It is necessary to calculate correctly and fully the profits for investors in the decree on land prices.

DNVN - Commenting on the draft Decree of the Government on land prices, the Vietnam Valuation Association (VVA) emphasized the need to correctly and fully calculate profits for investors.

Investor's profit should be calculated on land use fee.

The Ministry of Natural Resources and Environment is seeking comments on the Government's Draft Decree on Land Prices (Draft) guiding the implementation of the 2024 Land Law with many important contents related to land valuation and appraisal.

The Draft Decree is assessed to have actively absorbed comments from experts, professional social organizations such as VCCI and professional associations such as the Vietnam Valuation Association regarding land valuation and related issues.

After the Draft Decree was announced, to continue to complete it in a comprehensive direction, recently, the Vietnam Valuation Association sent a written comment, emphasizing the need to correctly and fully calculate profits for investors.

Point c, Clause 3, Article 8 of the Draft stipulates: “Investor's profit (including equity cost and loan cost) is calculated as a percentage of construction investment cost specified in Point a of this Clause”.

VVA believes that the above regulation is unreasonable because it does not correctly and fully calculate the profit of the entire project according to the surplus method for the investor. According to VVA, the investor's profit must be calculated on the total cost that the investor must spend to complete the project until the product is sold to generate revenue.

Accordingly, the total cost includes all costs in points a and b, clause 3, especially including "land use fee" which is the initial investment cost that the investor must pay to fulfill financial obligations to the State.

VVA believes that investors' profits should be calculated based on land use fees.

Explaining the argument that investors' profits must be calculated based on land use fees, VVA said that the investors' profits as stipulated in the Draft are only profits from real estate development (land development investment), not profits from total investment costs including land use fees plus real estate development investment costs.

Therefore, VVA believes that if only calculating the profit on the cost of an investment stage in the total cost of all investment stages to form the asset value is not in accordance with the principle of price formation when applying valuation according to the cost method combined in the surplus method to value assets.

Besides, if the investor's profit is not calculated on the land use fee that must be paid, it is a denial of the principle of "Time value of money" due to opportunity cost, inflation, risk and the principle of "Future value of money" when people with money invest in any business field.

Regarding the regulation "Total development costs of land plots and land areas specified in this clause do not include compensation, support and resettlement costs according to the plan approved by competent authorities", according to VVA, it also needs to be considered and clarified.

Specifically, according to VVA, the above content needs to be regulated in the direction of "If the investor is deducted compensation and site clearance costs by the State from the financial obligations to the State according to the plan approved by the competent authority, it will not be included in the total development cost".

Ensure correct and complete calculation of the value of assets attached to land

Point a, Clause 3, Article 6 of the Draft on the Formula for determining the current value of assets attached to land, VVA suggests considering using both "depreciation value" and "amortization".

Explaining the above recommendation, according to VVA, asset depreciation and wear and tear are related to each other, wear and tear leads to depreciation, but in essence they are different.

Depreciation is an objective phenomenon, a natural characteristic of assets, their value will gradually decrease over time of use. Meanwhile, depreciation is a subjective measure of the manager to recover the depreciated value of the asset.

“According to international practice and current regulations of Vietnam, the depreciation method and the depreciation method are different. Therefore, it can lead to different results and if two consulting units determine the price of the same land plot, one unit calculates by depreciation, one unit calculates by depreciation... the land price calculation results will be different”, VVA commented.

Therefore, according to VVA, the minus (-) side of the above formula should only use one criterion for calculation, either depreciation or amortization, and normally to determine the asset price at the time of valuation, people use "depreciation".

In addition, VVA also proposed to clarify the provision at Point b, Clause 3 of the Draft Regulations, which states: "In case at the time of valuation, perennial trees have not yet reached harvest time, the current value of the property attached to the land is determined by the total cost invested in planting and care up to the time of valuation".

“The above regulation does not clearly define the responsibility of which unit must determine the current value of assets attached to land, whether it is the consulting unit, the customer whose assets are to be valued providing the data, or the competent authority... Therefore, it is easy to lead to legal issues when using the data,” VVA commented and suggested that the Drafting Committee should clarify further.

Thu An

Source