Remove "problems" to promote potentiality in land

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Customers visit the project of the Novaland Group. Photo: Nguyen Hue.

Waste of public land

In Document No. 55 / CV, HCM City Real Estate Association (HoREA) proposed to remove obstacles in mechanism and policy of investment, capital construction and real estate market to the Prime Minister and ministries on 24 April 2018. Accordingly, HoREA said, the real estate market still had some shortcomings. It was a waste of public land. Typically, the surface of 121 Nguyen Hue, District 1, Ho Chi Minh City has been enclosed for more than 10 years. In some areas, especially in newly developed districts, new urban areas, houses and apartments in real estate projects, including land subdivision for sale, are still speculated, create a virtual "fever" that causes huge losses to consumers, including surfing investors, threatening credit security, macro instability of the economy and the sustainable development of the real estate market. In addition, administrative procedures and harassment are obstructing the development of the country and productive activities and businesses.

According to Mr. Le Hoang Chau, the Chairman of HoREA, the biggest bottleneck for the market as well as real estate companies is land use fees. Currently, land use fees are "burdensome" problems for developers. The method of calculating land use fee is creating "begging" mechanism and businesses have to take a lot of time to complete this administrative procedure. In fact, the project owner is paying a large amount of land use fees, equal to about 70% of the cost of compensation for ground clearance. Land use fees account for about 10% of the cost of a condominium; accounting for about 30% of the cost of a townhouse; and about 50% of the cost of a villa.

The State is collecting a large amount of land use fees, but in the long run, if land has been handed over, it will no longer have large budget revenues, which need to be replaced by property taxes. However, the drafting of the Law on Property Tax should go with the amendment of the land use fee policy and mechanism to avoid "overlapping taxes".

Eliminate "begging" mechanism

According to Mr. Le Hoang Chau, the amendment of the land use fee policy and mechanism should be implemented in the direction that the land use levy is a tax levied on conversion of land use purpose from agricultural land with a tax rate of about 10-15%, calculated on the land price list promulgated by the provincial People's Committee. On that basis, the Law on Property Tax will be supplemented to create a stable and sustainable source of revenues for the State budget of the provinces and cities under the Central Government.

"Besides, in order to compensate for the decrease of budget revenue due to the reduction of land use fee, localities should encourage the development of production, business, trade, service and tourism to increase revenues. For example, District 7 of Ho Chi Minh City previously collected less than VND 1,000 billion per year, but after the formation of Phu My Hung new urban area, the production, business, trade and service activities have increased budget revenues, reaching VND 4,567 billion in 2017", Mr. Chau said.

Another obstacle that needs to be resolved is the need to amend and supplement the Land Law on the mechanism of re-adjusting land and re-allocating land to carry out urban renewal and redevelopment. The conversion of land use into non-agricultural land, especially residential land, commercial land and services under the State's plan will help create ahigh added value. In order to do this, there should be a mechanism to ensure the harmony of the interests of the State, project investors, land users and buyers. In Ho Chi Minh City, the project of Xom Cai Village, Ward 8, District 5, Ho Chi Minh City, with a size of 3.1 hectares, successfully implemented in 1993 can be considered as a typical example.

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In addition, according to HoREA, in order to build a transparent business environment and healthy competition, it is necessary to popularize the method of land auction, bidding for projects using land for selection of contractors and investors to achieve the best effect. The reality in Ho Chi Minh City has shown the implementation of open and public auction to select qualified investors, help build a transparent business environment, to ensure the sale of land use right assets at market prices, to achieve high efficiency, and increase the budget revenues. From 2011 to the time of suspension of procedures for selling assets on land, transfer of land use rights pursuant to Official Letter No. 342 / TTg-VI dated 7 March 2003 of the Prime Minister; Ho Chi Minh City successfully organized 215 auctions, at the price of VND 3,211.8 billion and the auction price was VND 4,467.9 billion, a difference of VND 1,256 billion, an increase of 1.39 times compared to the initial price.