The income-based method for property pricing

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There are various land pricing methods, such as direct comparison methods, subtraction method, land price adjustment coefficient method, surplus-based method, and capital-based method. revenue. Here are the terms and conditions of land pricing for the income-based method.

1. What is the income-based method?

The revenue-based method is prescribed and clearly explained in Decree No. 44/2014/ND-CP alongside other land pricing methods as follows:

“3. Income-based method means a method of determining the price of land corresponding to the quotient between the average annual net income earned on a unit area of ​​land and the average annual interest rate of savings at the time of the land pricing of deposits in VND with a duration of 12 months at a state-owned commercial bank with the highest interest rate on savings in the provincial level locality.

2. Conditions for applying the income-based method

The income-based method can be applied to plots of land with fixed incomes and costs; this regulation is different from other methods.

This content is prescribed in point c, clause 1, article 5 of Decree No. 44/2014/ND-CP as follows:

“(c) The income-based method can be applied to parcels whose incomes and charges are determined; »

3. The income-based property pricing method

In accordance with Article 5 of Circular No. 36/2014/TT-BTNMT, the process and content of land price determination under the revenue-based method is prescribed as follows:

Step 1: Explore and gather information about the plot of land

– For non-agricultural land: The average annual income is the average amount derived from manufacturing, business or rental over 05 consecutive years until the term of pricing.

– For agricultural land: The average annual income is determined as follows:

  • Annual crops, aquaculture or salt production: is the average amount drawn from these activities over 03 consecutive years until the end of the tariff;
  • Perennial plants or production forests: is based on annual income, periodic income or lump sum income.

– If the income of the target plot cannot be determined, information on the average income of at least 03 similar plots in terms of purposes, locations, profitability, technical and social infrastructure, areas, dimensions, forms and legitimacy of land use rights should be collected, or market information should be used.

Step 2: Explore and collect operating cost information for the target plot of land

– The average annual cost is based on taxes related to land, cost of land valuation; cost of maintenance of constructions on land, and cost of production.

– The above costs are based on the limits and unit prices imposed by the competent authorities.

If no limit or unit price imposed by the competent authorities is available, information on the average income of at least 03 similar plots in terms of destination, location, profitability, technical and social infrastructure, surface area, size, shape and legitimacy of land use rights should be collected, or market information should be used.

Step 3: Define the average annual net income

The average annual net income is calculated as follows:

Average annual net income

=

Average annual income

Average annual cost

Step 4: Determining the price of the plot of land

– The value of the target plot of land is determined as follows:

Land value

=

Average annual net income

Average annual interest rate on savings deposits

The average annual interest rate on savings deposits (r) in 03 consecutive years until the pricing date is the highest 12-month interest rate on a deposit in VND defined by a bank public commercial in the provincial regions (at the term of pricing).

– For non-agricultural land with a limited duration of occupation, the average annual savings deposit interest rate is as follows:

Duration-adjusted interest rate =

=

rx(1+r)n

(1 + r)n – 1

In this setting, n is the remaining land use life of the target land parcel (by years).

If the parcel of land has been invested and constructed with the asset to be commissioned and in business, the current value should be deducted after determining the value of the parcel of land and the property thereon to determine the price of the target plot of land.

The determination of the current value of the land asset should be determined in accordance with Step 2.

Step 5: Determining the price of the plot of land

The land price of the target plot is determined using the formula below:

Target Land Plot Price

=

Land value

Area of ​​target land parcel

Here is the income-based method for property pricing methods.

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