Hang Dao street in Ha Noi, one of the streets with the highest land prices in the capital city. There are a significant gaps between regulated land prices and market prices, causing losses to the budget collection. — FIle photo

For example, regulated land prices in the southern city ranged from VND1.5 million per square metre to VND162 million, and a land price adjustment coefficient not exceeding 30 per cent annually.

In comparison, the market land prices on some streets in HCM City hit VND1 billion per square metre, such as Nguyen Hue, Dong Khoi and Le Loi streets in District 1.

Normally, when carrying out land transactions, buyers and sellers agreed on a price on the contract equivalent to or lower than the minimum prices to reduce the sums in taxes and fees they had to pay to the State budget.

Thus, the land price which was much lower than the market prices caused significant losses to the State budget, the municipal People’s Committee said.

The committee proposed that the land prices frame be abolished, adding that the land prices should be more market-based.

According to lawyer Vo Thien Hien from the HCM City Bar Asociation, the real transaction prices of property was not often shown in contracts. The price in the contracts was often lower or equivalent to the minimum in the regulated land prices frame.

Hien said this was a way to avoid taxes but legal and causing the State budget to lose a significant sum.

In addition, when real transaction prices were not shown in contracts, the State management agencies would not have accurate data for management and land evaluation. This was the biggest problem of the land prices frame, Hien stressed.

From a different viewpoint, the land prices frame significantly affected real estate companies because the frame was used to calculate land-use fees. Thus, any significant adjustments of regulated land prices could negatively affect the property market.

Duong Minh Tien, general director of Asia New Time, said land-use fees were a big headache for property companies. Changes in regulated prices also meant changes in land-use fees, which would create risks in liquidity and selling prices.

Too high land-use fees would discourage investors, which would lead to a shortage of supply for the real estate market.

According to Tran Thi Khanh Linh from the real estate services firm Savills, the land prices frame for a period of five years was too long in the context of a fast-changing real estate market.

Linh said that regulated land prices must be updated more regularly. — VNS