The State aims to increase the price of land in Viet Nam to a maximum of VND162 million per square metre.

This will be 2.4 times higher than the current price of VND67.5 million per square metre, according to a draft of the State's amended Decree on Land Price Framework.

The Ministry of Resource and Environment has sought the views of city and provincial authorities on the amended law. Under this law, the Government shall promulgate a land price framework once every five years for each type of land and for each region. City and provincial authorities will set up their respective land price frameworks based on the Government framework.

Prices will be based on the calculations of a price verification unit and must be in accordance with market prices. The current land price framework is seen as out of touch with the reality in the domestic market, and the land prices of city and provincial authorities have often stood at only 20 to 60 per cent of the actual trading price on the market.

According to the draft, prices under the Government framework will increase for all kinds of land, especially here and in HCM City, said Doan Ngoc Phuong, deputy head of the Economic and Land Development Department under the General Department of Land Management.

The new rate is expected to increase to VND162 million per square metre for special urban areas in the Hong (Red) River Delta and Southeast Regions while the lowest rate for urban land will be VND40,000 per square metre.

The lowest land prices for rural areas will be VND15,000 per square metre for mountainous communes in the Central Highland Region, and the highest will be VND29 million per square metre for communes in the Hong (Red) River Region.

The Thoi bao Kinh te Viet Nam (Viet Nam Economic Times) newspaper quoted Phuong as saying that the draft has specific regulations on prices for each kind of land, in accordance with real property market prices and possibilities.

Dang Hung Vo, former deputy minister of resources and environment, said the proposal to increase land prices for the cities of Ha Noi and HCM was right because the current land price framework was much lower than the actual trading prices on the market.

The highest trading price in the market is around VND500 million per square metre in Ha Noi and HCM, but under the cities' land price framework, the price is only VND86 million per square metre and under the State's land price framework, it is even lower, at VND67.5 million per square metre, added Vo.

Therefore, an increase in the land price framework is needed to enable cities and provinces to issue frameworks that closely follow the actual trading price on the market, noted the former deputy minister.

Tran Ngoc Chinh, chairman of the Viet Nam Urban Plan and Development Association, said the increase in land price would affect the domestic investment environment and real property market but would also make the property market more transparent.

Tran Ngoc Quang, general secretary of the Viet Nam Real Estate Association, agreed with proponents of the amended law but said the increase should not be double that of the maximum land price in the cities of Ha Noi and HCM.

A high increase would have a negative impact on the property market in general and the property companies in particular because it would lead to a surge in construction costs and the selling price of property products, thereby creating risk for the property market, Quang added.

He called for an increase of five to 10 per cent against existing prices instead of double, as indicated in the draft. The State should also schedule land price increases to enable property investors to calculate construction costs and then fix a reasonable rate of investment and business strategies, he added.

Tran Nhu Trung, deputy general director of Tan Hoang Minh Group, said the increase would have positive and negative effects. The positive effects include the efficient collection of taxes on land price increases and property projects. The negative effects include difficulties in site clearance activities, a surge in input costs and a reduction in the competitive ability to attract investments in the property market.

However, Vo said the framework under the amended law would be applied mainly on the collection of taxes on land and administrative fines while the calculation of the land use fee, land rental for investment projects, compensation for the state's site clearance and the value of land in the equitisation process would be based on land value assessment for specific projects.

This means the land price framework would not be applied in these cases, so the increase would have little effect on the trading prices of land and property products on the market, he added.