministry of Finance;
Pursuant to Decree 188/2004/ND-CP of the Government dated 16 November 2004 on
price determination methods and price frameworks for all types of land
(hereinafter referred to as Decree 188);
Pursuant to Decree 123/2007/ND-CP of the Government dated 27 July 2007 amending
Decree 188 (hereinafter referred to as Decree 123);
Having reached agreement with the Ministry of Natural Resources and
Environment, the Ministry of Finance provides the following guidelines on
Decree 188 (as amended by Decree 123):
I. LAND PRICE
DETERMINATION METHODS
1. Direct comparison
method:
The following steps shall be taken in order
to determine a land price in accordance with the direct comparison method:
(a) Step 1: Survey and gathering of
information:
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Select three to five land parcels or vacant
blocks which adjoin or are situated in an area neighbouring the land in
question and which have similar characteristics to the land in question in
terms of land type, location2, land area,
infrastructure, legal grounds and use
purpose and which have been successfully
sold on the market (comprising traded
directly between individuals and organizations
with each other, traded via an
auction of land use rights, or
successfully traded on a real estate exchange
floor).
- Period for gathering information:
Information gathered must have been created
in the most recent period from the time of survey in order to determine a price
for the land in question. If information in the most recent period cannot be
gathered, information on assignments of land use rights in the period of one
year before the time of land price determination may be gathered.
- Information on the following should be
gathered:
+ Location.
+ Current use characteristics (land type,
land area and measurements of borders, geographic features, assets on the land,
current use purpose and zoned use purpose).
+ Conditions regarding infrastructure.
+ Environment (comprising
the natural environment including landscape,
water sources; level of pollution of air and water sources;
noise pollution etc.; and the social environment including social order and
security, and population density).
+ Legal characteristics (zoning and
construction master planning of the land in question; certificate of land use
right; whether financial obligations have been discharged and if so to what
degree).
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+ Date and conditions of such assignment,
transaction or auction, and payment therefor.
- Conditions of information:
The above information must be gathered from
results of actual market assignments of land use rights in normal conditions as
stipulated in article 1.2 of Decree 123.
(b) Step 2: Comparison and analysis of
information:
Information which is surveyed and gathered in
Step 1 shall be analysed and compared in order to sort out the similar and the
different elements between the land parcels or vacant blocks which are
comparable with the land in question, and such elements shall be used to
calculate and fix a price for the land in question.
(c) Step 3: Adjust the different price
elements:
Adjust the different price elements of the
comparable land parcels or vacant blocks in order to determine a price for the
land in question.
The estimated value of the land in question
shall be calculated by way of adjustment of the different price elements of the
comparable land parcels or vacant blocks as follows:
Estimated value of the land in question
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Price for assignment of land use
rights of each comparable
land parcel or vacant block
±
Amount of money for
adjustment of the price formed
from the different price elements
of each comparable land parcel or vacant block
Of which the amount of money for adjustment
of the price between each comparable land parcel or vacant block
and the land in question is to
adjust the difference in terms of
prices resulting from differences in terms
of location, infrastructure, legal
characteristics and level of environmental pollution
etc. The difference in terms of prices between the comparable land and the land
in question (which may be calculated as an absolute value or as a percentage of
the price for assignment of land use rights in normal
conditions on the local market) shall
be determined on the basis of the
evaluation of experts and the price
determining body which assisted the
provincial people's committee when the latter made its decision on
specific prices in the locality.
Where a land price was changed during the
period from the time of successful assignment of the land use right of the
comparable land parcel to the time of price determination of the land in
question, then before applying the above formula, the price for the assignment
of the comparable land parcel must be adjusted
(increased or reduced) by the current
fluctuation indicator for land of such type
which may be taken and calculated from information collated by the Department
of Finance or price consultants pursuant to Circular
80/2005/TT-BTC of the Ministry of Finance dated 15 September 2005
providing guidelines for implementation of Decree 188, or the current fluctuation
indicator for land of such type may be taken from statistics provided by the
statistics body (if available).
(d) Step 4: The price for the land in
question shall be determined by using the average of prices for three to five
comparable land parcels or vacant blocks which has been adjusted for the price
difference in Step 3.
Appendix 1 provides an example of determining
a land price in accordance with the direct comparison method.
2. Income method:
The following steps shall be taken in order
to determine a land price in accordance with the income method:
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- With respect to a vacant block or land on
which buildings (housing) have been constructed for lease, total annual income
derived from the land in question is the rent for the real estate (comprising
the land plus assets on the land) collectible annually.
- With respect to
agricultural land on which the person
allocated with such land himself organizes agricultural
production, total income earned means:
+ For land for planting annual crops and for
land for aquaculture, total income earned from the land in question is the
total turnover from the above-mentioned production activities on the land
collectible annually.
+ For land for planting perennial crops
(fruit trees, industrial orchards and trees for wood production), total income
shall be calculated on the basis of annual revenue, periodic revenue or one-off
revenue depending on the type of trees planted.
(b) Step 2: Calculation of expenses payable
for generation of total income:
- Total expenses shall include specific costs
such as land use fees, costs for investment in improvements, and production
costs. These costs shall be calculated in accordance with the current State
regulations; costs for which there is no relevant State regulation shall be
calculated on the basis of actual prevailing prices in the local market where
the business or production entity made the payment (specified in the contract
or goods sale invoice published by the competent financial body).
- If there has been investment in
construction of assets on the land in question, total annual expenses shall not
include any item for depreciation of the assets on the land.
(c) Step 3: Annual net income shall be
calculated in accordance with the following formula:
Annual
net income
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Total annual income calculated at Step 1
Minus
(-)
Total expenses calculated at Step
2
(d) Step 4: An estimated land price shall be
determined in accordance with the following formula:
Estimated
land price
=
Annual net income earned from the parcel of land
Rate of interest for Vietnamese dong savings with a term of 12 months
When a land price is determined in accordance
with the income method, then the total income, total expenses and net income
calculated at steps 1, 2 and 3 respectively must be the net average total
income, total expenses and net income respectively of the location of land of
the type subject to the land determination, with the correct land use purpose
approved by the authority, and calculated as an average of the three years
immediately prior to the time of the land price determination. If it is
impossible to gather data for three years, then the data of the year
immediately prior to the time of the land price determination shall be used.
Total income and total expenses shall be calculated using prices stipulated in
State regulations, or if there are no such applicable regulations than the
market floor prices of goods, materials, services and labour remuneration and
annual production volumes o as at the time of the land price determination.
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Appendix 2 provides an example of determining
a land price in accordance with the income method. With respect
to land parcels on which there has
been investment in construction of assets
(comprising project works, housing or buildings; or perennial crops such as
rubber tree, coffee, tea, pepper tree, cashew or fruit trees and so forth have
been planted) in order to conduct business or production, then first and
foremost the price of the land and assets must be estimated in accordance with
the income method, and then the value
of the assets on the land shall be deducted
and the residual value shall be the value of the land in question.
The method of deduction of the value of
assets on land shall be as provided in clause 3 (c) below of this Section 1.
3. Subtraction
method:
The following steps shall be taken in order
to determine a land price in accordance with the subtraction method:
(a) Step 1: Gathering of information:
- Gather market information in order to
select at least three properties (comprising the land plus assets on the land)
which have been successfully sold on the market and which have similar
characteristics to the land in question in terms of location, status quo,
infrastructure conditions, legal grounds, use purpose, cost and so forth.
- The period for gathering market information
shall be the same as stipulated in clause 1(a) above for the direct comparison
method.
(b) Step 2: On-site survey:
- Conduct an on-site survey and obtain a
complete and accurate description of the assets on the [three] properties
mentioned above (assets comprising housing, buildings or perennial crops).
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Present
value of
assets on the
land
=
Value of new
construction calculated
at the time of land price determination
Minus
(-)
Part of the value
for wear and tear.
Of which:
- Value of new construction calculated at the
time of land price determination means the costs of either replacing the
present assets on the land, or of constructing new assets with exactly the same
use function as the current assets on the land. This value of new construction
shall include both direct and indirect costs, and an appropriate profit margin
for the person investor in construction.
- Wear and tear of
assets on the land comprises both
tangible and intangible wear and tear, and
includes a reduction for damage to
the assets during their use process
and an allowance for outdated function and for wear and tear
due to the effect of outside factors.
- The method of calculating the value of new
construction and of deducting a part of the value for wear and tear shall be
implemented in accordance with current regulations of the Ministry of
Construction and the Ministry of Finance,
and the Evaluation Standards of Vietnam. If there
is no specific regulation on such method, then calculations shall be made on
the advice of consultants, experts or organizations directly conducting an
evaluation on the basis of market information and data.
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Value
of the property
=
Price of assignment
of the property
Minus
(-)
Current value of assets on the property.
Land unit
=
Value of the property
Area of the property
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Adjust the different price elements of the
properties as chosen in Step 1 in order to determine a price for the land in
question (the same as Step 3 of the direct comparison method above).
The unit price of the land in question shall
be the average adjusted unit price of the properties chosen in Step 1.
Appendix 3 provides an example of determining
a land price in accordance with the subtraction method.
4. Surplus method:
The following steps shall be taken in order
to determine a land price in accordance with the surplus method:
(a) Step 1: Determine the optimal use purpose
and effectiveness of the land in question on the following bases:
- Special characteristics of the land in
question.
- Regional and urban zoning; construction
master planning and plans, and master plans and specific plans for land use as
issued and approved by the competent authority.
(b) Step 2: Estimate the total developed
value of the property:
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- A determination of the total developed
value of the property must be conducted on the basis of an investigation
and survey of actual prices of market
assignments of houses, apartments, buildings,
sub-divided plots and so forth of other projects which have been completed and
which have similar features to the project in
question, and these other projects must
be in the adjoining area or in neighbouring
areas with similar living conditions and
infrastructure conditions; there must also be
consideration of the current market orientation and market fluctuations in
order to make a realistic estimate of the selling price.
(c) Step 3: Estimate the total costs of
developing the property:
- Total costs of developing the property
shall include all costs which the investor spends in order to construct the
infrastructure (including roads, water supply and water drainage, power supply
and so forth); to create the landscape; and to construct the houses, buildings
or sub-divided plots in order to sell them correctly in accordance with the
detailed zoning approved by the authorized body; and shall also include
advertising costs, sales' costs, general management expenses, and an item for
profit of the investor (to include an item for business risks).
Estimated total costs must be calculated on
the basis of unit prices, drawdown of investment capital, and
standard rates stipulated in regulations of
the competent authorities. If there are no such applicable
regulations, then costs should be based on actual prevailing costs of similar
projects in the adjoining or neighbouring areas.
If the investment project for development of
the property extends for a number of years and has a number of different stages
and revenue and expenses are calculated on an annual basis, then there must be
a discount on revenue and expenses in terms of current prices at the time of
determining the price of the land in question in accordance with the following
formula:
n
H. Total developed value:
Total costs of developing the property:
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In which:
TRi is the revenue in the nth year of the
project.
C is the expenses in the nth year of the
project.
r is the discount rate3 (calculated at
the interest rate charged by commercial banks for lending to perform investment
projects for development of properties).
n is the number of years required to
implement the project (calculating from the commencement of building works
until the date of completion of the project).
(d) Step 4: An estimated land value shall be
determined as follows:
Estimated
value
of the land
in question
=
Total developed value of the property
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Total costs of
developing the property
Appendix 4 provides an example of determining
a land price in accordance with the surplus method.
5. Conditions for
application of land price determination methods:
5.1 When applying any
of the land price determination methods,
the information and data which is gathered must
be in normal market conditions, and any information which is chosen and
analysed must be accurate and reliable.
5.2 The direct comparison method shall be the
principal method used to determine a land price when sufficient information and
data has been gathered in order to apply all four methods.
5.3 In the following
cases, a combination of at least two
of the land price determination methods specified
in this Circular shall be used to examine and compare estimated prices for the
purpose of determination of a specific price:
- The assignment of land use rights is not
prevalent on the market and the data gathered is not systematic;
- Market prices for assignment of land use
rights fluctuated irregularly and do not reflect the relationship between
supply and demand for land in normal conditions;
- An estimated land price resulting from
application of one of two land price determination methods exceeds the maximum
price in the price framework provided by the Government in clause 1 of article
5 of Decree 123.
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II. SPECIFIC PRICE
DETERMINATION IN LOCALITIES
1. Preparatory work
before making a land price determination:
(a) Classifying boundaries of regions
according to their administrative boundaries defined at the commune level into
plains [or delta], midlands and mountainous regions in order to apply the price
framework for all types of agricultural
land, residential land and non-agricultural
land used for production or business
purposes in rural areas as provided
by the Government on the basis of regions,
namely [classifying] plains, midlands and mountainous regions into each type of
commune in the locality (province or city) for conformity.
(b) Deciding the locations of the following
types of agricultural land: land for planting annual crops; land for planting
perennial crops; land for aquaculture; forest land for production; protective
forest land; specialized use forest land and other agricultural land in
accordance with the principles stipulated in article 1.7(b) of Decree 123.
- The locations of agricultural land shall be
formulated into classes of location namely location 1, location 2, location 3
etc., and the main basis for this shall be distance from the residence of the
land user and distance from the market for the sale of produce, the proximity
and level of convenience of traffic because producers
will incur travelling and other costs
(to buy raw materials and costs of selling
their produce), combined with other elements which create advantages:
- Class 1 location shall include all areas
which have the same socio-economic conditions, the same infrastructure, and the
same land use purpose; and which have from 1 to 3 features regarding place of
residence, market position and traffic conditions combined with other
advantages for agricultural production:
+ The following places are [close or near] in
the adjoining area or in neighbouring areas:
* Residence of the land user (measured from
the centre of the hamlet of the land user);
* Market for selling the agricultural produce
(rural or urban market or location for collecting the produce);
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+ The area has the best features for
agricultural production comprising smooth terrain, self-irrigating conditions,
a high level of land fertility, and climactic and weather conditions which are
favourable for production and business.
- Class 2 location, class 3 location and so
forth shall have less favourable conditions than those mentioned above for
class 1 location.
- In a number of specific cases, the following
matters shall be taken into consideration when classifying locations:
+ Even if an area has the best advantages for
agricultural production but it has from 1 to 3 features of a long distance from
the residence of the land user, from the market or from a road, then such
location shall be classified below class 1.
+ An area shall still be classified as a
class 1 location if one of the three features namely residence, market or road
is in the adjoining or neighbouring area but the degree of such advantage can
only be said to be average or below average.
- A provincial people's committee shall
stipulate the criteria and the distances from land locations for the order of
class 1 location, class 2 location and so forth, and shall also stipulate the
number of such locations depending on the special characteristics of each type
of agricultural land within its area and the special characteristics of
agricultural production and sale of agricultural produce, ensuring that the
criteria and the classifications are appropriate for the actual conditions
within its locality.
(c) Providing specific criteria for locations
of land from location 1, location 2 and onwards in conformity with
the conditions of the particular locality
and determining quantities of locations of
land for salt production and locations of types of non-agricultural
land in rural areas in order to determine land prices in accordance with the
general criteria specified in clauses 1(b) and 2 of article 9 of Decree 188, as
follows:
- With respect to land for salt production:
Subject to specific conditions in the locality, the provincial people's
committee shall classify locations on the
basis of the criterion of the
distance from the saltern [or saltworks] to the salt warehouse in
the production area or the distance from the saltern to an inter-district road
(or if no inter-district traffic road runs through the area, then the distance
to the inter-commune road).
- With respect to residential land, and
non-agricultural land used for production or business purposes in rural
areas: Subject to the specific conditions
in the locality, the provincial people's
committee shall determine land areas for which land prices should be
determined; classify locations of land, and decide a quantity of locations in
each land area for price determination.
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Subject to specific
conditions in its locality, the provincial
people's committee may decide not to classify
streets but to classify locations of land and provide a quantity of locations
of land for each section of street or specific street for land price
determination. The classification of locations of land and
divisions of each section of street
or each street of each urban category
for land price determination shall also be performed in accordance
with the general principles specified in article 10 of Decree 188.
(e) A provincial people's committee shall, on
the basis of decisions establishing and classifying urban areas within
the province as approved by the authority,
apply the price framework for all types
of residential land, and of non-agricultural land used for production or
business purposes in rural areas as provided by the Government.
2. Price
determination and adjustment of prices for specific types of land:
(a) A land price must be decided in accordance
with the correct land use purpose stated in one of the following documents:
- The certificate of land use right issued in
accordance with the law on land, or the land use purpose stated in
one of the documents specified in
article 50 of the 2003 Law on
Land. If the land use purpose is not
stated in such document, then it
shall be the main use purpose of
the land in conformity with land use zoning at the time of price
determination of the land;
- The decision of the authorized State body
allocating or leasing land or permitting conversion of the land use purpose;
- Registration for conversion of land use
purpose in conformity with the law on land.
With respect to land for which no certificate
of land use right or document specified in article 50 of the 2003 Law on Land
has been issued; or if there is not yet any land use zoning or the land use
zoning is available but has not yet been implemented; or if the land use right
has not yet been registered, then the land price shall be determined in
accordance with the current use purpose.
Where a land user has used all or part of a
land parcel other than for the use purpose recognized by law or approved by the
authorized body; or has used agricultural land comprising all types specified
in article 13.1 of the 2003 Law on Land for intercropping or for joint
ecological-environmental tourism business or has used non-agricultural land
combined with other purposes, then the land use purpose as specified in the
above certificate of land use right, decision of the State allocating or
leasing land, land use zoning or planning, or registration of land use rights
shall still be used as the basis for land price determination.
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- If the actual land use right transfer
prices for the following types of land are less than the minimum price level
stipulated by the provincial people's committee pursuant to article 1.5 of
Decree 123, then such people's committee may decide to apply a lower more
appropriate price and at the same time send such decision to the Ministry of
Finance for its inspection if it considers it necessary:
+ In a number of isolated cases where land
prices have already been announced on 1 January in any one year, but the
relevant regions are deep-lying and remote areas, plains, midlands or
mountainous regions, or islands in which
the natural and socio-economic conditions
are difficult or especially difficult pursuant to standards
stipulated by the State or by the provincial people's committee, and if there
is no infrastructure or very poor infrastructure in such areas (including if
they have been zoned as residential land or
non-agricultural production and business land
but there is not yet any infrastructure).
+ In the following cases:
* Where the State allocates land without
collection of land use fees or leases land but not in the form of auctioning a
land use right or tendering for a project using land;
* Where the State recovers land; or
* Where a State owned enterprise undergoing
equitization chooses the form of land allocation: and for such land the
provincial people's committee on 1 January issued land prices but at the time
of allocating the land, or at the time of the decision recovering the land, or
at the time of valuing the land for the purposes of equitization the price is
inconsistent with actual market prices for assignment of land use rights in
normal market conditions, then the provincial people's committee shall rely on
such actual market prices within its locality and on the land price
determination methods stipulated in this Circular in order to adjust the
specific prices which it announced on 1 January (after obtaining the opinion of
the standing committee of the provincial people's council).
- [In the above
cases], The Department of Finance in
any one province shall preside over co-
ordination with other relevant departments and branches in order to fix
specific prices for submission to the provincial
people's committee to make the final
decision; and in a case where experts
or consultants are hired, such Department shall contact the other relevant
departments and branches to evaluate the advice of the experts or consultants
prior to submitting the proposed specific prices to the provincial people's
committee, ensuring that they are as close as possible to actual market prices
for assignment of land use rights in normal conditions.
- In the above cases, the prices shall not be
subject to the restrictions stipulated in article 1.5 of Decree 123 but must
not be higher than the actual market prices.
- The above provisions
shall only apply to each isolated
project, and are aimed at achieving the
following objectives, namely calculation of land use fees when the State
allocates land other than via an auction of a
land use right or tendering for a
project using land; calculation of the
amount of compensation for loss after the State recovers land, and
calculation of the value of a land use right on equitization of a State-owned
enterprise which chooses the form of land allocation. In all other cases
the specific prices stipulated by the people's
committee as applicable to each land location within
the region shall apply.
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- In the case of rural residential land and
non-agricultural land for production and business also within rural areas and
lying in the special locations stipulated in article 1.10 dd [or e] of Decree
123, namely land lying next to a main road (highway or inter-provincial road)
or lying next to a traffic hub, trade zone, tourist resort or industrial zone,
then the provincial people's committee may stipulate a specific price
for the best locations of the
above-mentioned two types of land, consistent
with the local markets prices for
assignment of land use rights in
normal conditions, but such price must not
exceed 5 times the maximum price level in the framework for rural
non-agricultural land for business and production stipulated by the Government
in Lists 6 and 8 issued with Decree 123 (but excluding the 20% band stipulated
in article 5.2 of Decree 123).
+ When the competent authority amends land
use zoning or land use plans, if the market prices of land within
such zoning has changed as compared
with the prices announced on 1 January,
then the provincial people's committee must
also amend the prices of the land
in accordance with current regulations for consistency.
+ When the competent authority issues a
decision agreeing to a conversion of land use purpose, the provincial
people's committee shall also amend the
price framework in accordance with the
latest regulations issued by the Government.
+ When the competent authority issues a
decision upgrading an urban category, then the provincial people's committee
must also adjust the land prices for consistency.
- In all of the above-mentioned cases of
price adjustment within any one year, the provincial people's committee must
first seek an opinion from the standing committee of the provincial people's
council prior to issuing a decision.
(c) Determination of
specific prices for each location of
land of all types for which the
Government provides a land price framework:
- With respect to land for planting annual
crops, land for planting perennial crops, land for aquaculture and forest land
for production, prices shall be determined for each location of land. Land of
class 1 location shall be subject to the
highest price, and land of subsequent
classes shall be subject to lower prices.
Where crops or livestock of different kinds
are raised in the above agricultural land of one type, there shall be only one
uniform price provided for each location of land in the region in which a main
crop or livestock is raised (for example land for rice cultivation in a region
for planting annual crops); and land prices shall not be provided on the basis
of different crops or livestock for the same land location of the same type of
agricultural land in the same region.
- Land for salt production shall also be
classified into locations, so that class 1 location shall have the highest
price and the subsequent locations shall have a lower price.
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- For these types of land, the people's
committee must formulate specific criteria and make a decision on the number of
classes of location of such land.
- In the case of urban residential land, and
non-agricultural land for production and business in urban areas,
the people's committee must provide land
prices according to the type of each
street in different urban categories.
Subject to the
specific conditions in the locality, either
of the following methods may be used
for serial price determination for classes of land of each location:
+ The first method: Direct price
determination for each location of land:
Serial price determination for each location
of land shall be based on results of price determination of a number of
specific land parcels of such location of land as follows:
For each location of land of a specific land
type, select at least three parcels of land with different special
characteristics and which are representative of the land in question. After
that, determine a price for each land parcel using the price determination
methods provided in Part I of this Circular and calculate the price for a land
area unit (m2) of each land parcel.
The price for each location of land
(calculated for a square metre) shall be fixed as the average price of prices
of the land parcels selected as above.
+ The second method: Determining a
price for land of class 1 location, then use land class coefficients to
determine prices for the remaining classes of location.
The method of determining a price for land of
class 1 location shall be carried out the same as a direct determination for
each class of location in the first method.
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The above location coefficient for land price
determination of all the above-mentioned types of land is a ratio to compare
the actual prevailing market prices for assignment of use rights of land at
each location compared to location 1, or a ratio to compare the criteria of
each land location.
Prices for all types of land which are
calculated on the basis of the above land locations shall be calculated by way
of multiplying the price fixed for land of class 1 location by the relevant
coefficient for land price determination for each type of land.
For example: Assume
that the price determining body is
pricing residential land in street H
in a special urban area in order to
submit a plan on land prices to
the provincial people's committee. Applying the land price
determination methods, the price determining body has fixed the price of land
of class 1 location at 54,000,000 Dong/m2. Land in street H is divided into
four different locations; and based on the criteria for classifying locations
of land and the actual prices of market assignments of land use rights in the
area, the price determining body has formulated location coefficients for price
determination for locations 1 to 4 in street H at 1; 0.45; 0.35 and 0.30 respectively,
so that land prices for subsequent locations following location 1 shall be as
follows:
Street H
Location
coefficients for price determination
Pre-determined
price for location 1
(1,000 Dong/m2)
Prices for specific
locations of land (1,000 Dong/m2)
1
2
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4 = 2x3
Location 1
Location 2
Location 3
Location 4
1.00
0.45
0.35
0.30
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54,000
24,300
18,900
16,200
With respect to residential land and
non-agricultural land used for production or business purposes in
towns and townships which have not yet been
classified by the authority as an urban area and do not adjoin land which has
already been classified into the urban area category, then upon specific land
price determination, the price framework
for residential land and non-agricultural
land used for production or business
purposes in urban areas of category
IV shall be used for towns and of
category V shall be used for townships, but not to exceed the prices of actual
market assignments of land use rights in normal conditions at the time of the
land price determination.
With respect to residential land and
non-agricultural land used for production or business purposes in new urban
areas which adjoin land which has already been classified by the authority into
the urban area category, then upon specific land price determination, the price
framework for residential land and non-agricultural land used for production or
business purposes in adjoining urban areas or in the nearest
neighbouring urban area shall be used,
but not higher than the prices of
actual market assignments of land use rights in normal conditions at the
time of the land price determination.
(d) Specific price determination for types of
land for which the Government has not provided any land price framework:
- With respect to protective forest land and
specialized use forest land: Prices for protective forest land and specialized
use forest land shall be determined on the basis of specific prices for forest
land for production provided by the provincial people's committee. The
procedures for price determination for protective forest land and specialized
use forest land shall be carried out the same as for forest land for production
specified in clause 2(c) of Part II of this Circular.
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- With respect to specialized use forest land
- With respect to other agricultural land as
stipulated in clause 4(dd) of article 6 of Decree 181: Prices for other types
of agricultural land shall be determined on the basis of specific land prices
provided by the provincial people's committee for adjoining agricultural land
types or for neighbouring areas in the same region (if there is no adjoining
land).
Specific maximum land prices for each type of
other agricultural land shall not exceed the specific [highest] price provided
by the provincial people's committee for adjoining agricultural land types or
for agricultural land in neighbouring areas.
- With respect to land for construction of
offices of bodies and construction of works of professional institutions;
land used for objectives of national
defence and security; land used by
religious organizations (comprising land used by
religious organizations and land on which
there are communal houses, temples, shrines,
pagodas, worship halls and family shrines);
and other non- agricultural land (including land on which there are
museums, houses to preserve or display works of art, or houses of cultural and
artistic compositions) the provincial people's committee shall, on the basis of
prices of adjoining residential land or prices of land in the nearest
neighbouring area (if there is no adjoining land) as already decided, and on
the basis of the provisions in article 10.1 of Decree 123, determine the
specific land price level. If the above types of lane are in rural areas, then
land prices in such rural area shall be the basis; and if the above types of
lane are in urban areas, then land prices in such urban area shall be the
basis.
- Based on the special characteristics of
each type of land (size of the land area, construction density, rights and
obligations of the land user), the provincial people's committee shall issue an
appropriate specific price for each location of the type of land mentioned
above, which shall not be higher than the specific [highest]
price provided for adjoining equivalent
locations or for residential land in the
nearest neighbouring area (if there is no adjoining land).
- With respect to land used for public
purposes pursuant to Government regulations; and other types of
non-agricultural land (including land for other private construction works
which are not attached to residential land and which are not for business
purposes; land with holiday homes, tents or farms for employees;
urban land used for construction of
sheds for planting purposes including the
form of planting not directly on soil;
for construction of pens to breed
animals as permitted by law; for construction of
stations and farms for agricultural, forestry, salt production and aquatic
research and experiment; for construction of
barns and buildings for family households
and individuals to store agricultural produce,
plant protection agents, fertilizer, machinery
and other tools for agricultural production),
the provincial people's committee shall, on
the basis of prices of adjoining non-
agricultural production and business land or such prices in the nearest neighbouring
area (if there is no adjoining land) as already decided, and on the basis of
the provisions in article 10.1 of Decree 123, determine the specific land price
level.
Specific [maximum] land prices for each
location of the types of land mentioned above shall not be higher than the
specific [highest] price provided by the provincial people's committee
for adjoining equivalent locations of non-agricultural
land used for production or business
purposes or for such land in the nearest neighbouring area
(if there is no adjoining land).
- With respect to land used for cemeteries
and graveyards, the provincial people's committee shall, on the basis of prices
of types of adjoining land as already decided, determine the specific land
price level. If there are many types of land in the adjoining area, then the type
of land with the highest price should be taken.
Specific [maximum] land prices for each
location of the type of land mentioned above shall not be higher than the
specific [highest] price provided by the provincial people's committee
for adjoining equivalent locations of such type of land.
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3. Price
determination for land in bordering areas:
(a) Prices for land in areas bordering
provinces and cities under central authority:
- If the land in an area bordering provinces
and cities under central authority has the same natural and infrastructure
conditions, and the same current use purpose and the same use purpose pursuant
to zoning, then price determination must be based on article 12.1 of Decree 188
and on article 9.1 of Decree 123.
- Before conducting price
determination for land in bordering areas,
provincial people's committees must consult and confer each other
on the proposed prices to be published to ensure compliance with article 1.11
of Decree 123.
- Where local authorities fail to agree on a
price for land in their bordering area, the matter shall be reported to the
Prime Minister of the Government for his decision.
- If such land has different natural and
infrastructure conditions, and a different current use purpose and
different use purpose pursuant to zoning,
then provincial people's committees shall
decide a specific price for such land in the area bordering provinces and
cities under central authority based on the actual conditions in each locality.
(b) Land prices for areas bordering districts,
small towns and townships within provincial cities and cities under central
authority:
- Subject to actual conditions in its
locality, a provincial people's committee shall provide land prices for land in
bordering areas in conformity with the following principle: the width4 of land
shall be provided by the provincial authority and prices shall be the same if
the natural and infrastructure conditions, the current use purpose and the use
purpose pursuant to zoning are the same.
- Where the infrastructure conditions in a
bordering area are not the same, then prices for land in such bordering area
shall be determined on the basis of actual conditions of each area.
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- Provincial people's committees shall issue
specific provisions on residential land prices in rural areas surrounding urban
areas.
III. ORGANIZATION OF
IMPLEMENTATION
1. Provincial people's committees shall, on
the basis of the Law on Land 13-2003-QH11, Decree 188, Decree 123
and the guidelines provided in this
Circular, determine specific land prices, announce them
publicly, and inspect implementation of price lists within their localities.
2. Provincial people's committees shall
allocate an annual sum from the local budget in order to carry out the
investigation, survey and keeping statistics of prices for assignment of land
use rights; shall engage consultants specialized in land prices and price
determination of all types of land; shall hold training courses on
implementation of decisions on land prices, and shall train officials engaged
in management of land prices in their locality. Such budget funding shall be
managed in accordance with the applicable State regulations.
A provincial people's committee shall direct
its Department of Finance to organize a network in order to monitor and keep
statistics of actual market prices for assignment of land use rights in the
locality, and shall submit periodical reports to the Ministry of Finance in
accordance with regulations. Where actual market prices for assignment of land
use rights in a locality are constantly changed over a long period resulting in
large price differences, such changes must be reported to the Ministry of
Finance for submission to the Government to consider an adjustment of the price
framework for all types of land.
3. This Circular shall be of full force and
effect after fifteen (15) days from the date of its publication in the Official
Gazette.
This Circular shall replace Circular
114-2004-TT-BTC of the Ministry of Finance dated 26 November 2004 providing
guidelines for implementation of Decree 188.
People's committees are requested to report
any problems arising during implementation of this Circular to the Ministry of
Finance for guidance for resolution.
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FOR THE MINISTER OF
FINANCE
DEPUTY MINISTER
Tran Van Ta
APPENDIX
1
EXAMPLE
OF THE DIRECT COMPARISON METHOD
(Issued together with the Circular No. 145/2007/TT-BTC of the Ministry of
Finance dated December 6, 2007)
Apply the direct comparison method to
determine the land price (to make it simple and understandable, this example
only presents the direct comparison method to determine the price of the land
in question with one comparable land parcel or land block).
Assuming that in the course of determining
the price of a residential land block of 20,000 m2 in a grade-V urban center
(coded as land block B), the pricing agency has collected information on an
adjacent land block of 25,000 m2 which is comparable with the land in question
and already put up for a successful land use right auction for the construction
of dwelling houses (coded as land block A), which took place in the period
nearest the time of determining the price of land block B. The total money
amount earned from the auction of land block A is VND 125 billion, with the
unit price per square meter being VND 5 million (VND 5 million/m2).
With all collected information, the pricing
agency compares land block A and land block B as follows:
Comparable criteria
Similarities
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Land block A
Land block B
Land block A
Land block B
1. Legal ground
Having land use right certificate
Having land use right certificate
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2. Use purpose
Residential land in grade-V urban center
Residential land in grade-V urban center
3. Land location
Location 1: Land with one frontage side
close to street
Location 1: Land with one frontage side
close to street
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4. Street type
Type 2
Type 2
5. Frontage width (m)
100
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6. Length of the land block
250
285.7
7. Infrastructure - Road
- Convenient (with 2 sides fronting big
alleys
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8. Environment
- Noise
- Dust
- Noisy
- Noisy
- Dusty
- Less dusty
7. Assets on land
No
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8. Trading status
Voluntary
Voluntary
Through comparison, the pricing agency has
drawn out 7 similar criteria and 4 different criteria between the two land
blocks. To determine the difference between comparable elements of the land
blocks in order to adjust the price, the pricing agency should apply the expert
method in combination with the statistics method to calculate the coefficient
of difference between the criteria.
It can use the method of marking using a
point scale with the highest point 10 given to the criterion with the best
conditions, (example, when taking location into consideration, the land
occupying the best location shall be given 10 points; or when taking street
grade into account, land lying in the street of the highest profitability and
with the most convenient infrastructure shall be given 10 points). Other points
under 10 shall be given to identical criteria with poorer conditions. Based on
the practical situation, localities shall draw up point scales to determine
specific prices:
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- Frontage width of the land block Wider:
10 points In land block A
Narrower: 8 points In land block B
- Length of the land block
Shorter: 10 points
In land block A
Longer: 9 points
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- Road
Convenient: 10 points
In land block A
Less convenient: 8.5 points
In land block B
- Dust
Dusty: 8 points
In land block A
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In land block B
For every point less, the price of the
comparable land block (A) shall be reduced by 5%; vice versa, for every point
more, the price shall be increased by 5%. The number of points less or more and
its corresponding percentage must totally depend on market survey results. With
such assumption:
On the basis of the successful auction price,
VND 125 billion, of the comparable land block A, used for determining the price
for land block B, the price of land area B shall be reduced as follows:
- Frontage width: B is inferior to A: 2
points or 10% less = VND 12.5 billion.
- The land block’s length: B is inferior to
A: 1 point or 5% less = VND 6.25 billion.
- Road: B is inferior to A: 1.5 point or 7.5%
less = VND 9.375 billion.
The total price reduction due to B’s
inferiorities to A: VND 28.125 billion
B shall be added with:
- Dustiness: B is superior to A: 1 point or
5% more = VND 6.25 billion
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Land block A’s price readjusted (coded A’)
according to different elements of land area B shall be calculated as follows:
A’ = 125 - 28.125 +
6.25 = 103.125 (VND billion).
So, the unit price per square meter is:
VND 103,125 million : 25,000 m2 = VND 4.125
million/m2.
Similarly, it is assumed that the pricing
agency additionally selects two land blocks C and D for comparison with land
block B. On the basis of the results of analysis and comparison, it has been
determined that land block C’s unit price already adjusted according to
elements of land block B is VND 4.5 million/m2 and land block D’s adjusted unit
price is VND 4.05 million/m2.
Land block B’s unit price is determined to be
the average price of the three above adjusted prices:
(4.125 + 4.5 + 4.05)
: 3 = 4.225 (VND million/m2).-
APPENDIX
2
EXAMPLE
OF THE INCOME-BASED METHOD
(Issued together with the Circular No. 145/2007/TT-BTC of the Ministry of
Finance dated December 6, 2007)
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Unit of calculation
Year 2004
Year 2005
Year 2006
Total annual paddy output
kg
6,500
6,000
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Average sale price in 2006 (the year of
land pricing)
VND/kg
2,500
2,500
2,700
Total income
VND
16,250,000
15,000,000
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Cost
VND/kg
1,150
1,100
1,250
Production cost
VND
7,930,000
7,500,000
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Interest rate for Vietnamese dong savings
with a term of 12 months(*)
%
8.0
8.3
8.6
Note: (*) Assume that this is the annual
average interest rate for savings with a term of 12 months at a commercial bank
which has the highest interest rate for savings in the locality.
+ The total income of 3 years is VND
49,250,000/ha
+ The total production cost of three years is
VND 24,538,000/ha.
+ The average annual net income is:
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+ The average interest rate for Vietnamese
dong savings with a term of 12 month at the state-run commercial bank is
8.3%/year.
+ The value of the paddy field of 4,000 m2
calculated according to the formula mentioned at Step 4, Section 2, Part I of
this Circular is:
The estimated land value
or
» VND 24,811/m2
which is rounded up to VND 25,000/m2.-
APPENDIX
3
EXAMPLE
OF THE SUBTRACTION METHOD
(Issued together with Circular No. 145/2007/TT-BTC of the Ministry of
Finance dated December 6, 2007)
The land pricing agency is determining the
price of a residential land parcel of 90m2 (with a frontage width of 5m and a
length of 18m, on which exists a four-story house) facing an internal road of
8m wide in a completely built new urban center in Hanoi capital.
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Step 1: Through market surveys, the land
pricing agency has collected information on several dwelling houses already
sold and purchased in the above urban center which have a construction floor
similar to the land in question.
To make it simple, this example only deals
with one real estate among the successfully traded real estate, namely a house
of 100 m2 (with four stories and a frontage with of 5m) lying adjacent to
another road also of 8 m wide and crossing the road of the land in question.
The selling price of the real estate (both house and land) in the successful
transaction is VND 3,000 million. This house was sold 4 months ago. During
these months, the land prices on the market are almost unchanged. However, the
land in question is located at a more convenient location and in a better
direction. So, the land in question has a unit price about 6% higher than that
of the land parcel on which the successfully sold house exists.
Step 2: Through field and market surveys, the
following data are collected:
- Construction area: 75 m2.
- The construction unit price of a house with
similar quality and utilities on the market at the present time is VND 2.8
million/m2 floor (package unit price inclusive of the construction
contractor’s profit).
- The house has been used for 12 years; its
expected economic life is 70 years. Thanks to good maintenance and use, the
house can be used for another 63 years.
Step 3: Determining the residual value of the
house:
- Total construction floor area of the house:
75 m2 x 4 = 300 m2
- Cost of building a new house with similar
area and utilities:
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- The value of wear is determined as follows:
+ Wear ratio: Apply the method of determining
the wear ratio based on the house’s life:
The wear ratio
=
1
-
The number of remaining years of using the
house
The economic life of the house
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+ The value of tangible wear: VND 840 million
x 10% = VND 84 million
The residual value of the house:
VND 840 million - VND 84 million = VND 756
million
Step 4: Determining the price of the land
parcel of the real estate
The value of the land parcel:
VND 3,600 million - VND 756 million = VND
2,844 million.
The unit price of the land parcel:
VND 2,844 million; 100 m2 = VND
28.44 million/ m2, which is rounded up to: VND 28.5 million/m2.
Step 5: Determining the price of the land
parcel concerned
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VND 28.5 million + (VND 28.5 million x 6%) =
VND 30.21 million/ m2, which is rounded up to VND 30.5 million/m2.
Conclusion: The unit price of the land in
question is about VND 30.5 million/m2.
APPENDIX
4
EXAMPLE
OF THE SURPLUS METHOD
(Issued together with Circular No. 145/2007/TT-BTC of the Ministry of
Finance dated December 6, 2007)
The land in question has an area of 10,000 m2
in District X of a grade-I city. The State has leased this land block to an
enterprise for industrial production. At the end of the contractual lease term,
due to environmental pollution, the municipal People’s Committee has decided to
lease to the enterprise land in an industrial park in the suburban area. It is
intended that this land block will be allocated to a urban housing company to
build infrastructure and houses for sale. At present, on the land block exists
a production workshop of 6,000 m2 (one story, brick walls, steel frames,
corrugated iron roof and cement floor.); according to experts’ evaluation, the
residual quality is 30%.
According to construction regulations, for
this project, the maximum percentage of land for building dwelling houses is
55%; the total construction area is 5,500 m2.
Under the project, it is allowed to be built
a 12-story apartment building on a ground area of 3,000 m2; and
divide a land area of 2,500 m2 for selling house foundations (with 25 lots, 100
m2 each).
Assume that the project will be completed in
one year and the investor only has to pay compensation for the value of the
workshop to the enterprise from which the land is recovered.
On the basis of the planning, the project’s
detailed design and data supplied by the investor; through surveying and
analyzing the real estate and construction markets, the land pricing agency has
collected the following information:
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- Average cost of building infrastructure:
VND 600,000/m2
- Cost of project designing and planning: VND
1,000 million.
- Average cost of building an apartment
building: VND 3,000,000/m2.
- Cost of building water tanks, pump stations
and standby generator to serve the apartment building: VND 1,000 million.
- Cost of dismantlement of the old workshop:
VND 100 million and the value of recovered waster materials is equal to 20% of the
residual value of the workshop.
- The investor has to borrow bank loans
accounting for 60% of the construction cost at an annual interest rate of 10%.
- The advertisement and sale cost: 1% of
turnover.
- Project management expense: 5% of the
project’s total expense.
- The investor’s profit: 20% of the project’s
total turnover.
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The surplus method is applied to determine
the price of this land block as follows:
Step 1: Determining the best and most
effective use purpose of the land block, that is for the residential purpose;
of which the most reasonable structure is that 55% of the land block is for
building a high-rise apartment building and the remaining 45% will be divided
into smaller lots for sale.
Step 2: Estimating the total turnover
- Turnover from the sale of apartments:
(3,000 m2 x 12 x 80% x VND 7 million/m2 = VND
201,600 million
- Turnover from the sale of divided land
lots:
2,500 m2 x VND 15 million/m2 = VND 37,500
million
Expected total turnover:
VND 201,600 million + VND 37,500 million =
VND 239,100 million
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- Cost of infrastructure:
10,000 m2 x VND 600,000/m2 = VND
6,000 million
- Cost of designing and planning = VND 1,000
million
- Cost of building the apartment building:
(VND 3,000 m2/story x 12 stories) x VND 3
million/m2 = VND 108,000 million
- Cost of building water tanks, pump stations
and standby electricity generator to serve the apartment building: VND 1,200
million
- Cost of dismantlement of the old workshop:
VND 100 million
- Compensation for the workshop
(6,000 m2 x VND 800,000/m2) x 30%
= VND 1,440 million
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- Advertisement and sale cost: 1% x VND
239,100 million = VND 2,391 million
Total direct construction expense: VND
119,843 million
- Bank loan interests to be paid
(VND 119,843 million x 60%) x 10% = VND
7,190.58 million
- Management expense: 119,843 million x 5% =
VND 5,992.15 million
- The investor’s profit: VND 239,100 million
x 20% = 47,820 million
Total of expenses and profit: VND 180, 845.73
million
Step 4: Determining the land price
The estimated value of the land block
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Conclusion: The value of the above land block
is about VND 58 billion or 5.8 million/m2.