Real estate businesses have headaches with land use fees

Shocked by the estimated land use fee

Novaland Group's record loss in the first half of 2024 mainly came from the provision for land rent and land use fees payable based on the 2017 land price plan of the Lakeview City project (District 2 - now Thu Duc City, Ho Chi Minh City). The value of the provision for payable amounts is VND 4,358 billion.

Accordingly, Lakeview City is the project that this enterprise is exchanging with the 30.2ha project in Binh Khanh ward, Thu Duc city (compensation and site clearance completed in 2008 according to the land allocation decision in 2004). In 2016, the Ho Chi Minh City People's Committee issued a decision approving the land price plan according to market price for the 30.2ha land plot and the Lakeview City project land plot to settle the swap with Novaland, with the time of determining the land price for both projects being 2008. After determining the land use right value and the location difference value between the two land plots, the company had to pay an additional amount of nearly 52.7 billion VND after the project swap and the enterprise recorded this financial obligation in the accounting books in 2016. However, on December 29, 2020, the Ho Chi Minh City People's Committee issued a decision approving the land price plan for the Lakeview City project at the time of April 2017 (instead of 2008). After that, the Ho Chi Minh City Tax Department issued a notice of land rent payment and a notice of land use fee payment with a total amount payable of nearly 5,176 billion VND. Novaland disagrees with the determination of the time for calculating land use fees as April 2017, because the enterprise completed compensation in 2008.

Also having a headache because of the story of waiting for land use fees, the general director of a real estate company investing in a project in District 7, Ho Chi Minh City said that according to the plan, in the fourth quarter of 2024, the company will launch the product to the market, the legal procedures are almost completed, the project has also started construction with fast progress, only one last step is to pay the land use fee and have to wait. However, the plan has been disrupted, because initially the land use fee was estimated to be less than 200 billion VND. However, now the company has to pay may increase by 3-4 times.

More burden for businesses

According to the Vietnam Association of Realtors (VARS), many businesses with projects are currently unable to implement due to "blockage" in calculating land use fees. Many projects have been completed but cannot be sold because they have to wait for financial obligations to be fulfilled. Because the risks of increased land use fees are likely to happen. Not only that, a project that takes many years, even decades, to calculate land use fees not only causes stagnation, but also increases costs for businesses.

In particular, for projects that were previously subject to provisional land use fees, businesses continue to face huge challenges with additional payments that are greater than originally estimated, leading to the risk of losses.

According to real estate businesses, the reason for the slow land valuation and the high land use fee is due to the many shortcomings in the calculation method. The land use fee must be paid, calculated by total revenue minus total cost, but the problem here is that the management agency always wants the highest revenue and the lowest cost to get the highest land use fee. Meanwhile, businesses want all types of costs to be calculated correctly and fully. This contradiction leads to the story that the land valuation consultancy unit cannot solve the problem.

Or in another case, according to regulations, land use fees are calculated at the time of the land allocation decision, so if the land allocation decision lasts for 5-7 years, how will it be resolved? These problems have caused nearly tens of thousands of houses of people in Ho Chi Minh City to not be granted pink books.

"The government should only collect 9 out of 10 dong, and the remaining 1 dong is considered as investment stimulus. People participating in consumption also contributes to economic development and revenue generation," said Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association.