Many real estate businesses are having headaches with land use fees skyrocketing compared to the previous estimated amount.
A typical case is the story of Novaland with consolidated after-tax profit in the first 6 months of 2024 recording a loss of VND 7,327 billion compared to the self-prepared financial report with a profit of VND 345 billion.
Novaland representative said that this loss mainly comes from the provision for land rent and land use fees payable according to the 2017 land price plan of the 30.106 ha Nam Rach Chiec project (An Phu ward, Thu Duc city), commercial name is Lakeview City project (investor is 21st Century International Development Company Limited), based on the tax authority's announcement on January 8, 2021.
Provision value for payables is 4,358 billion VND.
In 2016, the Ho Chi Minh City People's Committee decided to approve the land price plan according to market price for the 30.224 ha land in Binh Khanh ward and the Lakeview City project land to settle the swap for Novaland with the time of determining land price for both projects at the same time in 2008.
After determining the value of land use rights and the difference in location between the two plots of land, the company had to pay an additional 52.7 billion VND after exchanging the project and the enterprise recorded this financial obligation in its accounting books in 2016.
However, Novaland said that on December 29, 2020, the Ho Chi Minh City People's Committee issued Decision No. 4777 approving the land price plan for the 30.106 ha Nam Rach Chiec land plot with the land price plan as of April 2017 (instead of 2008).
Ho Chi Minh City Tax Department issued notice of land rent payment and land use fee payment with total payable amount 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.
In a similar situation, the investor of a housing project in Thu Duc City said that after many years of waiting to pay land use fees, the company was recently shocked when it received a notice that the land use fees for the project were up to more than 300 billion VND.
Meanwhile, at that time, the valuation unit estimated the land use fee to be only over 50 billion VND. Due to the need for business cash flow, the investor sold some products to customers at prices based on the provisional land price.
Currently, the land use fee has increased more than 5 times. This causes investors a headache because if they continue to sell at the old price, they will definitely suffer heavy losses, and if they adjust the price to increase to ensure profit, the selling price will be very high and not suitable for market demand.
According to businesses, the reason for slow land valuation and high land use fees is due to many shortcomings in the calculation method.
Land valuation still has many problems, many reasonable costs of investors are not included or are forced to be paid, if included, it is at a very limited level.
For example, the cost of dismantling and cleaning the construction site is a mandatory expense, but there are some cases where it is not allowed to be included.
When reasonable costs are not recorded, investors are forced to increase product prices to compensate. Increasing the selling price is something that no investor wants, but if they do not increase, they will certainly lose money, because the input costs of project development are all increasing, especially land use fees.
Decree No. 44/2014/ND-CP of the Government on land prices has prescribed methods for land valuation. However, in reality, the criteria for implementing land valuation are stuck, mainly the surplus method.
Although the Government has recently issued Decree No. 12/2024 amending and supplementing Decree No. 44/2014, key issues related to land valuation have not been included.
