Thông tư 36/2014/TT-BTNMT

CIRCULAR

ON LAND PRICING METHOD; COMPILATION OF AND ADJUSTMENT TO LAND PRICE LISTS; DETERMINATION OF SPECIFIC LAND PRICES AND CONSULTANCY ON LAND PRICING

Pursuant to the Law on Land dated November 29, 2013;

Pursuant to the Government's Decree No. 44/2014/NĐ-CP dated May 15, 2014 on land pricing;

Pursuant to the Government's Decree No. 21/2013/NĐ-CP dated March 04, 2013 defining the functions, tasks, entitlements and organizational structure of the Ministry of Natural Resources and Environment;

At the request of Director of Land Management Authority and Director of Legal Department;

The Minister of Natural Resources and Environment promulgates a Circular on land pricing method; compilation of and adjustment to land price lists; determination of specific land prices and consultancy on land pricing.

Chapter I

GENERAL PROVISIONS

Article 1. Scope

This Circular deals with land pricing method; compilation of and adjustment to land price lists; determination of specific land prices and consultancy on land pricing.

Article 2. Regulated entities

1. Land authorities, the agencies responsible for compiling, adjusting, assessing the land price and determining specific land prices.

2. Organizations and individuals licensed to provide land pricing consultancy services.

3. Relevant organizations and individuals (hereinafter referred to as entities).

Chapter II

LAND PRICING METHOD

Article 3. Direct comparison method

Land prices shall be determined using the direct comparison method as follows:

1. Collecting information

a) Carry out a field survey to collect information about the plot of land that needs pricing (hereinafter referred to as target land plot).

b) Collect information about at least 03 plots of land with similar characteristics as the target land plot in terms of purposes, location, profitability, technical and social infrastructure, area, dimensions, shape, and legitimacy of rights to use land (hereinafter referred to as comparable land plots) that have been transferred sold at land auction over the previous 02 years. Information to be collected:

- Land prices;

- Purposes, locations, areas, dimensions shapes, technical and social infrastructure, legitimacy of rights to use land, transfer dates, and other information that affect the land price.

c) Information about prices of comparable land plots are collected from:

- Prices of land sold at land auction;

- Market land prices in the land price database;

- Prices of transferred land on real estate exchanges;

- Prices of transferred land provided by the transferors or transferees in interviews.

A plot of land is considered transferred when the transferee has paid of the transferor as agreed and received the right to use land.

d) During the survey, information about prices of land sold at land auction, land transferred via real estate exchanges, market land prices in the land database, and information obtain near the land location or the pricing date shall be given priority. If information in the area is not sufficient, information shall be obtained from adjacent areas with similar natural conditions, socio-economic conditions, technical and social infrastructure as the target land plot.

During the survey, the plots of land of which the purposes will be changed according to a land use plan of the district, which has been approved by a competent authority, and the plots of land that cannot be transferred according to regulations of law on land shall not be taken into account.

2. Analysis, comparison, and adjustment of princes due to differences between comparable land plots and the target land plot

a) Carry out analysis and comparison to determine the similarities and differences of between comparable land plots and the target land plot.

b) Adjust the price according to the differences between comparable land plots and the target land plot.

The price of the comparable land plot shall be adjusted by an absolute value or a percentage according to the differences between the comparable land plots and the target land plot.

The adjustment of prices of the target land plot shall be based on the target land plot; the price shall be adjusted by an absolute value first, then percentage; if the comparable land plot is inferior to the target land plot, the price of the comparable land plot shall be increased; if the comparable land plot is superior to the target land plot, the price of the comparable land plot shall be decreased.

3. Estimating price of target land plot

The estimated price of the target land plot shall be determined by adjusting the price of each comparable land plot according to differences between the comparable land plots and target land plot using the formula below:

If market land prices fluctuate during the period from the land transfer date to the land pricing date, prices of comparable land plots must be adjusted to the land pricing date based on the market land price index announced by the Service of Natural Resources and Environment. If the Service of Natural Resources and Environment has not announced the market land price index, the index of each kind of land shall be calculated according to collected information about common land prices or statistics given by a statistical agency (if any).

4.  Determination of price of target land plot

The price of the target land plot is determined by calculating the arithmetic mean of estimated prices of the target land plot calculated in Clause 3 of this Article; the price of the target land plot must not differs by more than 10% from the estimated prices.

Examples of the application of direct comparison method to land pricing are provided in Appendix 01 enclosed herewith.

Article 4. Deduction method

Land prices shall be determined using the deduction method as follows:

1. Collecting information

a) Carry out a field survey to collect information about the plot of land with property thereon (hereinafter referred to as real estate) that needs pricing.

b) Collect information about at least 03 pieces of real estate with similar characteristics as the target land plot in terms of puposes, location, profitability, technical and social infrastructure, area, dimensions, shape, and legitimacy of rights to use land (hereinafter refered to as comparable real estate) that have been transferred our sold at auction over the previous 02 years. Information to be collected:

- Land prices;

- Purposes, locations, areas, dimensions shapes, technical and social infrastructure, legitimacy of rights to use land, transfer dates, and other information that affect the land price;

- Information about property on land.

c) Information sources are similar to those mentioned in Point c Clause 1 Article 3 of this Circular.

d) During the survey, the surveyors shall follow the instructions in Point d Clause 1 Article 3 of this Circular.

2. Determination of current value of property on land of comparable real estate

Current value of property on land of comparable real estate is determined as follows:

Where:

- New construction value on the pricing date is the costs of construction of new property with equivalent specifications or the costs of renovation of the property on land. New construction value includes direct costs, indirect costs, reasonable profit received by the investor, taxes and fees payable as prescribed by law.

- Depreciation of property on land include tangible depreciation and intangible depreciation (including physical deterioration over the property operation; depreciation due to obsolete functions, changes to the planning, economic decline, or external impacts.

New construction value and depreciation of property on land shall be calculated in accordance with law. If no regulations or instructions on calculation of new construction value and depreciation are available, the calculation shall rely on information collected from the market.

3. Estimating land price of comparable real estate

Land value of comparable real estate is calculated as follows:

Land price of comparable real estate is estimated as follows:

4. Determination of land price of target real estate

Land prices of target real estate is calculated in accordance with Clauses 2, 3, and 4 Article 3 of this Circular.

Examples of the application of deduction method to land pricing are provided in Appendix 02 enclosed herewith.

Article 5. Income-based method

Land prices shall be determined using the income-based method as follows:

1. Collecting information about the target land plot

a) Average annual income of a plot of non-agricultural land is the average amount earned from manufacturing, business, or lease over 05 consecutive years up to the pricing date.

b) Average annual income of a plot of agricultural land is determined as follows:

- Average annual income of a plot of land used for annual crops, aquaculture, or salt production is the average amount earned from such activities over 03 consecutive years up to the pricing date;

- Average annual income of a plot of land used for planting perennial plants or production forests is based on annual revenue, periodic revenue, or lump sum revenue.

c) If the income from the target land plot cannot be determined, information about average income of at least 03 similar plots of land in terms of purposes, locations, profitability, technical and social infrastructure, areas, dimensions, shapes, and legitimacy of rights to use land shall be collected, or information collected from the market shall be used.

2. Collecting information about the operating cost of the target land plot

a) The average annual cost is calculated according to the taxes related to land, cost of land recovery; cost of maintenance of constructions on land, production cost.

b) The costs mentioned in Point a of this Clause shall be calculated according to the limits and unit prices imposed by competent authorities. If no limits or unit prices imposed by competent authorities are available, information about average income of at least 03 similar plots of land in terms of purposes, locations, profitability, technical and social infrastructure, areas, dimensions, shapes, and legitimacy of rights to use land shall be collected, or information collected from the market shall be used.

3. Average net income in a year shall be calculated using the formula below:

4. Value of the target land plot is determined using the formula below:

Average saving deposit interest rate in a year (r) in 03 consecutive years up to the pricing date is the highest 12-month interest rate on VND deposit announce by a state-owned commercial bank in the province on the pricing date.

With regard to non-agricultural land with limited land use terms, average saving deposit interest rate in a year is calculated as follows:

Where n is the remaining land use term of the target land plot (expressed in years).

If property have been built on land to serve the business operation, current value of such property shall be deducted after determining the value of the land plot and property thereon in order to determine the price of the target land plot.

Current value of property on land shall be determined in accordance with Clause 2 Article 4 of this Circular.

5. Land price of the target land plot shall be calculated using the formula below:

Examples of application of income-based methods to determination of land prices are provided in Appendix 03 enclosed herewith.

Article 6. Surplus method

Land prices shall be determined using the surplus method as follows:

1. Collect information about the target land plot; information about land planning, construction planning, permission to change land purposes, and regulations on construction approved by competent authorities to make the best use of land.

2. Estimate assumed total development revenue from real estate

Assumed development revenue from real estate is estimated according to collected information about transfer prices, rents, and other factors of the projects with similar characteristics as the planned project in the target area or adjacent area, similar technical and social infrastructure; with account taken of tendency and intensity of fluctuation of transfer prices, rents, and other factors.

3. Estimate total development cost of real estate

a) Development costs include:

- Cost of development of technical and social infrastructure, construction of housing and other constructions according to the planning approved by competent authorities; temporary and ancillary constructions serving the project execution;

- Equipment costs include cost of equipment purchases, cost of technology transfers; costs of installation, experiment, calibration; costs of transport and insurance; taxes and relevant fees;

- Consultancy costs include: costs of consultancy of survey, project planning, design, supervision, and relevant consultancy costs;

- Project management costs;

- Operating costs include: costs of advertising, sale, management; profit received by the investor with account taken of business risks and capital;

- Provision for additional works and inflation during the project execution;

- Other costs defined by law.

The assumed total development cost shall not include the cost of compensation, support, and relocation according to a plan approved by a competent authority.

b) Estimation of total development cost

The total development cost is determined according to the costs mentioned in Point a of this Clause, the limits and unit prices imposed by competent authorities.  If no limits or unit prices imposed by competent authorities are available, information common costs of similar projects in the target area or adjacent areas with similar profitability and infrastructure shall be collected.

4. The real estate development project prolongs extends for many years through many stages, revenues and costs shall be estimated annually and depreciated up to the pricing date. Total development revenue and development cost of real estate shall be estimated as follows:

Total development revenue =

Total development cost =

Where:

- TR_i is the revenue in the i^th year of the project

- C_i is the cost in the i^th of the project

- r is the discount rate (according to average rate of midterm loan interest rates on the pricing date of state-owned commercial banks in the same province intended for real estate development projects)

- n is the number of years of project execution

5. Determination of price of target land plot

Value of the target land plot is determined using the formula below:

Land price of the target land plot is determined using the formula below:

Examples of application of surplus methods to determination of land prices are provided in Appendix 04 enclosed herewith.

Article 7. Coefficient-based method

Land prices shall be determined using the coefficient-based method as follows:

1. Collecting information

a) Collect information about at least 03 plots of land in the same target area that have been transferred or sold at land auction over the previous 02 years.

If information in the target area is not sufficient, information shall be obtained from adjacent areas with similar natural conditions, socio-economic conditions, technical and social infrastructure as the target area.

During the survey, the surveyors shall follow the instructions in Point d Clause 1 Article 3 of this Circular.

b) If income and cost of the land plot have been determined, information about income and cost of at least 03 plots of land in the same target area shall be collected to determine land prices using income-based method.

c) Collecting information about local socio-economic conditions

2. Determination of common land prices at each location

a) Determine market land prices at each location according to the information collected as prescribed in Point a and Point b Clause 1 of this Article.

b) Common land prices of each location shall be determined in accordance with Clause 3 Article 3 of the Government's Decree No. 44/2014/NĐ-CP dated May 15, 2014 on land prices (hereinafter referred to as Decree No. 44/2014/NĐ-CP)  If market land prices fall within a price range, the common land price shall be the arithmetic mean of the prices at that location.

3. Determination of land price coefficient

The land price coefficient is determined according to common land prices, local socio-economic conditions, and land prices on the land price list.

4. Determination of price of target land plot

Article 8. Selection of land pricing method

A suitable land pricing method shall be selected according to collected information and the land pricing methods mentioned in Clause 2 Article 5 of Decree No. 44/2014/NĐ-CP. Various land pricing methods mentioned in Clauses 1, 2, 3, and 4 Article 4 of Decree No. 44/2014/NĐ-CP may be combined to compare and decide land prices.

Chapter III

COMPILING, ADJUSTING LAND PRICE LISTS

Section 1: COMPILING LAND PRICE LISTS

Article 9. Contents of the land price lists

1. Pursuant to the land pricing principles in Article 112 of the Law on Land, land pricing methods in Clauses 1, 2, 3, and 4 Article 4 of Decree No. 44/2014/NĐ-CP the People’s Committees of provinces shall request the People’s Councils of provinces to grant approval before issuing land price lists with regard to the types of land mentioned in Clause 1 Article 11 of Decree No. 44/2014/NĐ-CP

Apart from the land price lists mentioned in this Clause, the People’s Committees of the provinces that have hi-tech zones shall issue lists of prices of land in hi-tech zones.

2. In consideration of the local development, the People’s Committees of provinces shall decide increases or decreases in prices of the plots of land that are superior or inferiors to other plots of land in the same location in terms of dimensions, shapes, profitability, and other factors that affect land prices.

3. In cases where the land planning is adjusted, or land purposes are changes and new streets are added to the current land price list that are not mentioned in Clause 1 Article 14 of Decree No. 44/2014/NĐ-CP the People’s Committee of the province shall adjust the land prices on the list and request the People’s Council of the province to grant approval before issuing it. Services of Natural Resources and Environment shall assist the People’s Committees of provinces in adjusting land price lists and submitting reports to the Ministry of Natural Resources and Environment within 15 days from the adjustment date.

4. After a land price list is issued, the land prices on which depend on locations of land, the People’s Committee of the province shall, if capable, request the Service of Natural Resources and Environment to determine the a price of every plot of land in the area that has a cadastral map, and develop a land price database.

Article 10. Land price list compilation project planning

1. A land price list compilation project shall specify: the surveyed types of land; quantity of enquiry forms; number of surveyed communes, wards and towns (hereinafter referred to as communes); human resources, equipment, time, plan, and estimated budget.

2. Procedures for planning a land price list compilation project:

a) Collect information and documents serving the project planning including: geographical location, topography, geomorphology, socio-economic developments, management and use of land that affect land prices;

b) Determine the number of surveyed sites: the survey communes must have land price fluctuation; the number of survey sites must account for at least 50% of the total number of communes of the district; the surveyed commune must represent the surveyed type of land, which is evenly distributed over the district;

c) Determine the number of land plots that need surveying

The number of land plots that need surveying sorted by type of land in each surveyed commune must account for at least 50% of the total number of land plots of the same type that have been transferred or sold at land auction over the previous 02 years. Nevertheless, the minimum number of land plots is 03.

If income or cost of the land plots can be determined, at least 03 land plots must be surveyed in each surveyed commune in order to determine land prices using income-based method.

3. Responsibility to plan and approve the project

a) The Service of Natural Resources and Environment shall plan the land price list compilation project and submit it to the People’s Committee of the province for approval before April 01 of the year in which the land price list is compiled.

Project documents include: the land price list compilation project; a written request for approval for the project; a draft decision to approve the project made by the People’s Committee of the province>

b) The People’s Committee of the province shall approve the land price list compilation project by April 15 of the year in which the land price list is compiled.

Article 11. Preparation for land price list compilation

1. Establishing a Steering committee

The People’s Committee of the province shall establish a Steering committee to direct the execution of the approved land price list compilation project. Composition of a Steering committee:

a) The Chairperson is a representative of the People’s Committee of the province;

b) The Deputy Chairperson is the Director of the Service of Natural Resources and Environment;

c) Members of the Steering committee are representatives of the Service of Finance, Service of Justice, Service of Planning and Investment, Service of Agriculture and Rural development, and Service of Construction; representatives of the People’s Committees of districts; and representatives of management boards of hi-tech zones and economic zones (if any);

The Steering committee shall assist the People’s Committee of the province to instruct relevant units to execute the land price list compilation project.

2. The Chairperson shall establish project teams to assist the Steering Committee.

3. The Service of Natural Resources and Environment shall assist the Steering committee to execute the land price list compilation project:

a) Select consultancy units to carry out market land price surveys;

b) Assist the Steering Committee in providing training for project teams; instruct project teams to carry out examine and accept market survey results, the draft land price list, and performing other tasks given by the Chairperson.

Article 12. Classification of communes serving price list compilation

1. When compiling the list of prices of agricultural land, housing land in rural areas, commercial and services land in rural areas, non-agricultural land for manufacturing and business other than commercial and services land in rural areas, communes shall be classified into communes in the plains, communes in the midlands, and communes in the highlands with the characteristics below:

a) Communes in the plains are those with flat terrains, and altitudes as low as the sea level; high population density, the infrastructure and conditions for goods circulation are more convenient than in the midlands and highlands;

b) Communes in the plains are those with medium altitudes (lower than highlands, higher than the plains), most of the area is hills; the population density is lower than that in the plains and higher than that in the highlands, the infrastructure and conditions for goods circulation are less convenient than in the plains but more convenient than in the highlands

c) Communes in the highlands are those with higher altitudes than the midlands, most of the area is mountains with rough terrains; low population density, the infrastructure and conditions are for goods circulation are less convenient than in the midlands.

Communes in the midlands shall be determined according to the characteristics prescribed in this Point and instructions of Committee for Ethnic Affairs.

2. Every the People’s Committee of the province shall make a list of communes in the plains, midlands, and highlands in the province as prescribed in Clause 1 of this Article.

Article 13. Classification of urban areas serving price list compilation

When compiling the list of prices of commercial and services land in urban areas, non-agricultural land for manufacturing and business other than commercial and services land in urban areas, land for construction of office buildings, administrative construction, land for public services, and other non-agricultural land in urban areas, urban areas shall be classified as follows:

1. Urban areas are classified into cities, towns, and townships that are established and classified by competent authorities;

2. By law, urban areas are classified into 06 classes including special class, class I, class II, class III, class IV, and class V. Unclassified townships shall be classified into class V;

3. The People’s Committee of the province shall apply suitable land price brackets to urban areas in the province according to the decisions on establishment and classification of urban areas approved by competent authorities.

Article 14. Classification of areas serving price list compilation

When compiling the list of prices of housing land in rural areas, commercial and services land in rural areas, non-agricultural land for manufacturing and business other than commercial and services land in rural areas, land for construction of office buildings, administrative constructions, land for public services, and other non-agricultural land in rural areas, the areas shall be classified as follows:

1. Zone 1: the area with highest profitability and most convenient infrastructure;

2. Zone 2 onwards: the areas with lower profitability and less convenient infrastructure than the superior zone.

Article 15. Classification of land location serving price list compilation

1. With regard to land for paddy fields or other annual crops; land for perennial plants, land for production forests, land for aquaculture; land for salt production, the determination of land location in the commune or district depends on the productivity, infrastructure, advantages (applied to annual crops and perennial plants); on infrastructure, advantages, distance from the residential area to the manufacturing area, and distance from the manufacturing area to the concentrated consumption area (applied to land for aquaculture and land for salt production). The locations are classified into:

a) Location 1: the location where the conditions are most convenient;

b) Location 2 onwards: the locations where the conditions are less convenient compared to the superior location;

2. With regard to commercial and services land in rural areas, non-agricultural land for manufacturing and business other than commercial and services land in rural areas, the location of land shall be determined by street or street segment, or depend on the technical and social infrastructure, advantages, distance to the downtown. The locations are classified as follows:

- Location 1: the location where the conditions are most convenient;

- Location 2 onwards: the locations where the conditions are less convenient compared to the superior location.

3. With regard to housing land in urban areas, commercial and services land in urban areas, non-agricultural land for manufacturing and business other than commercial and services land in urban areas, the location of land shall be determined by street or street segment, or depend on the technical and social infrastructure, advantages, distance to the downtown. The locations are classified as follows:

a) Location 1: the location where the most convenient conditions are found;

b) Location 2 onwards: the locations where the conditions are less convenient compared to the superior location;

4. In consideration of the market land prices, pursuant to Clauses 1, 2, and 3 of this Article , the People’s Committee of the province shall decides criteria for determination of locations of each type of land, quantity of locations, and the price of each location within the land price bracket.

Article 16. Collecting information about market land prices; natural conditions, socio-economic conditions, management and use of land that affect land prices on the survey date

1. Information about market land prices; natural conditions, socio-economic conditions, management and use of land that affect land prices on the survey date shall be collected from May 01 to not later than July 01 of the year as follows:

a) Collect information about the market price of at least 03 plots of land in 03 locations for each type of land (using Forms No. 01 thru 05 of Appendix 05 enclosed herewith).

Apart from the required information mentioned in this Point, the People’s Committee of the province may provide other information in the enquiry form to serve the compilation of the land price list;

b) Collect information about natural conditions, socio-economic conditions, management and use of land that affect land prices on the survey date using Form No. 05 in Appendix 05 enclosed herewith.

2. All of the enquiry forms in every surveyed commune shall be checked at the end of the survey in order to determine market land prices at various locations. The land price at a location is the arithmetic mean of the prices of the surveyed land plots in the same location.

If information about the market land prices at a location is not available, land prices of other locations shall be determined according to the current price list and determined prices of other locations using the direct comparison method specified in Clause 1 Article 4 of Decree No. 44/2014/NĐ-CP and Article 3 of this Circular.

3. Market land prices in the surveyed commune shall be collected using Form No. 07 in Appendix 05 enclosed herewith. A report on market price survey in the surveyed commune shall be made. The report shall specify:

a) Overall assessment of the surveyed commune;

b) Assessment of market land prices in the surveyed commune, fluctuation (increase or decrease) of market land prices compared to prices of the same type of land in the current land price list;

c) Suggested prices of land locations in the surveyed commune.

4. Documents about market land price survey shall be completed by July 10 of the year in which the land price list is compiled. Documents include:

a) The enquiry form to collect information about the surveyed commune;

b) The enquiry form to collect information about the plot of land;

c) The statistics of enquiry forms collect information about the plot of land;

d) A report on the results of the market land price survey in the surveyed commune.

Article 17. Processing result of market land price survey in the district

1.  Results of market land price survey in the district shall be processed using Forms No. 08 thru 11 of Appendix 05 enclosed herewith.

2. Making reports on the results of market land price survey in the district: The report shall specify:

a) Assessment of natural conditions, socio-economic conditions, management and use of land that affect land prices in the district;

b) Assessment of the results of market land price survey; the fluctuation (increase or decrease) of market land prices compared to prices of the same type of land in the district;

c) Suggested prices of land locations in the district.

3. Documents about results of market land price survey in the district shall be completed by July 20 of the year in which the land price list is compiled. Documents include:

a) A list of land prices in the district;

b) A report on the results of market land price survey in the district.

Article 18. Processing results of market land price survey in the province; assessing the current land price list

1.  Results of market land price survey in the province shall be processed using Forms No. 12 thru 14 in Appendix 05 enclosed herewith. This task must be done before August 01 of the year in which the land price list is compiled.

2. Analysis and assessment of the current land price list

a) Assess the fluctuation (increase or decrease) of the market land price and prices of the same type of land on the current land price list.

b) Assess the regulations of the current land price list.

Article 19. Land price list compilation

1. The Forms No. 15 thru 19 of Appendix 05 enclosed here with shall be used to compile the land price list based on land locations. Form No. 20 shall be used to compile the land price list that specifies the price for each plot of land.

2. Pricing of land in adjacent areas

a) The People’s Committee of the province shall prescribe the adjacent areas between provinces (hereinafter referred to as adjacent areas in accordance with Clause 1 Article 13 of Decree 44.

b) The People’s Committee of the province shall send the draft land price list to the People’s Committee of the adjacent province to seek opinions; post the draft land price list on the website of the People’s Committee of the province and the Service of Natural Resources and Environment. Within 15 days from the receipt of the draft land price list, the People’s Committee of the adjacent province shall make a written response.

If the difference between the prices of adjacent land in the draft price list exceeds the limit in Clause 2 Article 13 of Decree No. 44/2014/NĐ-CP the People’s Committees of the adjacent provinces shall reach an agreement on the price of adjacent land.

If an agreement cannot be reached, a report shall be sent to the Ministry of Natural Resources and Environment by September 15 of the year in which the land price list is compiled.  If the People’s Committee of the province and the Ministry of Natural Resources and Environment fails to reach an agreement on the price of adjacent land, the Ministry of Natural Resources and Environment shall report the case to the Prime Minister.

3. Making the description of the land price list compilation. The description shall contain:

a) Assessment of the natural conditions, socio-economic conditions, management and use of land that affect the prices of land in the province;

b) Assessment of result of market land price survey and suitability of the current land price list;

c) Assessment of the conformity of land prices in the draft land price list with the land price brackets, the market price survey results; land prices in the draft land price lists of adjacent provinces (if any);

d) The land locations, application of land pricing methods, and prices of types of land in the draft land price list; plans for pricing of various types of land (if any);

dd) Assessment of the impacts of the draft land price list on socio-economic developments, investment environment, implementation of financial policies on land, incomes and life of land users.

4. Compiling a report on the issuance of the land price list.

5. Seeking opinions on the draft land price list and completion thereof from relevant entities.

Article 20. Assessment of the draft land price list

1. The Service of Natural Resources and Environment shall send the documents to the Assessment Council by October 15 of the year in which the land price list is compiled. Documents include:

a) A report on the issuance of the land price list;

b) The draft land price list;

c) The description of the land price list compilation (using the Forms No. 12 thru 14 of Appendix 05 enclosed here with).

2. The Assessment Council shall assess the land price list in accordance with instructions of the Ministry of Finance and the Ministry of Natural Resources and Environment.

Article 21. Completing the draft land price list; requesting approval by the People’s Council of the province; issuing the land price list

1. According to the assessment of the Assessment Council, the Service of Natural Resources and Environment shall adjust and complete the draft land price list, then submit it to the People’s Committee of the province. The documents submitted to the People’s Committee of the province are specified in Clause 2 Article 12 of Decree No. 44/2014/NĐ-CP.

2. The People’s Committee of the province shall submit the documents to the People’s Council of the province for approval. The documents submitted to the the People’s Council of the province are specified in Clause 3 Article 12 of Decree No. 44/2014/NĐ-CP.

3. After receiving the Resolution from the People’s Council of the province, the People’s Committee of the province shall request the Service of Natural Resources and Environment to complete the land price list, issue the land price list and announce it on January 01 of the year.

4. The Service of Natural Resources and Environment shall submit a report on the land price list compilation result to the Ministry of Natural Resources and Environment by January 15 of the year. The results include:

a) A decision to issue the land price list;

b) Description of the land price list compilation;

c) The list of prices of each type of land in the province.

Section 2: LAND PRICE LIST ADJUSTMENT

Article 22. Preparation for land price list adjustment

Pursuant to Clause 1 Article 14 of Decree No. 44/2014/NĐ-CP the Service of Natural Resources and Environment shall:

1. Plan the land price list adjustment project in accordance with Article 10 of this Circular; provide instructions on surveys into market land prices with regard to each type of land, location, and areas where land prices are fluctuating;

2. Select an organization licensed to provide consultancy on land pricing to execute the land price list adjustment project in accordance with law.

Article 23. Collection of information about market land prices; natural conditions, socio-economic conditions, management and use of land that affect land prices in the surveyed commune

1. Information about market land prices; natural conditions, socio-economic conditions, management and use of land that affect land prices shall be collected in accordance with Clauses 1, 2, and 3 Article 16 of this Circular.

2. Documents about results of market land price survey in the surveyed commune include:

a) Enquiry forms to collect information about the surveyed commune;

b) The enquiry form to collect information about the plot of land;

c) The statistics of enquiry forms collect information about the plot of land;

d) A report on the results of market land price survey in the surveyed commune.

Article 24. Processing results of market land price survey and assessing the current land price list

1. Processing collected information about market land prices in the district

a) Results of market land price surveys in the district shall be processed and reported in accordance with Clause 1 and Clause 2 Article 17 of this Circular.

b) Documents about results of market land price surveys in the district include:

-  A list of land prices in the district;

- A report on results of market land price surveys in the district.

2. Processing results of market land price surveys in the province and assessing suitability of the current land price list.

 Results of market land price surveys in the province and suitability of the current land price list shall be processed and assessed in accordance with Article 18 of this Circular.

Article 25. Compilation of an adjusted land price list

1. Compile the land price list with adjusted prices of one, some, or all types of land, or one, some, or all locations (hereinafter referred to as adjusted land price list) in accordance with Clause 1 Article 19 of this Circular.

2. Process prices of adjacent land (if any).

3. Make a report on the compilation of the adjusted land price list.

4. Make a report on the issuance of the adjusted land price list.

5. Seek opinions of relevant entities about the draft and completion of the adjusted land price list.

Article 26. Assessing the draft of the adjusted land price list

1. The Service of Natural Resources and Environment shall send documents about the adjusted land price list to the Assessment Councils Documents include:

a) A report on the issuance of the adjusted land price list;

b) The draft of the adjusted land price list;

c) A description of the compilation of the adjusted land price list (using Forms No. 12 thru 14 of Appendix 05 enclosed herewith).

2. The adjusted land price list shall be assessed in accordance with instructions of the Ministry of Finance and the Ministry of Natural Resources and Environment.

Article 27. Completing, approving, and issuing the adjusted land price list

1. The Service of Natural Resources and Environment shall revise and complete the draft of the adjusted land price list, then submit it to the People’s Committee of the province. Documents submitted to the People’s Committee of the province are specified in Clause 5 Article 14 of Decree No. 44/2014/NĐ-CP.

2. The People’s Committee of the province shall submit the documents specified in Clause 6 Article 14 of Decree No. 44/2014/NĐ-CP to the People’s Council of the same province.

3. After receiving a response from the People’s Council of the province, the People’s Committee of the province shall request the Service of Natural Resources and Environment to complete the documents, issue and announced the adjusted land price list locally, then submit a report to the People’s Council in the nearest meeting.

4. The Service of Natural Resources and Environment shall report the compilation of the adjusted land price list to the Ministry of Natural Resources and Environment within 15 days from the day on which the decision to issue the adjusted land price list is signed. The report shall be enclosed with:

a) The decision to issue the adjusted land price list;

b) The description of the compilation of the adjusted land price list;

c)  A list of land prices in the province, sorted by type.

Chapter IV

DETERMINATION OF SPECIFIC LAND PRICES AND CONSULTANCY ON LAND PRICING

Article 28. Plan for determination of specific land prices

1. According to annual land-use planning for districts, plans for equitization of state-owned enterprises, the Service of Natural Resources and Environment shall make a plan for determination of specific land prices of the next year and send it to People’s Committee of the province before every June 30.

2. A plan for determination of specific land prices shall include:

a) Estimates of cases in which specific land prices need determining;

b) Estimates of cases in which it is required to hire an organization licensed to provide consultancy on land pricing (hereinafter referred to as consultancy unit) and a number of consultancy units;

c) Estimates of time and funding for land pricing.

Article 29. Preparation for determination of specific land prices

According to the plan for determination of specific land prices approved by People’s Committee of the province, the Service of Natural Resources and Environment shall prepare for determination of specific land prices following the procedures below:

1. Determine purposes of land pricing, operating time and budget estimates.

2. Prepare documents on the target land plot, including:

a) Location, area, type of land and useful life of the target land plot;

b) Specific information about planning, land-use plan, construction planning approved by competent government agencies and other regulations on management and use of the target land plot.

3. Select consultancy units and conclude a service contract with them for land pricing (if applicable).

Article 30. Collecting information about land plots, market land prices; application of methods for land pricing and formulation of land pricing plans

1. The collected information about land plots and market land prices shall be filled in from Form No. 1 to Form No. 5 of Appendix 5 enclosed herewith.

2. According to collected information, methods for land pricing prescribed in Clause 1, 2, 3 and 4 Article 4 of Decree No. 44/2014/ND-CP and Article 3, 4, 5 and 6 of this Circular shall be applied to determine the land prices.

In case of conclusion of a service contract with a consultancy unit, that unit must formulate a Land price Certification using Form No. 21 of Appendix 05 enclosed herewith.

3. Formulation of land pricing plan and a report on formulation of land pricing plans shall follow contents below:

a) Purposes of land pricing and information about target land plot;

b) Assessment of situation and results of collecting information about market land prices;

c)  Application of land pricing methods;

d) Results of land pricing and suggestion for land pricing plans;

dd) Assessment of socio-economic effects on land pricing plans.

4. Service of Natural Resources and Environment shall inspect and evaluate the results of land pricing and land pricing plans; and make a report on decision about land prices.

Article 31. Assessment of land pricing plans

1. Service of Natural Resources and Environment shall send the documents on land pricing plans to the Assessment council. Documents shall include:

a) A report on decision about land prices;

b) A draft of land pricing plans;

c) A draft of report on formulation of land pricing plans

2. The assessment of land pricing plans carried out by the Assessment council shall conform to regulations on guidance of the Ministry of Finance and the Ministry of Natural Resources and Environment.

Article 32. Completing the draft of land pricing plans and requesting People's Committees of provinces to impose land prices

1. Within 05 working days from the day on which the written assessment of the Assessment council is received, the Service of Natural Resources and Environment shall complete the draft of land pricing plans and request People's Committees of provinces to impose land prices. Documents which are sent to People's Committees of provinces shall comply with Clause 2 Article 16 of Decree No. 44/2014/ND-CP

2. Within 05 working days from the day on which the written request of the Service of Natural Resources and Environment is received, People's Committees of provinces must impose the land prices.

3. The Service of Natural Resources and Environment must keep all results of determination of specific land prices; release statistics and send a report on local results of determination of specific land prices to the Ministry of Natural Resources and Environment before every January 15.

Article 33. Determination of specific land prices according to coefficient-based method applied to the case prescribed in Point b Clause 2 Article 18 of Decree No. 44/2014/ND-CP

1. The collected information about land plots and market land prices shall be filled in using from Form No. 1 to Form 5 of Appendix 5 enclosed herewith; collecting the information about local socio-economic conditions.

2. According to collected information, the coefficient-based method as prescribed in Clause 5 Article 4 of Decree No. 44/2014/ND-CP and Article 7 of this Circular shall be applied to formulate land price adjustment coefficients.

3. Formulation of land price adjustment coefficient plans and a report on formulation of land price adjustment coefficient plans shall follow contents below:

a) Purposes of land pricing and information about target land plot;

b) Assessment of situation and results of information about market land prices; socio-economic condition affecting local land prices.

c) Application of coefficient-based method;

d) Results of formulation of land price adjustment coefficients and suggestion for land price adjustment coefficients plans;

dd) Assessment of socio-economic effects on land price adjustment coefficient plans.

4. Service of Natural Resources and Environment shall inspect and evaluate the results of formulation of land price adjustment coefficients and land price adjustment coefficient plans; and make a report on decision about land price adjustment coefficients.

5. The assessment of draft of land price adjustment coefficients; completion of such draft; and request People's Committees of provinces to impose the land price adjustment coefficients in accordance with Article 31 and Article 32 of this Circular.

6. Pursuant to Point b Clause 2 Article 18 of Decree No. 44/2014/ND-CP and actual condition of the provinces, People's Committees of provinces shall decide the cases in which land price adjustment coefficients shall be applied as prescribed in this Article.

Article 34. Selection of consultancy units

1. According to the plan for determination of specific land prices and documents on target land plot, the Service of Natural Resources and Environment shall select consultancy units as prescribed in regulations of law on bidding.

2. In case of application of public bidding, the Service of Natural Resources and Environment shall:

a) Set up groups of bidding experts and establish criteria and methods for bid-envelopes assessment;

b) Announce invitations for bid by means of mass media as prescribed in regulations of law on public bidding;

c) The assessment of bid-envelopes shall be conducted according to rules of objectivity, honesty, and specific criteria prescribed in invitations for bid;

d) Decision on selection of consultancy units who determine the specific land prices.

3. In case of application of no-bid contract prescribed in regulations of law on bidding, the Service of Natural Resources and Environment shall assess competence and decide to select the consultancy units.

Article 35. Conclusion of service contract with consultancy units

1. According to the Decision on selection of consultancy units, the Service of Natural Resources and Environment shall conclude a service contract with them.

2. Service contract with consultancy units shall include:

a) Name and address of the Service of Natural Resources and Environment; consultancy units;

b) Purposes of land pricing;

c) Information of target land plot: location, area, type of land and usable life of target land plot;

d) Executing time of land pricing.

dd) Results of land pricing include: Inquiry form market land prices; results of market land prices, Land price certification; report on formulation of land pricing plans; and land price adjustment coefficients;

e) Costs of land pricing and methods of payment;

g) Contractual rights and obligations of both parties.

Article 36. Procedures for granting the License for land pricing

1. The applicant for the License for land pricing shall send the application to General Department of Land Administration. Application shall include:

a) An application form for License for land pricing (using Form No. 22 of Appendix 5 enclosed herewith);

b) A copy of Certificate of training in land pricing according to the fresher courses offered by the Ministry of Natural Resources and Environment;

c) A copy of the bachelor's degree or above, written confirmation of workplace on working time as prescribed in Point c and d Clause 2 Article 20 of Decree No. 44/2014/ND-CP;

d) A copy of the ID card or passport of the applicant.

2. General Department of Land Administration must receive, inspect the application and grant the License for land pricing within 15 days from the day on which the satisfactory application is received.

Chapter V

IMPLEMENTATION

Article 37. Effect

1. This Circular shall take effect from August 13, 2014.

2. This Circular shall replace Circular No. 145/2007/TT-BTC dated December 06, 2007 of the Minister of Finance providing guidance on Decree No. 188/2004/ND-CP dated November 16, 2004 of the Government on methods of land pricing and land price brackets and Decree No. 123/2007/ND-CP dated July 27 of the Government on amendments to Decree No. 188/2004/ND-CP; Joint Circular No. 02/2010/TTLT-BTNMT-BTC dated January 8, 2010 of the Minister of Natural Resources and Environment and the Minister of Finance providing guidance on formulation, assessment and imposition of land price brackets and adjustments to land price brackets within competence of People’s Committees of provinces.

Article 38. Implementation

1. Ministers, ministerial-level agencies, Governmental agencies; People’s Committees of provinces are responsible for implementation of this Circular.

2. General Department of Land Administration is responsible for inspection and implementation of this Circular.

3. The Service of Natural Resources and Environment must assist People’s Committees of provinces in implementing this Circular.

Difficulties that arise during the implementation of this Circular should be reported to the Ministry of Natural Resources and Environment for consideration./.

APPENDIX 1

 (Issued together with Circular No. 36/2014/TT-BTNMT dated June 30, 2014 of the Minister of Natural Resources and Environment)

AN EXAMPLE OF DIRECT COMPARISON METHOD

The land plot whose price needs determining is land plot A located in the class IV urban area, which faces Nguyen Van A street, closes to markets, schools, hospitals, populous areas, has an area of 100 m² (referred to as land plot A), and closes to an asphalt road whose cross section (including sidewalks) is 15m in width. The price of land plot A shall be determined according to direct comparison method as follows:

1. Information survey and collection

Time of land pricing: June 2014.

Conduct the market survey, collect information about prices of 3 similar housing land plots (referred to as land plot B, C and D) which are in the aforesaid urban area, have been transferred over the previous 2 years up to the pricing day. Assuming that the common housing land prices on the market of the class IV urban area do not fluctuate from March 2013 to June 2014.

Collect the information about comparable land plots (B, C and D):

Conduct the market survey, collect the information below:

- Value of the land plot facing Nguyen Van A street is higher than value of the land plot facing Nguyen Van B street by 4%, and higher than value of the land plot facing Nguyen Van C street by 2%.

- Value of the land plot facing the road whose cross section is 15m in width is higher than value of the land plot facing the road whose cross section is 10m in width by 5%, and lower than value of the land plot facing 2 roads whose cross sections are 15m and 6m in width by 10%.

- Value of the land plot whose frontage size is 10m in width is higher than the land plot whose frontage size is 7m in width by 5%; and higher than the land plot whose frontage size is 6m in width by 6%.

- Value of the land plot is 10m in depth is higher than the land plot is 15m in depth by 2%.

- Value of the land plot in the area with good supply of clean water is higher than the land plot in the area with less steady supply of clean water by 2%.

2. Analysis, comparison and adjustments to the price due to differences between comparable land plots and the land plot whose price need determining

a) Analyze and compare to select the same and different factors between land plot B, C and D and land plot A.

The result of the analysis shows that there are 3 similar factors (purpose, no property attached to land, and having land use right certificate), and 5 different factors (location; transportation; area, size; other infrastructural works) between land plot B, C and D and land plot A.

b) Adjustments to the price due to differences between land plot B, C and D and land plot A.

- Adjustments to the price due to the difference in location: Value of land plot A is the same as value of land plot D (facing Nguyen Van A street), higher than value of land plot B (facing Nguyen Van B street) by 4%, and higher than value of land plot C (facing Nguyen Van C street) by 2%.

Assuming that price of land plot A and D is 100%, the price of land plot B and C shall be 96% and 98%.

The adjusted rate of land plot B is:

The adjusted rate of land plot C is:

- Adjustments to the price due to the difference in transportation: Value of land plot A is the same as value of land plot C (both facing the road whose cross section is 15m in width), higher than value of land plot B (facing the road whose cross section is 10m in width) by 5%, and lower than value of land plot D (facing 2 roads whose cross sections are 15m and 6m in width) by 10%.

Assuming that price of land plot A and C is 100%, the price of land plot B and D shall be 95% and 110%.

The adjusted rate of land plot B is:

The adjusted rate of land plot D is:

- Adjustments to the price due to the difference in area and size: Value of land plot A is the same as value of land plot B (the same frontage size 10m), higher than value of land plot C (frontage size 7m) by 5%, higher than value of land plot D (frontage size 6m) by 6%.

Value of land plot A and C (10m in depth) are higher than value of land plot B and D (15m in depth) by 2%.

Assuming that price of land plot A is 100%, the price of land plot B, C and D shall be 98%, 95% and 92%.

The adjusted rate of land plot B is:

The adjusted rate of land plot C is:

The adjusted rate of land plot D is:

- Adjustments to the price due to the difference in other infrastructural works:

Clean water supply: Value of land plot A is the same as value of land plot D (in the area with good supply), is higher than value of land plot B and C (in the area with less steady supply) by 2%.

Assuming that price of land plot A and D is 100%, the price of land plot B and C shall be 98%.

The adjusted rate of land plot B and C is:

3. Estimate price of land plot A:

4. Determination of price of land plot A:

Variance ratio of land plot A (land plot whose price needs determining) to land plot B (comparable land plot) is:

Variance ratio of land plot A to land plot C and D is -1.97% and 1.27%.

Consequently, it is ensured that the differences in value between land plot A and comparable land plots do not exceed 10%.

Conclusion: The price of land plot A is VND 34.30 million/m²

 (The aforesaid figures are used for reference only)

APPENDIX 2

 (Issued together with Circular No. 36/2014/TT-BTNMT dated June 30, 2014 of the Minister of Natural Resources and Environment)

AN EXAMPLE OF SUBTRACTION METHOD

The land plot whose price need determining is a land plot in A city which faces an internal road whose cross section is 8m in width in a new urban area, has an area of 90m² (5m frontage x 18m depth), and has a 3-storey house thereon (referred to as land plot B). The price of land plot B shall be determined according to subtraction method as follows:

1. Information survey and collection

Conduct the market survey, collect information about prices of 3 real estate which are similar to real estate B and in the same aforesaid urban area. In order to keep it simple, there is only price of 1 comparable real estate (hereinafter referred to as real estate C) in 3 real estate that have been transferred shall be estimated.

The information of the real estate C: having a house with 100m² in total area (3 floors, 75m² in constructional area per storey; 5m frontage), facing an internal road whose cross section is 8m in width; the selling price of real estate C (including house and land) is VND 7,200 million, real estate C has been transferred for 6 months up to the present day, in which the market land price is relative steady.

According to the analysis and comparison with prices between land plot B (in real estate B) and land plot C (in real estate C) due to their differences, the adjusted rate of price is 6%.

Conduct the field survey, collect the figures below:

- Price of a house construction having equivalent technical standards is VND 7 million/m² floor area according to current market price (all-in price).

- The house has been used for 12 years; its remaining economic life is about 40 years.

2. Determination of current value of property attached to comparable real estate (real estate C)

- Gross floor area of the house: 75m²/storey x 3 floors = 225 m².

- Expenditures on a new house construction having equivalent area and technical standards:

VND 7 million/m² x 225 m² = VND 1,575 million

- Determination of depreciation:

Depreciation rate: apply the determination of depreciation rate method according to the remaining economic life:

Depreciation: VND 1,575 million x 30% = VND 472.5 million

- The current value of the house:

VND 1,575 million – VND 472.5 million = VND 1,102.5 million

3. Estimates of price of real estate C

Estimates of value of real estate B:

VND 7,200 million – VND 1,102.5 million = VND 6,097.5 million

Estimates of price of real estate B:

VND 6,097.5 million/100m2 = VND 60.975 million/m²

4. Estimates of price of B real estate

According to the analysis and comparison with prices between land plot B (in real estate B) and land plot C (in real estate C) due to their differences, the adjusted rate of price is 6%. Consequently, estimates of price of real estate B are:

VND 60.975 million + (60.975 million x 6%) = VND 64. 634 million/m²

In round: VND 64.6 million/m²

Suppose that there are other 2 comparable real estate (hereinafter referred to as real estate D and E), apply the determination of current value of property attached to land, the prices of land plot C and D shall be VND 58 million/m_­­­² and VND 65 million/m_­­­². According to the analysis and comparison with prices between land plot D, E (in real estate D and E) and land plot B (in real estate B) due to their differences, the adjusted rate of price are 7% and -2%.

Consequently, estimates of price of B real estate according to prices of real estate C and D are:

VND 58.0 million + (VND 58.0 million x 7%) = VND 62.06 million/m²

VND 65.0 million + [VND 65.0 million x (-2%)] = VND 63.70 million/m²

5. Estimates of price of real estate B

Variance ratio of land plot B to land plot C, D and E are -1.78%; 2.24% and -0.39%.

Consequently, it is ensured that the differences in value between land plot B and comparable land plots do not exceed 10%.

Conclusion: The price of land plot B is VND 63.45 million/m²

 (The aforesaid figures are used for reference only)

APPENDIX 3

 (Issued together with Circular No. 36/2014/TT-BTNMT dated June 30, 2014 of the Minister of Natural Resources and Environment)

AN EXAMPLE OF INCOME-BASED METHOD

E.g.1:

Apply the income-based method to determine the price of  agricultural land planting annual crops in the commune A (A is a delta commune) district B province C of Mekong Delta. The land plot whose price needs determining (hereinafter referred to as land plot X) is 4.000 m² in area which plants 3 ordinary rice crops per year.

The result of information collection of land plot X during 3 consecutive years up to the time of land pricing is:

The price of land plot X shall be determined according to income-based method as follows:

- Average income in a year:

- Average cost in a year:

- Average net income in a year:

VND 31,713,333 – VND 19,833,333 = VND 11,880,000

- Average saving deposit interest rate in a year:

- Value of land plot X:

- Price of land plot X:

In round: VND 30,000/m²

Conclusion: The price of land plot X is VND 30,000/m²

 (The aforesaid figures are used for reference only)

E.g.2:

Apply the income-based method to determine the price of agricultural land growing coffee beans (perennial plants) in commune B, district C, province D of the central highlands. The land plot whose price need determining (hereinafter referred to as land plot A) is 10 ha in area, basalt, planting density 1,110 trees/ha. Up to the time of land pricing, land plot A has passed 03 years of cultivation and profits can be reaped from land from the forth year. The result of information collection of land plot A:

Average production of coffee kernel in a year: 3.5 metric tons/ha/year.

Market price: VND 40,000,000/metric ton

Average interest rate of saving deposit (r) in the 3 consecutive years up to the time of land pricing applicable to the 12-month deposit (in VND) at the state-owned commercial banks whose interest rate is highest in the province: r = 9.83%/ year (2011: 12%; 2012: 9%; and 2013: 8.5%).

The price of land plot A shall be determined according to income-based method as follows:

-  Average income arising from sale of coffee kernel in a year:

VND 40,000/metric ton x 3.5 metric tons/ha x 10 ha = VND 1,400,000,000/year

- Average cost in a year:

VND 90,300,000/ha x 10 ha = VND 903,000,000/year

- Net income arising from sale of coffee kernel in a year:

VND 1,400,000 – VND 903,000,000 = VND 497,000,000/year

- Value of land plot A and orchards therein:

- Value of land plot A:

VND 5,055,951,170 – (VND 153,300,000/ha x 10 ha) = VND 3,522,951,170

- Price of land plot A:

Conclusion: The price of land plot A shall be rounded down to VND 35,000/m2.

 (The aforesaid figures are used for reference only)

E.g.3:

Determination of price of non-agricultural land on the A street, district B of province C (hereinafter referred to as land plot X) with a construction thereon, including 01 office building for lease and auxiliary works with the following information:

- Land plot X area: 6,000m², remaining useful life is 40 years.

- Office building: constructional area 3,000m², 10 floors, gross floor area 30,000m²; net leasable area 22,000m².

- Total value of constructions on land (main building and auxiliary works) at the time of land pricing: VND 315,000 million.

- Recovery value of the constructions after useful life of land expires is not considerable.

Office rent according to survey on 3 similar office buildings for lease in the same administrative division. After adjustments to the different factors, the average market rent at the time of land pricing is: VND 0.23 million/m²/month (not including VAT); lease-up and occupancy rate is 80%. The rent shall be paid annually, the initial payment day is 1 year after pricing day.

- Administrative cost of the office building (electricity, water, security, sanitation, managers, maintenance,…) is 15% of revenue according to the statistics in the administrative division.

- The annual amount of land use tax is VND 30 million.

- Average interest rate of saving deposit (r) in the 3 consecutive years up to the time of pricing day applicable to the 12-month deposit (in VND) at the state-owned commercial banks whose interest rate is highest in the province: r = 9.83%/ year (2011: 12%; 2012: 9%; and 2013: 8.5%).

The price of land plot X shall be determined according to income-based method as follows:

- Income arising from office leasing in a year is:

VND 0.23 million/m²/month x 22,000m² x 80% x 12 months = VND 48,576 million.

- Administrative cost in a year is:

VND 48,576 x 15% = VND 7,286 million.

- The annual amount of land use tax is: VND 30 million.

- Net income arising from office leasing in a year is:

VND 48,576 million - VND 7,286 million – VND 30 million = VND 41,260 million.

- Because the remaining useful life of land plot X is 40 years, the interest rate shall be adjusted as follows:

- Value of real estate X:

- Value of land plot X:

VND 409,728 million – VND 315,000 million = VND 94,728 million

- Price of land plot X:

Conclusion: The price of land plot X shall be rounded up to VND 15.8 million/m².

 (The aforesaid figures are used for reference only)

APPENDIX 4

 (Issued together with Circular No. 36/2014/TT-BTNMT dated June 30, 2014 of the Minister of Natural Resources and Environment)

AN EXAMPLE OF SURPLUS-BASED METHOD

In 2014, People’s Committee of A City estimate allocate a land plot (hereinafter referred to as land plot X) has an area of 20,000m² to B company trading houses in urban area in order to project to build apartment buildings and office buildings for lease. Land plot X has completed indemnity and site clearance up to the present time. Where the plan for best use of land plot X is:

- 7,000m² for construction of apartment buildings, constructional area 4,000m², 20 floors; method of land allocation: allocate housing land with land levy not through land use right auction.

- 9,000m² for construction of office buildings for lease, constructional area 4,000m², 15 floors; method of land allocation: leasing land with lump sum payment, lease term 50 years.

- 4,000m² for public internal road, method of land allocation: allocate land without land levy.

Suppose that this project shall be completed within 02 years and the investment estimates shall be declared 02 times in the end of first year and second year. Plan for conducting the project:

1. Expenditures on the project (not including VAT):

- Expenditure on constructional consultancy is VND 15,000 million (where expenditures on apartment building consultancy is VND 8,000 million).

- Expenditure on infrastructural construction: VND 0.8 million/m²;

- Expenditure on 20-storey apartment building construction: VND 10.2 million/m²;

- Expenditure on 20-storey apartment building construction: VND 10.2 million/m²;

- Provisional expenditure on new work and price slippage during the time of construction is VND 70,000 million (where provisional expenditure on apartment building is VND 42,000 million).

- Administrative expenditures on the project (set up or assess the project, assess its design, choose contractors, supervise construction, control quality and other works relating to the investors of the construction…) is 2% of total expenditures on construction and equipment of the project.

- Expenditure on advertisement, sale, and management is 1% of total revenue.

- Profits of the investors with account taken of business risks and capital cost is 15% of total expenditures on construction and value of land plot of the project.

- Average interest rate of mid-term loan (in VND) at the state-owned commercial banks on the administrative divisions to project to real estate development is 12% per year on the pricing day.

The expenditures on infrastructure and constructional consultancy arising in the first year; expenditures on construction; provisional expenditures on executing 50% of quantities in the first year; expenditures on project management arising from cost of construction and equipment of every year.

2. The selling price of an apartment and office rent (not including VAT):

- The average selling price of an apartment is VND 20 million/m², total usable floor area in the apartment accounts for 80% of total constructional floor area of the apartment building. After signing the transfer contract, the client shall pay 50% of the value of the apartment (the contract concluded by both parties at the end of the first year). By the end of the second year, the client must pay the remaining amount of money.

- Total usable floor area of the office area accounts for 75% of the gross constructional floor area of the office building; average office rent of other similar offices in the same area is VND 0.3 million/m²/month (Suppose that the office rent does not vary throughout the time of conducting project); lease-up and occupancy is 80%. Expenditures on administrating the office building (electricity, water, security, sanitation, managers,…) are 15% of revenue. Profitable constructions operate after 02-year construction.

The surplus-based method is applied to determine the price of land plots as follows:

Determination of price of the land plot used for apartment building construction (hereinafter referred to as land plot Y)

1. Estimate of revenue coming from apartment building development

- The first year:

 (4,000m²/storey x 20 floors x 80%) x VND 20 million/m² x 50%

= VND 640,000 million

- The second year:

 (VND 4,000m²/storey x 20 floors x 80%) x VND 20 million/m² x 50%

= VND 640,000 million

- Actual revenue coming from the apartment building development

2. Estimate of expenditures arising from apartment building development

a) Expenditure on construction

The first year:

- Expenditure on constructional consultancy of apartment buildings: VND 8,000 million

- Expenditure on infrastructure:

 (20,000m² x VND 0.8 million/ m² x 7,000m²/(7,000m²+9,000m²)

= VND 7,000 million

- Expenditure on apartment building construction:

VND 4,000m²/storey x 20 floors x VND 10.2 million/m² x 50%

= VND 408,000 million

- Provisional expenditure on derived works and price slippage during the time of construction: VND 42,000 million x 50% = VND 21,000 million

- Administrative expenditure on the project:

 (VND 7,000 million + VND 408,000 million) x 7% = VND 8,300 million

- Total expenditure in the first year:

8,000 + 7,000 + 408, 000 + 21,000 + 8,300 = VND 452,300 million

The second year:

- Expenditure on apartment building construction:

4,000m²/storey x 20 floors x VND 10.2 million/m² x 50%

= VND 408,000 million

- Provisional expenditure on derived works and price slippage during the time of construction: VND 42,000 million x 50% = VND 21,000 million

- Administrative expenditure on the project:

VND 408,000 million x 2% = VND 8,160 million.

- Total expenditure in the second year:

408,000 + 21,000 + 8,160 = VND 437,160 million

Total expenditure on constructional consultancy of apartment building up to the present time:

b) Expenditure on advertisement, sale, or management

1% x VND 1,081,632.65 million = VND 10,816.33 million.

c) Profits of the investors with account taken of business risks or capital cost factors:

15% x (V_cc + VND 752,340.56 million)

Where: V_cc  is value of the land plot Y

d) Total expenditure on apartment building development

VND 752,340.56 million + VND 10,816.33 million + 15% x (V_cc + VND 752,340.56 million)

= 876,007.97 + 0.15 V_cc (VND million)

3. Determination of the value of land plot Y:

V_cc = VND 1,081,632.65 million – (876,007.97 + 0.15 V_cc) VND million

V_cc = 178,804.07 VND million

4. Determination of the price of land plot Y:

VND 178,804.07 million/7,000m² = VND 25.54 million/m²

II. Determination of price of office buildings for lease (hereinafter referred to as land plot Z)

1. Estimate of total revenue coming from office buildings for lease development:

- Income arising from office leasing in a year is:

VND 0.3 million/month x (4,000m²/storey x 15 floors x 75%) x 80% x 12 months

= VND 129,600 million

- Administrative cost in a year (equivalent to 15% of revenue) is:

VND 129,600 million x 15% = VND 19,440 million

- Net income arising from office leasing in a year is:

VND 129,600 million – VND 19.440 million = VND 110,160 million

- Revenue coming from the office building up to the present time (except for the first 2 years under construction in which the revenue has not generated):

Where:

DTvp is revenue coming from office buildings for lease development:

The time of conducting the project shall be equivalent to the time of land leasing (50 years).

2. Estimate of the expenditures arising from office buildings for lease development:

a) Expenditure on construction.

The first year:

- Expenditures on office construction consultancy:

VND 15,000 million – VND 8,000 million = VND 7,000 million

- Expenditure on infrastructure:

20.000m² x VND 0.8 million/m² x 9,000 m²/ (7,000m² +9,000m²)

= VND 9,000 million

- Expenditure on office construction:

4,000m²/storey x 15 floors x VND 9 million/m² x 50%

= VND 270,000 million

- Provisional expenditure on derived works and price slippage during the time of construction:

 (70,000 – 42,000) x 50% = VND 14,000 million

- Administrative expenditure on the project:

 (VND 9,000 million + VND 270,000 million) x 2% = VND 5,580 million.

- Total expenditure in the first year:

7,000 + 9,000 + 270,000 + 14,000 + 5,580 = VND 305,580 million.

The second year:

- Expenditure on office construction:

4,000m²/storey x 15 floors x VND 9 million/m² x 50%

= VND 270,000 million

- Provisional expenditure on derived works and price slippage during the time of construction:

 (70,000 – 42,000) x 50% = VND 14,000 million

- Expenditure on the project management: VND 270,000 million x 2% = VND 5,400 million.

- Total expenditure in the second year:

270,000 + 14,000 + 5,400 = VND 289,400 million.

Total expenditure on constructional investment up to the present time:

b) Expenditure on advertisement, sale or management up to the present time.

1% x VND 728,647.53 million = VND 7,286.48 million.

c) Profits of the investors with account taken of business risks or capital cost factors:

15% x (Vcc + VND 503,547.19 million)

Where: V­_vp is the value of the land plot Z

d) Total expenditure arising from office buildings for lease development

VND 503,547.19 million + VND 7,286.48 million + 15% x (V_vp+503,547.19)VND million.

= 586,365.75 + 0.15 V_vp (VND million)

3. Determination of the value of land plot Z

V_vp = VND 728,647.53 million – (586,365.75 + 0.15 V_vp) VND million

V_{vp =}  VND 123,723.29 million

4. Determination of the price of land plot Z

VND 123,723.29 million/9,000m² = VND 13.75 million/m².

III. Total value of the land plot 20,000m² in area whose price needs determining

VND 178,804.07 million + VND 123,723.29 million = VND 302,527.36 million

- Value of land plot Y is: VND 178,804.07 million; Price of land plot Y is: VND 25.54 million/m²

- Value of land plot Z is: VND 123,723.29 million; Price of land plot Z is: VND 13.75 million/m²

 (The aforesaid figures are used for reference only)