Land rents should be raised as long-term sources of revenue rather than collected all at once, as mentioned in a draft scheme for the HCMC property market development compiled by the municipal department of construction.
The one-time land rent collection puts investors under capital pressure, restricting the market supply and creating a need for property price hikes, said the draft scheme. On the other hand, land use right values often change over time, thus collecting land rents annually is more beneficial than charging a lump sum.
Realty firms have been complaining about land use fees calculated on market prices, saying this makes land rentals remain unknown when they make investment decisions. As a result, investors find it difficult to figure out the efficiency of their projects.
In fact, many enterprises have been caught in a dilemma with land values calculated on apartment sales revenues minus investment costs.
[Source: Saigon Times]
For instance, Le Thanh Company, developer of the apartment project on the East-West Highway, is struggling to determine land use fees.
The company’s director Le Huu Nghia said his firm had signed contracts to sell apartments at VND13 million per square meter, but the State agency disapproved and imposed the price of VND17 million instead to calculate a tax sum.
Such a paradox is understandable, as the management agency is trying to make land rents available to collect. Given the calculation method of revenues minus costs, the offering prices of Le Thanh Co. will make land value shrink to zero.
Similarly, a developer of a low-cost apartment project in Binh Tan District also finds land rent calculation a headache. The project owner originally planned to offer products at VND14 million each square meter, but the State management agency has set the selling prices of VND17-18 million.
Given the current gloomy market situation, apartments priced at VND14 million per square meter are already hard to sell, let alone those at VND17 million, said real estate enterprises. Selling low-cost apartments is also far from simple.
Therefore, the paradox in land value calculation should be resolved and an appropriate method of land rent collection should be adopted, so that investors can take the initiative to calculate their business performance and fulfill their financial duties to the State.
According to the draft scheme, the property market contributes an average VND8 trillion to the HCMC budget every year, making up 10% of the city’s total budget revenue.