New Land Price Frame Offers more Powers to Localities

New Land Price Frame Offers more Powers to Localities

The Ministry of Finance recently held a press conference to introduce Decree No.188/2004/ND-CP and methods to calculate land prices and a land price frame. This decree will replace Decree No.87/CP, which stipulates the frame of land prices. Nguyen Tien Thoa, deputy head of the Department of Price Management under the Ministry of Finance, said that the Decree No.188-CP consisted of four chapters with 17 articles, which introduced two methods for calculating land prices: direct comparison and collection. The two methods are used to identify the price of a concrete land lot, which will act as a basis for identification of prices of other lots.

These methods were developed based on the experience in pricing of lands by People’s Committees of provinces and cities nationwide and studies on methods for land pricing applied by other countries. Decree No.188-CP consists of nine frames for land prices, identified in accordance with land classification stipulated in Article 13 of the 2003 Land Law. Therefore, new frames for land prices and land use purposes have been more clearly identified. Furthermore, for land prices which the Government has not yet stipulated, according to the decree, the People’s Committee of provinces and cities can set prices based on the price of neighbouring lands. This is a new feature of the decree, offering more powers to localities.

Another new feature of the decree in setting land prices is its close following of the price setting principle stipulated by the 2003 Land Law ‘pricing land close to the transfer price in the market in a normal condition.' Minimum prices of each frame for each kind of land according to regions and urban areas have been developed equal to real minimum prices. Maximum prices in each frame have been developed close to the price of land use rights transfer in the market. Therefore, in principle, maximum prices of frames of land prices are set equal to 90 per cent of maximum prices of land use rights transfer of successful, eligible and popular transactions, but not specific transactions.

Nguyen Ngoc Tuan, deputy minister of finance, said that due to complicated developments of the transfer market, the land market was sensitive and implementation guidelines should be flexible. The Government has stipulated the maximum price for each frame of land prices according to regions and urban areas, which is equal to 75 per cent of real prices of land use rights transfer in the market. People’s Committees at the provincial levels are allowed to set concrete prices, which can be higher by a maximum of 20 per cent than the price frame set by the Government based on their own conditions. For land prices which the Government has not yet set, provincial People’s Committees are allowed to set their own prices.

Thoa said that the adjustment of the frame of land prices was also a new feature of the decree. When popular prices of land use rights transfer in the market of some or all kinds of lands in the frames of land prices experience developments for at least 60 days on a large scale (in many provinces and cities), with an increase of at least 30 per cent against the maximum price or a fall of at least 30 per cent against the minimum price in the frames of prices stipulated in paragraph 1 of Article 6 of the decree, the Ministry of Finance will act as the focal point in developing some or all new frames of land prices to submit to the Government for adjustment.

Concerning the power and methods for division of lands, and classification of streets and positions of lands for price setting, Decree N⁰ 188 assigns provincial People’s Committees to set concrete criteria based on general regulations of the decree and their conditions and customs. These criteria will be used to decide the position and quantity of each kind of land, and numbers and positions of streets in accordance with urban areas to set land prices. Thoa said that it was a new method, which would offer flexible reactions to a diversified situation in the land market.

It is reported that the Decree N⁰ 188 was announced in late November but so far only around 50 provinces and cities have reported they have completed frames of land prices without any difficulty.

• Lan Anh