Realty developers still bemoan land use fee
By Dinh Dung in HCMC
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| A corner of a new urban area in HCMC’s District 7 - Photo: Dinh Dung |
Like other property developers, Luong Tri Thin, general director of Dat Xanh Corporation, recently brings the story of land use fee to chat over a cup of coffee every morning with his colleagues. For him, the issue of land use fee is not only negatively touching his company’s business but others as well.
“This is the topic we often chat these days when meeting for a cup of coffee,” Thin says, “The costly land use fee to be charged following the spirit of the Decree 69/2009/ND-CP has caused many difficulties for us and other companies.”
Over one year since the decree was issued, and although there have had several seminars hosted to delve into regulations in the decree for solutions, many property developers have show grave concerns about the problem as the decree regulates that land use fee will be calculated basing on a real transaction prices in the market, not on the pricing table issued yearly by local governments. That means they have to pay a big amount of money for land use fee.
Speaking at a seminar held at the Windsor Plaza Hotel in HCMC last week, many realty developers raised their voices over the issue, saying that the new method of collecting land use fee is too complicated, unrealistic and not encouraging developers risking their money into new property projects.
Le Hoang Chau, chairman of the HCMC Real Estate Association (HoREA), said thanks to infrastructure development done by the Government, land has increased in value, thus the Government had a right to regulate the land value. However, property developers, with their property projects, have also contributed to create value for land, and so they were entitled to profit from the increased values.
The problem is that realty developers have to invest money to develop a new property project, build infrastructure to improve the land and housing value in the region, and then have to pay land use fee at the market price that they spent money to create.
Le Ngoc Tu, director of Binh Dan Housing Development Co, takes his company case for an instance, saying that Binh Dan is developing a housing project covering 14,000 square meters in Thu Duc District, with the construction density being some 50%.
Following new regulations, the company gets an evaluation company to assess the market price on which the project’s land use fee will be charged. After taking the evaluation, the company was told that the project was worth around VND57 billion. If this value is divided by 7,000 square meters of the housing area, each square meter is around VND7 million, approximately the current salable prices. That means the company have to pay the amount of VND57 billion for land use fee.
Suppose that the company can sell out the entire housing sector for VND60 billion, Tu says, the company nearly has nothing left after spending several years and risking money in the project.
Most property developers lament that with the new calculation, the land use fee is an unknown factor, and thus they cannot calculate the cost price of their products. The fact is that realty firms have to negotiate for site clearance in order to get land for project development. Although new regulation allows deducting compensation fee to land use fee, but the deduction is often lower than the real expenditure, thus they will never receive enough what they have really spent.
Some companies, speaking at the event, suggested that land use fee should make up a certain percentage, such as 15% or 20%, of a project’s revenue, then it will help cross out the complicated mechanism of deduction and simplify procedures.
Lawyer Truong Thi Hoa suggested that as a way to solve the problem, provincial governments should issue a market price table which will be announced on January 1 every year as a basis for land use fee collection. The current formal pricing table often sets prices as low as 30% of the market price.
Upon complaints from realty firms at the seminar, Le Ngoc Khoa, deputy head of Public Property Department under the Ministry of Finance, said that he understood the problem with realty firms. He said relevant organizations would study the situation for adjustment in the coming time to solve the problem.
The Saigon Times Daily