Land Law 2024: Thoughts on Land Price Regulations

After an elaborate construction process, the Land Law (amended) has finally been passed by the National Assembly, raising hopes of resolving difficulties and obstacles in land management practices and helping unlock the potential of this crucial development resource. However, regarding land price regulations, the writer still has some concerns about their rationality and feasibility in the implementation of the law.

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Regarding the directions to improve the land pricing mechanism, Resolution No. 18-NQ / TW has specific policy goals: “Abolish land price frame. Have mechanisms and methods to determine land prices based on market principles, regulations, functions, tasks, and responsibilities of agencies responsible for determining land prices. The central government establishes criteria and supervises localities in building land price tables. The provincial People’s Councils decide , supervise the implementation of land prices. Have effective mechanisms to improve the quality of land pricing work, ensure the independence of the land appraisal council, the capacity of the land appraisal consulting organization, and the ethics of the appraisers…”.

Thus, the Land Law of 2024 essentially institutionalized some important content such as abolishing land prices; specifically regulating land pricing methods and cases of applying methods to ensure that land prices are determined based on market principles. However, in general, in Section 2 (from Article 158 to Article 162), there are still some concerns about the content of land prices.

Basis for determining land prices

The basis for determining land prices is stipulated in Article 158 (2), including 5 bases: 1) The purpose of land use is used for pricing; 2) Land use term. For agricultural land that has been allocated by the State to households and individuals according to the land allocation limit, agricultural land within the limit of receiving transfer rights is not based on the land use term; 3) Input information for determining land prices according to various land pricing methods; 4) Other factors affecting land prices; 5) Relevant provisions of the law at the time of pricing.

Therefore, if compared to the Land Law of 2013, the Land Law of 2024 has eliminated 2 bases in points c and d of clause 1 of Article 112: (1) In accordance with the prevailing land prices on the market for land of the same intended use that have been transferred, auctioned prices for land use rights for places with auctions for land use rights or income from land use; and (2) at the same time, adjacent plots of land with the same intended use, profitability, and income from land use would have the same price.

Regarding the basis of aligning with prevailing land prices on the market, the implementation of the Land Law of 2013 showed that this qualitative regulation has caused many difficulties for enforcement agencies because it cannot determine and quantify what is “suitable”; especially in the context of incomplete real estate transaction price data, lacking effective control mechanisms for the “dual pricing” situation… Referring to the market land price is also unreliable and inaccurate. Moreover, determining land prices in line with market prices is a political orientation. Therefore, from a legal standpoint, what needs to be done is how to institutionalize this principle to make land prices closer to market prices, rather than re-establishing a principle and lacking specific and detailed implementation regulations.

Regarding the basis of “at the same time, adjacent plots of land with the same intended use, profitability, and income from land use would have the same price”, it highlights the limitations and lack of rationality. Land is a highly characteristic subject, and many factors can affect land prices, not just the intended use, profitability, and income from land use.

However, looking at it frankly, the new 5 bases in the Land Law of 2024 still have some issues that need to be discussed to clarify further:

Firstly, regarding the basis of “the purpose of land use is used for pricing”. According to the regulations in point c of clause 5 of Article 158, for surplus pricing, this method is priced based on the most efficient land use according to land use planning, detailed construction planning. Thus, if this method is applied to land pricing, the basis of pricing based on the intended use of land will not be suitable for cases where the land plot/area is transferred for the most efficient use of land.

Secondly, regarding the basis of “the land use term”. According to the current regulations guiding land prices in Decree No. 44/2014/ND-CP and Circular No. 36/2014/TT-BTNMT, how the land use term affects the land pricing results has not been clarified. According to that, in the specific process of determining land prices, the land use term does not have much influence. In particular, for agricultural land used by households and individuals when the state determines land prices for compensation, most of them do not take into account the land use term, only based on the type of land and the location of the land. Therefore, the Land Law of 2024 added the provision: “For agricultural land that has been allocated by the state to households and individuals according to the land allocation limit, agricultural land within the limit of receiving transfer rights is not based on the land use term”. However, for other cases, how the land use term affects the pricing results needs to be further specified by the Government. In particular, special attention should be paid to certain types of land with long-term use periods such as residential land, and how does this factor affect land prices?

Thirdly, regarding the basis of “input information for determining land prices according to various land pricing methods”, if based on the regulations on land pricing methods in clause 5 of Article 158, it includes some input information as follows: land prices that have been transferred on the market, prices for land use rights auctioned (comparison method); income from land use (income method); estimated revenue and total development costs from land use (surplus method); adjustment coefficient based on comparing land prices in the land price table with market prices (price adjustment coefficient method).

– For land prices that have been transferred on the market, according to the current regulations, the transfer price of land use rights used as a basis for calculating taxes is the price recorded in the contract. However, if the land price is not recorded on the contract or the price on the contract is lower than the price in the land price list, then the transfer price is the price in the land price list. This creates the phenomenon of “dual pricing”, where the land price recorded on the contract is often an artificial and much lower price than the actual transfer price. This fact has caused many difficulties for agencies and organizations in collecting information for land pricing and building a land database. As a result, it affects the results of the land pricing process. To overcome this shortcoming, the Land Law of 2024 has amended the regulations to use only the price in the land price list as the basis for calculating land use rights transfer taxes. This is expected to encourage individuals to accurately record the actual transaction prices in the contract.

– For prices obtained from land use rights auctions. According to the regulations in clause 4 of Article 125, the conditions in the case of individuals participating in land use rights auctions, especially participating in residential land auctions, are not yet closely governed. According to that, individuals who want to participate in land auctions only need to meet two very basic conditions: belonging to the subjects assigned land by the State, land lease, and other conditions according to the regulations on auctioning assets. Thus, the Land Law of 2024 omits the very important criterion of proving the demand for land use. This criterion is particularly important for cases of land auctions. In the past, the lack of requirement to prove the demand for land use as a mandatory condition for participation in auctions has led to many cases of winning auctions then immediately transferring them to others to benefit from price differences or speculation in land. This speculation and “flipping” situation is one of the main causes of the “land fever” phenomenon, affecting the market land price level, strongly affecting the reference value when determining land prices.

– For income from land use. The reality shows that accurately determining the total income from using land of a land plot/area in each year and predicting income for the entire remaining economic period of that land plot/area is a very difficult task, especially for developing countries with fledgling market economies like Vietnam.

– For estimated revenue and total development costs. Both of these factors are based on assumed cost plans. However, as mentioned, in the context of incomplete and non-transparent land price databases, the real estate market lacks stability and is easily influenced by many abnormal factors, the collection of information to estimate costs often lacks accuracy, especially in some underdeveloped areas with few transaction information. The reality shows that during the period of building land prices until land transfer, estimated costs such as investment costs, compensation costs often have a great variation. In addition, this method also depends a lot on the subjective will of the calculator, which has influenced and changed the determined land prices. Accordingly, if the assumed costs are determined too high, it will affect investment attraction; if determined too low, it will cause budget loss.

– For the price adjustment coefficient. Determining the land price adjustment coefficient based on comparing land prices in the land price list with market prices. Thus, how should this market land price be understood, while the previous regulations were “common land prices on the market”? In addition, in reality, there are some types of land with no transaction information on the market, such as production land, business land, service land (not residential land), how should this comparison be done?

Fourthly, regarding the basis of “other factors affecting land prices”. The addition of this provision can be understood as a precautionary provision to avoid overlooking factors affecting land prices, ensuring that the results of land pricing reflect the most accurate value of the land. However, if these “other factors” are not specifically identified, they can easily cause difficulties and challenges in practical implementation. Therefore, in the decree stipulating land prices, it is necessary to list these factors specifically to facilitate the implementation by localities.

Fifthly, regarding the basis of “relevant provisions of the law at the time of pricing”. In fact, this is a provision that can either be present or absent. That’s because the process of land pricing by appraisal agencies and organizations must be based on the provisions of the law to implement.

Authority, land pricing process

Resolution No. 18-NQ / TW requires the independence of the land appraisal council to be ensured. However, an overall review of the authority and land pricing process from Article 159 to Article 161 shows that the authority and influence of land prices of the provincial/district People’s Committees, especially individuals who are Chairpersons of the provincial/district People’s Committees, are immense.

For example, in the specific process of determining specific land prices, the Chairperson of the provincial/district People’s Committee has the power to decide specific land prices, is also the Chairperson of the specific land appraisal council, and can also represent the provincial/district People’s Committee to sign decisions to establish specific land appraisal councils. This shows that the requirement to ensure the independence of the land appraisal council has not been fully institutionalized.

However, on the other hand, this regulation also has a “bright spot” that has delegated authority and personalized the responsibility of individuals who are Chairpersons of the provincial/district People’s Committees in determining land prices. This helps the approval of land prices to take place quickly instead of seeking opinions from the members of the People’s Committee. This promotes the progress of land pricing, removing difficulties for hundreds of real estate projects nationwide that are currently “waiting” for the land pricing process. At the same time, this provision also helps to clearly determine the responsibility of individuals if there are any wrongdoings, overcome the situation of “group responsibility” to avoid responsibility in land management.

In addition, regarding the content of land appraisal, clause 5 of Article 161 stipulates: The content of appraisal by the land appraisal council, the specific land appraisal council includes: compliance with principles, land pricing methods, sequence, procedures for land pricing, and results of information collection. It can be understood that the specific land appraisal council does not have the authority to consider the reasonableness of the land pricing results. Thus, when deciding land prices, the Chairperson of the provincial/district People’s Committee will base on what criteria to consider the appropriateness of the specific land price compared to the land transaction price on the market?

Land prices are an important matter that determines the exploitation of land resources. The regulations on land prices from Article 158 to Article 160 are all assigned by the National Assembly to the Government to further specify. Therefore, the quality of the decree stipulating land prices needs to be very specific, clear, and transparent so that localities can easily and confidently implement it, avoiding difficulties, and truly unlocking land resources for the country’s development in the new period.

Đinh Tấn Phong – City Institute for Economic – Social Development in Can Tho City

SOURCEvietstock
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