The Government issues new regulations on land valuation.

4 methods of land valuation

Decree 12/2024/ND-CP amends Article 4 and Article 5 of Decree 44/2014/ND-CP on land valuation methods and conditions for applying each method.

Specifically,comparative methodis carried out by adjusting the price of land plots with the same land use purpose, certain similarities in factors affecting the price of land transferred on the market, winning the auction of land use rights where the auction winner has fulfilled the financial obligations according to the auction winning decision through analyzing and comparing the factors affecting the land price after excluding the value of assets attached to the land (if any) to determine the price of the land plot to be appraised.

The comparison method is applied to determine the price in cases where there are at least 03 land plots with the same land use purpose, certain similarities in factors affecting the land price transferred on the market, winning the land use right auction where the auction winner has fulfilled the financial obligations according to the auction winning decision (hereinafter referred to as the comparable land plots), except for the cases specified in points a, b, c and d below.

Income methodis done by taking the average annual net income per land area divided by the average savings interest rate of 12-month term deposits in Vietnamese Dong at commercial banks in which the State holds more than 50% of charter capital or total voting shares in the province for 3 consecutive years up to the end of the most recent quarter with data before the valuation time.

The income method is applied to valuation in cases where the land plot or agricultural land or non-agricultural land is not residential land and the land plot or land to be valued does not meet the conditions for applying the comparison method but the income and expenses from land use can be determined according to the legal land use purpose at the time of valuation, except for the cases specified in points a, b, c and d below.

Surplus methodis done by taking the total estimated development revenue minus the total estimated development cost of the land plot, land area on the basis of the most effective land use (land use coefficient, construction density, maximum number of floors of the building) according to the land use planning, detailed construction planning approved by the competent authority.

The surplus method is applied to value land plots and land areas for investment projects that do not meet the conditions for applying the comparison method or the income method but can estimate the total development revenue and total development costs of the project, except for the cases specified in points a, b, c and d below.

Land price adjustment coefficient methodis done by multiplying the land price in the land price table by the land price adjustment coefficient. The land price adjustment coefficient is issued by the People's Committee of the province or centrally-run city (hereinafter referred to as the provincial People's Committee) through comparing the land price in the land price table with the common land price on the market.

The land price adjustment coefficient method is applied to determine land prices for land plots and land areas specified in the land price list issued by the Provincial People's Committee and falling into one of the following cases:

a) Cases specified in Point a, Clause 4, Article 114 and Clause 3, Article 189 of the Land Law;

b) Calculate annual land rent when the State leases land without auctioning land use rights;

c) Calculate the starting price for auctioning land use rights when the State allocates or leases land in cases where the land plot or land area has been invested in technical infrastructure according to detailed construction planning;

d) Determine the land price of the land plot or land area that needs to be appraised, the total value calculated according to the land price in the land price list for the area subject to land use fee and land rent is under 30 billion VND for centrally-run cities, under 10 billion VND for mountainous and highland provinces, under 20 billion VND for the remaining provinces in the following cases:

Cases specified in Point b and Point d, Clause 4, Article 114, Clause 2, Article 172 of the Land Law;

Calculate land rent paid once for the entire lease term when the State leases land without auctioning land use rights.

d) Calculating compensation when the State reclaims land in cases of reclaiming many adjacent plots of land with the same purpose of use that do not meet the conditions for applying the comparison method.

The Decree clearly states: Comparable land plots to apply the land valuation method must meet the conditions for exercising the rights of land users according to the provisions of the Land Law.

Information for applying land valuation methodst

Decree 12/2024/ND-CP also supplements Article 5b on information for applying land valuation methods. Accordingly, information on land prices, land rents, and premises rents for applying the comparison method, the surplus method, and establishing land price adjustment coefficients includes:

1) Winning price of land use rights auction in case the auction winner has fulfilled financial obligations according to the auction winning decision,

2) Land price has completed tax procedures at the tax authority or registered at the land registration office for cases of land use rights transfer;

3) Land rental price, premises rental price;

4) Land transfer price on the market.

The Decree clearly states: Information for applying land valuation methods is information within a period of no more than 24 months from the time of land valuation or earlier, with priority given to information closest to the time of valuation and collected from the following sources:

- National land database, price database;

- Land registration office, unit organizing the auction of land use rights, unit organizing the auction of assets;

- Tax authorities, agricultural and rural development authorities;

- Real estate trading floor, real estate business;

- Organizations with the function of consulting on land price determination, price appraisal enterprises;

- Credit institutions, real estate associations, research institutes/centers;

- Directly interview the transferor or transferee for cases that have been transferred on the market.

Also according to Decree 12/2024/ND-CP, information on income and expenses from the use of non-agricultural land to apply the income method is collected from the following sources: Income from production and business activities recorded in financial statements or income from land lease and premises lease collected within 03 consecutive years (calculated from January 1 to December 31) immediately preceding the valuation time.

In case the income of the land plot or land area to be valued is not complete each year and does not accurately reflect the actual income from land use, collect information on land rental prices and premises rental prices of at least 3 land plots for comparison.

The cost of generating income from land use as prescribed above shall be determined based on the norms and unit prices issued by competent state agencies or the construction investment capital rate announced by the Ministry of Construction; in case there are no norms, unit prices or construction investment capital rates issued by competent state agencies, the cost shall be based on information and average cost data common in the market of at least 03 plots of land with the closest distance to the plot or land area to be appraised as prescribed in Point b, Clause 5 of this Article.

When applying comparison methods, the surplus method must select comparable land plots in the following order of priority: a) Similar in location, infrastructure conditions, area, size, shape, land use coefficient, construction density, building height and other factors affecting land price compared to the land plot to be appraised; b) Having the closest distance to the land plot or land area to be appraised and not limited by the administrative boundaries of commune-level, district-level and provincial-level administrative units.

Provincial People's Committee decides on specific land prices.to

Regarding the decision on specific land prices, Decree 12/2024/ND-CP stipulates that based on the principles of land valuation prescribed in Clause 1, Article 112 of the Land Law, conditions for applying land valuation methods, and results of land price appraisal by the specific land valuation council, the provincial People's Committee shall decide on specific land prices or the district People's Committee shall decide on specific land prices in cases where the provincial People's Committee authorizes according to the provisions of the Law on Organization of Local Government.

Specific land prices are used as a basis for the cases specified in Clause 4, Article 114, Clause 2, Article 172 and Clause 3, Article 189 of the Land Law; starting price for auctioning land use rights when the State allocates land with land use fee collection, or leases land with one-time payment for the entire lease term.

The Department of Natural Resources and Environment is responsible for assisting the People's Committee at the same level in organizing the determination of specific land prices.