Is there Decree 42 on Vietnamese Valuation Standards for Real Estate Valuation?

Has Decree 42 on Vietnamese Valuation Standards for Real Estate Valuation been issued?

On June 20, 2024, the Minister of Finance issued Decree 42/2024/TT-BTC on Vietnamese Valuation Standards for Real Estate Valuation.

Decree 42/2024/TT-BTC will be effective from August 5, 2024 to replace the Decree 145/2016/TT-BTC.

According to Article 2 of the Vietnamese Valuation Standards for Real Estate Valuation issued together with the Decree 42/2024/TT-BTC, the applicable entities include:

- Valuers, valuation enterprises engaged in providing valuation services as regulated by price-related laws.

- Organizations and individuals involved in state valuation activities as regulated by price-related laws.

- Organizations and individuals requesting valuation, third parties using valuation reports based on valuation contracts (if applicable).

Is there Decree 42 on Vietnamese Valuation Standards for Real Estate Valuation? - image from internet

What are approaches used in real estate valuation in Vietnam?

Based on Article 4 of the Vietnamese Valuation Standards for Real Estate Valuation issued together with Decree 42/2024/TT-BTC, the approaches and methods used in real estate valuation are as follows:

Approaches and Methods in Real Estate Valuation:

1. The approaches applied in real estate valuation include market approach, cost approach, and income approach as defined in the Vietnamese Valuation Standards, or a combination of these approaches.

2. The valuation methods used in real estate valuation include the methods specified under the applicable approaches or a combination thereof. The residual method is a valuation method that is developed based on a combination of the market approach, cost approach, and income approach.

3. Depending on the characteristics of the property being valued, the purpose of the valuation, the valuation date, the valuation basis, and the available information and data related to the property, suitable approaches and valuation methods can be selected.

The approaches applied in real estate valuation include:

- Market approach

- Cost approach

- Income approach

What are costs included in the total development cost of a real estate property in Vietnam?

Based on Article 9 of the Vietnamese Valuation Standards for Real Estate Valuation issued together with Decree 42/2024/TT-BTC, the determination of total development cost is as follows:

Determination of Total Development Cost:

1. The total development cost of a real estate property is the entirety of the necessary development expenses expected to be invested in the valued property, in accordance with the regulations of the law (regarding economic-technical norms, material consumption, and cost accounting for production and investment) and that fulfill the best and most effective use of the valued property.

2. The total development cost of a real estate property includes:

a) Construction investment costs, including costs for technical infrastructure construction, construction of buildings, other construction items, equipment costs, construction investment consulting costs, project management costs, and related costs.

b) Contingency costs.

c) Operational costs (such as advertising costs, sales costs, operation management costs, and other related costs).

...

Therefore, the total development cost of a real estate property includes the following expenses:

- Construction investment costs, including:

+ Costs for technical infrastructure construction, building construction, and other construction items.

+ Equipment costs.

+ Construction investment consulting costs.

+ Project management costs and related costs.

- Contingency costs.

- Operational costs.

- Financial costs, taxes if applicable (such as property/real estate taxes).

- Other reasonable expenses.

- Investor's profit, which is determined based on the average profit rate in the market calculated on the total cost of at least 03 similar real estate investment projects in the market or determined as the average percentage of pre-tax profit to total cost of at least 03 similar real estate companies in the market.

- Compensation and resettlement costs, including:

- Compensation payments, support for resettlement.

- Costs for organizing compensation and resettlement, not included in the total development cost.