LAND PRICE TABLE AND ITS PRACTICAL APPLICATION – ADVANTAGES AND CHALLENGES FOR THE REAL ESTATE MARKET
LAND PRICE TABLE AND ITS PRACTICAL APPLICATION – ADVANTAGES AND CHALLENGES FOR THE REAL ESTATE MARKET
Nguyen Nhu Quyynh
Đo Vu Bao Lam
Hanoi Law University
Abstract: From August 1, 2024, the 2024 Law on Land officially takes effect. Compared to the 2013 Law on Land, the 2024 Law on Land has clear new points, more specifics on legal policies related to land, of which a new point is considered a significant change. The most important thing is the removal of the land price bracket and changing the regulations on the land price table.
The additions and changes to this content increase transparency in the real estate market, harmonizing interest groups and interests between the State and land users and investors. However, such new regulations on the one hand bring advantages for the development of the real estate market, on the other hand there are still certain limitations. Within the scope of this conference, the article will point out new points of the 2024 Law on Land compared to the 2013 Law on Land in terms of land price table, advantages, challenges and give some suggestions and recommendations on current land price table.
Key word: Land price table; New point; Real estate market;
Introduction
Land in our country is characterized by the unique aspect of being owned by the entire population. Therefore, land is not considered an object of transactions in the market; rather, it is the land use rights that are the subject of market exchanges. The value of land use rights is determined through the land price table when transactions involving land use rights are conducted. Land prices play an important role in collecting land use fees, as well as land taxes, determining fines for administrative violations related to land, and compensation when the state expropriates land. Vietnamese law places significant importance on this issue and has consistently included provisions in Law on Lands over the years.
According to Clause 3, Article 159 of the 2024 Law on Land, the land price table shall be constructed by the Provincial People’s Committee and decided by the Provincial People’s Council, constructed annually according to market principles and the actual conditions of each province.
Compared to the regulations of the Law on Land 2013, the land price table and land prices were dependent on the land price framework issued by the Government. Under current regulations, the land price table and specific land prices are no longer dependent on the land price framework but are independently constructed and decided by the Provincial People’s Committee and the Provincial People’s Council.
Previously, the regulation of the land price framework caused several issues, such as the inability to construct a land price table that matched market prices, especially in large cities like Hanoi and Ho Chi Minh City, where some land locations had prices reaching nearly 1 billion VND/m², whereas the land price framework issued by the Government for Hanoi and Ho Chi Minh City was only up to about 500 million VND/m². The construction of a land price table exceeding the framework led to significant revenue losses for the State.
In Resolution No. 18-NQ/TW dated June 16, 2022, the Central Executive Committee of the Party proposed the abolition of the land price framework. The Law on Land 2024 has concretized this viewpoint. The 2024 Law on Land abolishes the regulation on the land price framework and allows provinces to construct land price tables as well as specific land prices, contributing to further protecting the rights of land users and enhancing the efficiency of state management of land prices.
However, this regulation also presents some issues, such as the significant impact on real estate businesses when the land price table is adjusted (when land prices increase, input prices increase, leading to higher housing prices, affecting home buyers…).
Therefore, researching and constructing the land price table according to market demand, evaluating the advantages and difficulties in applying the current regulations on the land price table, is very necessary, and meaningful both in theory and practice, helping to increase the effectiveness of promulgating and applying legal regulations.
This article studies the regulations in the Law on Land 2024 on the land price table and the Decrees detailing related contents. Based on research and analysis of the regulations, the author points out the new features of the 2024 Law on Land concerning the land price table, assesses the opportunities and challenges in applying these regulations, and proposes a few recommendations on the research issue.
These are also the prominent points of the article when examining the land price table according to current legal regulations. The study focuses on clarifying the following main contents: (i) Introduction; (ii) Overview of the application of the current land price table; (iii) The current situation of the application of the land price table; (iv) Some recommendations to improve the effectiveness of constructing and applying the land price table; (v) Conclusion.
I. Overview of the Application of the Current Land Price Table in the Law on Land
First, to discuss the land price table, it is essential to understand: What is land price? – Land price is one of the most critical bases for determining financial obligations derived from land. It is necessary to clearly distinguish between the land price table and specific land prices.
According to the regulations of the 2024 Law on Land, the land price table is constructed by the Provincial People’s Committee, submitted to the Provincial People’s Council for initial decision-making on the land price table. Annually, if necessary, the Provincial People’s Committee is responsible for submitting adjustments, amendments, and supplements to the land price table to the Provincial People’s Council for decision-making.
Regarding its scope of application, the land price table is applied to various cases. In contrast, specific land prices are determined by the Chairperson of the Provincial People’s Committee and the Chairperson of the District People’s Committee for specific cases such as land allocation, land leasing, permitting land use purpose changes, recognizing land use rights, extending land use duration, etc. Specific land prices are only applied in certain legally defined cases, with a narrower scope than the land price table.
The basis for constructing the land price table is land valuation: “Land valuation is the process by which competent state authorities or other individuals and organizations determine the monetary value per unit area of land at a specific time for a particular purpose, according to certain principles and methods.”
The land price table is constructed annually (on average once per year) and is detailed for each parcel of land. Accordingly, land prices are determined based on market principles – this contributes to increasing transparency and liquidity in the real estate market. This is considered a breakthrough in land law regulations, creating more fairness for stakeholders when land prices are close to market values.
The land price table plays a particularly important role as a necessary legal tool to help the State effectively manage land. Current legal regulations on the land price table for application in the real estate sector bring significant benefits, such as limiting land speculation and corruption. It is seen as a major breakthrough in the field of land management and use.
I. Current Situation of the Application of the Land Price Table
- Legal Provisions on the Application of the Land Price Table
According to Clause 1, Article 159 of the 2024 Law on Land, specific cases for the application of the land price table are detailed, amounting to eleven cases:
(i) Calculating land use fees when the State recognizes residential land use rights of households and individuals; changing the land use purpose of households and individuals;
(ii) Calculating land rental fees when the State leases land with annual rental payments;
(iii) Calculating land use taxes;
(iv) Calculating income tax from the transfer of land use rights for households and individuals;
(v) Calculating fees in land management and use;
(vi) Calculating fines for administrative violations in the field of land;
(vii) Calculating compensation to the State when causing damage in land management and use;
(viii) Calculating land use fees and land rental fees when the State recognizes land use rights in the form of land allocation with land use fee payments, or land leasing with one-time rental payments for the entire lease period for households and individuals;
(ix) Calculating the starting price for auctioning land use rights when the State allocates or leases land for plots or areas with technical infrastructure investments according to detailed construction planning;
(x) Calculating land use fees in cases of land allocation without auctioning land use rights to households and individuals;
(xi) Calculating land use fees in cases of selling state-owned housing to current tenants.
Compared to the regulations in the 2013 Law on Land, the new regulations have specified and detailed the cases for the application of the land price table, expanding the scope of its application as a basis.
– Construction of the Land Price Table:
According to the current land law regulations:
+ The land price table is constructed based on areas and locations;
+ For areas with digital cadastral maps and land price databases, the land price table is constructed for each parcel of land based on value zones and standard parcels;
+ The Provincial People’s Committee constructs and submits the initial land price table to the Provincial People’s Council for decision-making to announce and apply from January 1, 2026.
This is considered a breakthrough and a prominent new feature compared to previous regulations. Previously, the construction of the land price table was carried out every five years and announced on January 1 of the first year of the period. The Government would issue the land price framework for each type of land according to each region.
Based on principles, land valuation methods, and the land price framework, the Provincial People’s Committee constructs and submits the land price table to the Provincial People’s Council for approval before issuing.
– Adjustment of the Land Price Table:
+ According to previous regulations:
During the implementation period of the land price table, when the Government adjusts the land price framework or the popular land prices in the market fluctuate, the Provincial People’s Committee adjusts the land price table accordingly.
At least 60 days before submitting the land price table to the Provincial People’s Council for approval, the Provincial People’s Committee sends the draft land price table to the agency responsible for constructing the land price framework for consideration. In cases of significant discrepancies in land prices at the borders between provinces and centrally-run cities, the Prime Minister’s decision is required.
+ According to current regulations:
Annually, the Provincial People’s Committee is responsible for submitting adjustments, amendments, and supplements to the land price table to the Provincial People’s Council for decision-making to announce and apply from January 1 of the following year.
If the land price table needs adjustment, amendment, or supplementation within the year, the Provincial People’s Committee is responsible for submitting it to the Provincial People’s Council for decision-making. The current regulations allow for flexible adjustments to the land price table based on market prices, ensuring fairness for stakeholders during real estate transactions.
– Land Valuation Methods:
Previously, land valuation methods were prescribed by the Government. Currently, specifically in Article 158 of the 2024 Law on Land, the following land valuation methods are detailed: the comparison method, the income method, the surplus method, and the land price adjustment coefficient method. Additionally, the Government may prescribe other land valuation methods not yet regulated, with the consent of the Standing Committee of the National Assembly.
Thus, the 2024 Law on Land, which has just come into effect, showcases progressive and notable improvements over previous regulations, addressing some issues effectively.
- Advantages and Challenges in the Process of Constructing and Applying the Land Price Table
The 2024 Law on Land provides more detailed and specific regulations on the land price table. These regulations are more progressive compared to previous Land Laws. The current real estate market is constantly fluctuating, and applying the regulations on the land price table in real estate transactions, alongside certain efficiencies, still has some unresolved issues.
2.1. Advantages
– Firstly, the annual issuance of the land price table helps align with market land prices.
Under previous regulations, there were land price frameworks, especially in large cities, with substantial discrepancies compared to the actual transfer prices applied in the market. In practice, these transfer prices were often distorted, allowing transactions to be manipulated by buyers and sellers to their advantage.
Eliminating the land price framework and constructing the land price table based on market principles, although asset prices might be higher, reflects the real value, not inflated prices. These prices are rigorously filtered in the market, which facilitates the development of the real estate market towards more transparency and healthiness, while also reducing speculation and “artificial price surges.”
– Secondly, the issue of budget losses and reduced tax revenues is minimized.
Constructing the land price table close to market values limits the issue of declaring low prices to reduce tax obligations, thus eliminating the phenomenon of having two price types (high actual prices but low contract transfer prices).
This increases land-based revenue, attracting more resources for investment, and effectively addressing other economic and social issues.
– Thirdly, the land price table is constructed based on different land value zones and standard parcels.
This facilitates provinces in constructing land price tables suitable to local conditions, making them more independent in the process, ensuring the rights of land users, and improving the quality of state management of land prices.
– Fourthly, for cases of land expropriation by the State, higher compensation rates will be enjoyed.
With the elimination of the land price framework, localities are empowered to construct and decide on their own land price tables, adjusting them annually to fit market land prices (compared to the previous five-year adjustments based on minimum-maximum land prices prescribed by the Government).
Currently, the land price table is regulated close to market prices, and compensation prices are calculated based on specific land prices, thus compensation amounts will be higher than previously.
Additionally, applying the new regulations on the land price table has also contributed to limiting speculation and inflating land prices in land use rights auctions.
Previously, there was a relatively large discrepancy between the starting prices and winning bid prices, leading to exploitation in land use rights auctions, causing market disturbances and significantly impacting the overall development of the socio-economic sphere and the real estate sector specifically.
2.2. Challenges
– Firstly, the inconsistent application of principles for determining land prices, particularly market principles and the principle of ensuring harmonization of the interests of all parties. The consequence is that land prices are set very high, making it unaffordable for poor citizens to meet financial obligations after completing land use right certification procedures because they lack the financial capacity to fulfill these obligations.
Currently, with the 2024 Law on Land in effect, Ho Chi Minh City has drafted a new land price table, indicating a significant increase in the proposed land prices compared to the old table. For example, prices in Thu Duc City have increased 10 to 15 times; in Nha Be, Binh Chanh, Can Gio, and Cu Chi districts, prices have increased 10 to 20 times.
This is just a draft, but if this land price table is applied in the near future, it will create a high discrepancy, failing to keep up with the actual market values, causing serious consequences.
– Secondly, the current regulation has eliminated the land price framework, raising concerns about the risk of rising land prices, leading to increased compensation costs for land clearance, making it harder for the poor to access land.
Particularly for businesses and investors, the land price table reflecting market prices may increase land use fees. The annual construction of the land price table will increase pressure on human resources and real estate taxes, reducing the attractiveness of investment in the real estate sector.
– Thirdly, there are difficulties in how market-based land price determination is implemented. Market prices constantly fluctuate, depending on the timing and the demands of buyers and sellers, making it challenging to grasp.
– Fourthly, changes in land prices inevitably lead to increased costs such as land clearance, taxes, and land-related expenses. For investors, total investment costs must increase to ensure profitability, which also necessitates an increase in product prices.
Excessively high land prices will make it difficult for customers to access products, reducing product liquidity and inevitably increasing project deployment costs.
– Fifthly, according to previous and current regulations, the Provincial People’s Committee holds the authority to construct and adjust the land price table as necessary.
This leads to overlapping authority and potential abuse of power in constructing and implementing the land price table. It can also lead to negative issues such as embezzlement, corruption, and abuse of office in the execution of public duties.
Especially, when the 2024 Law on Land came into effect, it caused confusion among state agencies in implementation. For example, in Ho Chi Minh City, after the new Land Law took effect, adjustments to the land price table were carried out.
This created confusion on how to apply the land price table and accurately calculate financial obligations, leading to the temporary suspension of file processing by relevant agencies, causing significant inconvenience to citizens as many land-related transactions have been stalled.
III. Recommendations for Enhancing the Effectiveness of Constructing and Applying the Land Price Table
– Firstly, detailed guiding documents and additional specific regulations related to the 2024 Law on Land, especially regarding the land price table, need to be issued, in addition to Government Decree No. 71/2024/ND-CP dated June 27, 2024, on land prices.
As the 2024 Law on Land only took effect on August 1, 2024, the application period has not been long, so many provisions are still new to citizens and competent authorities.
Issuing detailed guidelines will help ensure the uniform and effective implementation of the law. Concurrently, efforts should be intensified to disseminate and popularize land law to ensure that citizens understand and correctly implement the new regulations.
– Secondly, the land price table should be constructed based on actual market prices. Competent authorities must regularly monitor and update the fluctuations in land prices, and effectively control the “land price fever” and real estate transactions. This not only enhances state management in the land sector but also protects the legitimate rights of transaction participants.
– Thirdly, competent authorities, especially in major urban areas, need to carefully consider before adjusting the land price table to avoid negative impacts on citizens’ rights. When making adjustments, a comprehensive assessment of the financial obligations that citizens must fulfill should be conducted, ensuring fairness, legality, and continuity in the activities of relevant agencies.
– Fourthly, when constructing the land price table, local authorities should conduct a comprehensive impact assessment on various societal groups, particularly the economic and social life of citizens. Opinions from citizens, political-social organizations, and professional organizations should be consulted to determine appropriate prices, ensuring the principle of “harmonizing the interests of the State, land users, and investors.”
Competent authorities need to further enhance their responsibility in organizing and implementing legal regulations, regularly inspect and monitor the implementation process by enterprises, organizations, and individuals, especially in real estate auctions, promptly detecting and strictly handling violations.
Additionally, competent authorities, individuals, and organizations must uphold their spirit and responsibility in fulfilling their assigned duties, ensuring transparency, and minimizing unnecessary negative incidents in public service execution.
IV. Conclusion
Promoting judicial reform and building a unified and synchronized legal system are tasks that our Party and State have focused on and effectively implemented. The amendments and additions to the new regulations on the land price table, stipulated in the 2024 Law on Land, represent a significant and important point in land law in particular and the Vietnamese legal system in general.
Compared to the 2013 Law on Land, the revised regulations on the land price table and land valuation are considered relatively rigorous, contributing to establishing a unified legal corridor, ensuring transparency, objectivity, and suitability with the actual situation.
References
- The 2013 Law on Land
- The 2024 Law on Land
- Bảo Chương (2024), “Bảng giá đất mới đề xuất ở TPHCM vẫn chưa sát với thị trường,” Báo Lao động. (https://laodong.vn/bat-dong-san/bang-gia-dat-moi-de-xuat- o-tphcm-van-chua-sat-voi-thi-truong-1384578.ldo)
- Ban Mai – Phạm Vinh (2024), “Tăng giá đất trong thời gian ngắn sẽ gây tác động tiêu cực,” Tạp chí điện tử. (https://vneconomy.vn/tang-gia-dat-trong-thoi-gian-ngan- se-gay-tac-dong-tieu-cuc.htm)
- Đoàn Thị Huyền (2013), “Quy định pháp luật về định giá đất – Kinh nghiệm của một số nước trên thế giới và vận dụng vào Việt Nam,” Master’s Thesis in Law, Hanoi Law University, Hanoi.
- Tiến Long – Ái Nhân – Ngọc Hiển – Quang Thế (2024), “Loay hoay tính giá đất theo luật mới,” Báo Tuổi trẻ Online. (https://tuoitre.vn/loay-hoay-tinh-gia-dat-theo-luat- moi-20240812092206451.htm)
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