Chairman of HCM City Real Estate Association Le Hoang Chau said that land prices in the city were so high that they depressed investors. — Photo villamaketer.com

HA NOI (Biz Hub)— The Finance Ministry has proposed increasing land rental rates as part of a draft decree on land rental, water surface rental and land use fees that will likely be submitted to the Prime Minister next month.

The land rental rate currently ranges from 0.25 to two per cent of the land price, depending on what the land is used for and any investor incentives that the province or city offers.

However, under the proposal, the rent would start at one per cent of the land price. Rates in urban areas, commercial or transport hubs and crowded residential areas could reach three per cent of land prices.

At a meeting in the capital on Monday, representatives from Ha Noi and northern Bac Ninh Province's Finance Departments said that the increased rent would burden enterprises, especially during the current economic slowdown.

At a similar meeting in HCM City last month, representatives from the southern provinces of Long An and Khanh Hoa said increasing rent could raise land prices.

The minimum rent increased from 0.25 per cent in 2005 to 0.75 per cent in 2010, and the land price went up 10-15 times as a result, they pointed out.

Chairman of HCM City Real Estate Association Le Hoang Chau said that land prices in the city were so high that they depressed investors.

"To get land for operations, investors mostly pay compensation based on market prices, which are much higher than those imposed by local authorities. They also have to pay land rental based on future land prices, meaning they pay twice for the same land plot," he said.

Deputy director of the HCM City Finance Department Ta Quang Vinh suggested that rental rates be based on what the land was used for.

It should also be made clear when the land rental rate was based on the land price frame and when it was lowered by the provincial People's Committee as an incentive, he added. — VNS