Official land prices, called the “K coefficient” or just “the coefficient”, in Ho Chi Minh City (HCMC) will remain unchanged this year amid the rising cost of goods and challenges facing the economy, according to HCMC People’s Committee vice-chairman Le Hoa Binh.

The HCMC Development Research Institute said that despite the pandemic, real estate prices in the city were expected to continue to rise in many segments.

According to the Department of Finance, land prices must be consistent with the market price. However, if the K coefficient rises too much amid the pandemic, it will cause difficulties for land users.

The K coefficient for land used for rent will be divided into two groups and five regions, based on the purpose of land use.

The first group covers land for lease for residences, financial services, restaurants, and hotels. The second group covers land for lease for industrial and sub-industrial zones and public works.

Region one comprises districts 1, 3, 4, 5, 10, 11, Tan Binh and Phu Nhuan. Region two is made up of the newly established Thu Duc City and districts 6, 7, Go Vap, Binh Thanh and Tan Phu.

Region three covers districts 8, 12 and Binh Tan, and region four is composed of Binh Chanh, Cu Chi, Nha Be and Hoc Mon districts. Region five corresponds to Can Gio district.

The official price list, which is adjusted every five years, serves as a basis for calculating land-use rights fees, administrative sanctions, fines and compensation payments for land the city acquires.

Anyone seeking land-use rights or changing the purpose of land use has to pay a fee based on the prevailing coefficient.

The city People’s Council recently approved the People’s Committee’s proposal to keep the same land price for the next five years.

HCMC Department of Natural Resources and Environment director Nguyen Toan Thang said that after approval by the People’s Council, the department would complete draft regulations on the price list for various types of land.

The land price list also sets fines and compensation to the State for violations committed by individuals and organisations.

According to current regulations, when the state wants to recover land from or calculate a land-use fee for real estate enterprises, authorities will appraise land prices for each specific case.

If households or individuals want to receive land-use rights or change the purpose of land use, they will have to pay a land-use fee based on the adjustment coefficient K issued annually by the People’s Committee.

Under such cases, the land price will be multiplied by the new coefficient. The coefficients for different land categories are revised every year to ensure that land prices are closer to market prices.

Since the market price of transferred land can be significantly higher than prices on the official land price list, the coefficient needs to suit reality, according to city authorities.