Real estate valuation is a crucial factor in transactions, investment activities, and the development of the real estate market in Vietnam. Such a valuation process not only requires accuracy and transparency but must also strictly comply with legal regulations in order to protect the legitimate rights and interests of the parties involved and ensure fairness in the market.
To provide a clearer understanding, the following article by NPLaw analyzes the current legal regulations governing real estate valuation in Vietnam.
Real estate valuation is a crucial factor in transactions, investment activities, and the development of the real estate market in Vietnam. Such a valuation process not only requires accuracy and transparency but must also strictly comply with legal regulations in order to protect the legitimate rights and interests of the parties involved and ensure fairness in the market.
To provide a clearer understanding, the following article by NPLaw analyzes the current legal regulations governing real estate valuation in Vietnam.
I. Demand for real estate valuation in Vietnam
In the context of the rapidly developing real estate market in Vietnam, the demand for real estate valuation has become more urgent than ever. Accurate valuation not only supports transactions such as sale, lease, and mortgage, but also assists investors, banks, and regulatory authorities in making well-informed decisions.
- Rapid development of the real estate market: Vietnam’s real estate market has experienced remarkable growth in recent years. Such a development has led to an increased demand for real estate valuation to ensure transparency and fairness in transactions.
- Difficulties in real estate valuation: Despite the high demand, real estate valuation in Vietnam faces numerous challenges. In particular, following the COVID-19 pandemic, the real estate market declined sharply, and enterprises had difficulties in selling properties due to prices that no longer aligned with market conditions.
- Common valuation methods: Currently, the direct comparison method is the most commonly applied approach in real estate valuation. However, the use of such a method also presents certain difficulties, especially in identifying and comparing comparable transactions.
II. Legal regulations on real estate valuation in Vietnam
1. Which authorities and organizations are competent to conduct real estate valuation in Vietnam?
Pursuant to Clause 16, Article 4 of the Law on Prices 2023, valuation appraisal is defined as a consultancy activity to determine the value of an appraised asset at a specific location and time for a specific purpose, conducted by valuation enterprises or councils in accordance with Vietnam Valuation Standards.
Accordingly, the authorities and organizations competent to conduct real estate valuation in Vietnam include valuation enterprises and councils operating in compliance with Vietnam Valuation Standards.
2. What valuation standards apply to real estate valuation in Vietnam?
Real estate valuation standards in Vietnam are implemented in accordance with the guidance provided under Circular No. 42/2024/TT-BTC, which include:
- General provisions;
- The residual method.
These Vietnam Real Estate Valuation Standards apply to:
- Valuers and valuation enterprises providing valuation services in accordance with the law on prices;
- Organizations and individuals conducting State valuation activities in accordance with the law on prices;
- Organizations and individuals requesting valuation, and third parties using valuation reports according to valuation service contracts (if any).
3. What are the procedures for real estate valuation in Vietnam?
According to the guidance set out in Circular No. 30/2024/TT-BTC, the procedures for real estate valuation in Vietnam include the following steps:
- Step 1: General identification of the asset to be appraised and determination of market value or non-market value as the basis for valuation.
- Step 2: Preparation of the valuation plan.
- Step 3: On-site inspection and information collection.
- Step 4: Analysis of collected information.
- Step 5: Determination of the value of the asset subject to valuation.
- Step 6: Preparation of the valuation report and valuation certificate, and submission to the client and relevant parties.
III. Common questions related to real estate valuation in Vietnam
1. Which valuation method is used for real estate valuation in Vietnam?
Pursuant to Circular No. 42/2024/TT-BTC, real estate valuation in Vietnam is conducted using the residual method.
The residual method is a valuation approach that determines the value of a development property based on the estimated development value of the asset (total development revenue) minus the reasonably anticipated development costs (including investor profit) required to create such development (total development costs).
2. What costs are involved in real estate valuation in Vietnam?
According to Circular No. 42/2024/TT-BTC, total development costs of a real estate asset include all necessary development costs expected to be invested in the appraised real estate, in compliance with applicable laws (including economic and technical norms, consumption of materials and fuels, and cost accounting for production and investment), and consistent with the highest and best use of the appraised real estate.
Total development costs include:
- Construction investment costs include costs for technical infrastructure construction, construction works and other work items; equipment costs; construction investment consultancy costs; project management costs; and other related costs;
- Contingency costs;
- Business costs, such as advertising and sales costs, operation and management costs, and other related expenses;
- Financial costs and taxes, if any (such as asset/real estate use taxes);
- Other reasonable costs;
- Profits are determined based on the average market profit rate calculated on total costs (including the value of the initial invested asset but excluding financial costs) of at least three comparable real estate investment projects on the market, or determined as the average pre-corporate income tax profit margin (as audited or finalized) over total costs of at least three comparable real estate enterprises on the market;
- Compensation and site clearance costs include compensation payments, resettlement support, and expenses for organizing compensation and site clearance, which are not included in total development costs.
3. What documents are required for real estate valuation in Vietnam?
A real estate project valuation dossier consists of legal documents evidencing the legality, scale, feasibility, and development potential of the project. Valuers rely on such dossiers to determine part of the project’s value, thereby ensuring an objective and accurate assessment of the real estate project.
For real estate projects:
- Land allocation decision;
- Certificate of land use rights;
- Investment policy approval decision;
- Investment registration certificate;
- Project explanatory report;
- Current planning status map;
- Appraisal of basic design;
- Construction permit;
- Project planning drawings;
- Feasibility or pre-feasibility study report (if any);
- Other relevant legal documents.
For buildings and commercial floors:
- Certificate of land use rights (if any);
- Certificate of ownership of construction works;
- Land allocation decision;
- Investment policy approval decision;
- Investment registration certificate;
- Construction permit;
- Written approval from competent authorities confirming eligibility for sale, and other relevant legal documents.
4. In which cases is real estate valuation mandatory under Vietnamese law?
Pursuant to Article 59 of the Law on Prices 2023, valuation appraisal is mandatory in the following cases:
- Capital contribution, joint ventures, associations, leasing, or transfer of public assets;
- Purchase or lease of goods, services, or assets using State capital.
5. Which legal standards apply to real estate valuation activities in Vietnam?
The legal standards applicable to real estate valuation activities in Vietnam include:
- The Law on Prices 2023;
- Circular No. 30/2024/TT-BTC promulgating Vietnam Valuation Standards on professional ethics, scope of valuation work, valuation bases, and valuation dossiers issued by the Minister of Finance;
- Circular No. 42/2024/TT-BTC promulgating Vietnam Valuation Standards on Real Estate Valuation issued by the Minister of Finance.
IV. Legal consulting services related to real estate valuation in Vietnam
The above information is provided by NPLaw to support clients regarding real estate valuation in Vietnam. Should you have any further questions concerning the above matters or other legal issues, please contact NPLaw directly for consultation and guidance.
