At a roundtable discussion on institutional reform and amending policies on land – an important solution to socio-economic recovery within the framework of the 2022 Vietnam Socio-Economic Forum held on September 18 - many issues related to land pricing were put into discussion.

Phoc stressed that Resolution 18 is the lodestar in planning and building the revised land law.

He emphasised three problems which have relations to land financing. First, there are large loopholes in switching land-use purposes that the current land law cannot fix.

“This causes big losses, differential ground rents and from that, breaches are created. Therefore, we need to control land-use purposes very strictly,” Phoc said.

He agreed with the opinion that when land used for the purpose of leasing has no more demand, the State should take the land back and auction it for more effective purposes.

“In the case of equitized enterprises, non-state investors eye attractive land plots and after equitization, they change the land-use purpose and use the land for commercial and accommodation purposes. This causes differential ground rent and loss from the state sector to the other sectors,” Phoc said. 

“Just one administrative decision can cause the loss of VND100 billion or VND1 trillion,” he added, stressing that there should be a mechanism to plug the loophole.

Regarding land prices, Phoc said there are currently five methods of determining land prices, but they are not consistent and accurate, which create loopholes.

For example, when changing land-use purposes, in most cases, the residual method is used. But the method is inaccurate because the value of revenue and investment costs are just assumed. When making assumptions, this will cause legal risks to businesses and state officers.

For example, a multi-storey building is calculated with the price of VND30 million per sqm, but inspectors say the price is not right and must be VND35 million. 

However, once the principle of assumption is applied, everyone has the right to use a figure when collecting data. Or in standard cost, it doesn’t always exist. And estimates are also assumptions. As such, land costs are not correct, which leads to incorrect land prices.

Therefore, violation of regulations are always subject to criminal penalties. Meanwhile, if officials do wrong and don’t follow the regulations but don’t cause losses, they won’t be subject to criminal penalties.

Therefore, Phoc said, it is necessary to check the methods of defining land prices to find reasonable methods. A sales comparison approach is one of them.

Digitizing to avoid difficulties with administrative procedures

Minister of Natural Resources and the Environment Tran Hong Ha said it is necessary to reform planning to prove the State's responsibilities and powers in this special resource; and ensure fairness, equality in land access, and show that people can participate in this process.

Regarding land pricing, Ha said there still is a gap between theory and practice. If land valuation can be implemented in a public, transparent and equal way, relations among all involved parties will improve.

“We need to shift from releasing administrative orders to applying market rules, using economic tools in combination with administrative procedures. If this can be done, we will be able to settle the existing problems, such as speculation, price manipulation and ineffective use of land,” Ha said.

With a land database, land resources will be monitored which gives the public access to information about land equally and fairly. 

"With the data system, we can carry out administrative reform to create favorable conditions for people and businesses rather than cause difficulties for them with complicated administrative procedures."

In related news, Le Hoang Chau, Chair of the HCM City Real Estate Association, has proposed adding to the amended land law a regulation allowing enterprises to continue to negotiate with land users for commercial housing projects. The regulation is now found in the draft law, though it is also shown in Resolution 18.

Thu Hang - Tran Thuong