Dr. Nguyễn Duy Phương, Investment Director of DG Capital, raised the issue that with annual land rent payments, investors will face increasing land rent, which is forecasted to rise rapidly, especially in the context of the 2024 Land Law abolishing the land price framework and adjusting the land price list annually. This will be a significant pressure for investors holding large land funds but lacking the financial capacity to develop projects, leading to the need to transfer to financially capable investors who do not want to spend a long time initiating projects from scratch.
Another issue that has raised many opinions is that while the Land Law stipulates that annual land rent is applied stably for a 5-year cycle from the time the State decides to lease the land, allowing for the change of land use purpose associated with the transition to the form of the State leasing land with annual land rent payments. The adjustment rate is regulated by the Government for each period, but the increase in land rent can be equal to or lower than inflation. However, the draft Decree stipulates that the adjustment rate for increasing land rent is equal to inflation. This is a point that needs to be reconsidered to help businesses reduce financial risks.
Some opinions also suggest that in the draft Decree, the application of a common calculation method for land use fees and land rent for different cases is unreasonable and may eliminate development incentives.
For example, according to the principles of the draft, businesses will have to recalculate land use fees at the current time, and the amount previously paid is only deducted as a part of the pre-paid amount, without considering the depreciation of money and the increase in land prices over time, which is not suitable with reality, Dr. Phương stated.
Here, it can be mentioned that the affected group is businesses with land funds or leased land only for production but not for real estate business, so they do not have direct profits from that land fund. Typically, for these businesses, when starting a project, the land use cost has been included in the investment cost estimate. Having to recalculate land use fees at current prices will cause a significant cost burden, and businesses will be very hesitant to expand production and business activities.
