Original Title: Notice on the Issuance of the "Technical Guidelines for Comprehensive Valuation of Industrial Land in Shanghai (Trial)"
To All Land Valuation Institutions and Relevant Units:
In accordance with the requirements of the “Work Plan for the Special Campaign on ‘Two Appraisals, One List, and One Revitalization’ for Industrial Land in Shanghai”and the "Guiding Opinions on Standardizing the Comprehensive Value Assessment of Industrial Land (Trial)," and in order to standardize the comprehensive value assessment of industrial land in this municipality, reasonably assess the comprehensive value of industrial land, and promote the high-quality utilization of industrial land, our Association has drafted the "Technical Guidelines for the Comprehensive Value Assessment of Industrial Land in Shanghai (Trial)" in accordance with the spirit of the "Asset Valuation Law of the People’s Republic of China" and the relevant professional standards of the land valuation industry.
These Technical Guidelines have been reviewed by the Executive Committee of the Association and approved by the relevant industry regulatory authorities. They are hereby issued and shall take effect on the date of issuance.
Shanghai Association of Land Appraisers
July 29, 2024
Technical Guidelines for the Comprehensive Valuation of Industrial Land in Shanghai (Trial)
Chapter I General Provisions
Article 1 To standardize comprehensive value assessment activities for industrial land in this municipality, these guidelines are formulated in accordance with the “Guiding Opinions on Standardizing Comprehensive Value Assessment Work for Industrial Land (Trial)” (Shanghai Planning and Natural Resources Land Use [2024] No. 190), relevant laws, regulations, and technical specifications, and in light of the actual conditions of this municipality.
Article 2 These Guidelines apply to comprehensive value assessments within the administrative region of this municipality concerning the disposal of underutilized land, the termination of land use contracts, and land reserve activities conducted in accordance with planning—all of which involve the withdrawal of state-owned industrial land use rights—as well as to the technical review and quality evaluation of assessment reports.
These guidelines also apply to other assessments in this municipality involving the recovery of state-owned industrial land use rights.
Article 3 The comprehensive value of industrial land refers to the overall value of the integrated “land, buildings, and assets” within the spatial scope of industrial land (including industrial land, warehousing land, and R&D land). It includes the assessed values of land use rights, buildings and structures (including interior decoration and finishes), machinery and equipment, production materials, and losses from production suspension or business cessation, while taking into account adjustments based on factors such as land performance, ecological environment, and safety.
Article 4 The conduct of comprehensive value appraisals for industrial land shall implement the relevant requirements of the Municipal Party Committee and Municipal Government regarding the establishment of a system for responsible appraisers.
The team of responsible appraisers undertaking the comprehensive value assessment of industrial land shall consist of two or more land appraisal professionals (land appraisers or real estate appraisers who have been registered following the implementation of the "Regulations on the Professional Qualification System for Real Estate Appraisers" (October 15, 2021)), one of whom shall serve as the lead appraiser.
Article 5 Responsible appraisers shall adhere to the principles of independence, objectivity, and impartiality; comply with laws, regulations, and technical standards; conduct comprehensive value assessments based on the value characteristics of the public resource and production attributes of industrial land; and be accountable for the comprehensive value assessment reports issued.
Article 6 Comprehensive value appraisal of industrial land shall be conducted in accordance with the following workflow:
(1) Communicate with the appraisal client to clarify the appraisal subject and related matters;
(2) Sign the appraisal engagement letter (see Annex 1 for the model text);
(3) Exchange with the client the land use conditions certified by the district government (Management Committee) and other relevant materials;
(4) Develop an appraisal work plan;
(5) Conduct a site inspection;
(6) Perform valuation calculations;
(7) Prepare the appraisal report;
(8) Review the appraisal report;
(9) Sign and seal the evaluation report;
(10) Filing of the appraisal report;
(11) Submission of the appraisal report to the client;
(12) Archiving of appraisal materials.
Article 7 The district government (or management committee) shall organize relevant departments to conduct investigations and make determinations, and shall submit the following materials to the responsible appraiser:
(1) Documentation regarding real property ownership or legal origin, including real property ownership certificates (such as real estate ownership certificates, state-owned construction land use right certificates, and house ownership certificates), state-owned land paid-use contracts, and land allocation decisions;
(2) Construction land planning permits, construction project planning permits, construction project construction permits, completion acceptance certificates, and area surveying reports, etc.
(3) Verification of land use, method of acquiring land use rights, remaining land use term, land area, and building floor area.
(4) Results of the comprehensive performance evaluation of industrial land.
(5) Findings from investigations into ecological environment and safety conditions, as well as plans for ecological restoration or the elimination of safety risks.
(6) The percentage increase in land use rights prices for plots classified as Category A or B based on the results of the comprehensive performance evaluation of industrial land, as determined through collective decision-making.
(7) Findings regarding unauthorized changes in land and building use, as well as cases involving illegal land use or illegal structures.
Article 8 In addition to the relevant materials specified in Article 7, the responsible appraiser may, based on the needs of the appraisal and calculation, request the following materials from the client:
(1) Documents such as architectural design or construction drawings, project budgets or final accounts, and descriptions of interior decoration, fixtures, and equipment.
(2) Lists of machinery, equipment, and production materials, as well as corresponding detailed accounts recorded in the enterprise’s financial statements, purchase and sales contracts, or invoices.
(3) Supporting materials regarding the land use right holder’s production performance over the past three years, including financial statements—such as income statements—and corporate income tax payment receipts.
(4) Other relevant materials.
Article 9 The purpose of the comprehensive value appraisal of industrial land should be stated as “to appraise the comprehensive value of industrial land and provide a basis for government decision-making regarding the determination of compensation amounts for the recovery of land use rights.”
Article 10 The valuation date (valuation point in time) for the comprehensive value assessment of industrial land shall be determined in accordance with the terms of the valuation engagement letter.
Article 11 The comprehensive value of industrial land includes the price of land use rights; the replacement cost of buildings (structures) and interior finishes adjusted for depreciation; relocation and installation costs for machinery and equipment that can be restored to use; the replacement cost of machinery and equipment that cannot be restored to use, adjusted for depreciation; relocation costs for production materials; losses from production and business suspension; and depreciation in value related to the ecological environment, safety, and other factors.
Article 12: The report to be issued for the comprehensive value appraisal of industrial land shall be a land valuation report; the content and format of the report are detailed in Appendix 2.
The comprehensive value appraisal report for industrial land shall implement a three-tier review system, be signed by land appraisal professionals including the lead appraiser, bear the official seal of the appraisal institution, and be submitted to the client after being filed in accordance with relevant regulations.
Article 13 The comprehensive value appraisal report for industrial land shall separately include the “Summary Table of Comprehensive Value Appraisal Results for Industrial Land” (containing appraisal results for land, buildings, fixtures and fittings, machinery and equipment, production materials, losses due to suspension of production and business operations, and impairment) and the “Summary Table of Land Valuation Results.” Appraisal results shall be expressed in Renminbi, with the total price rounded to the nearest yuan.
Chapter II Valuation of Land Use Rights
Article 14. The land use right price within the comprehensive value of industrial land refers to the price of state-owned construction land use rights under the conditions of land use at the valuation date—including the designated land use, method of acquisition, floor area ratio or gross floor area, remaining term of use, and actual development level—in the event of the revocation of state-owned construction land use rights.
Article 15 The valuation of land use rights shall be conducted using no fewer than two of the following methods: the benchmark land price coefficient adjustment method, the market comparison method, the cost approach, the income capitalization method, and the residual method, with the benchmark land price coefficient adjustment method being mandatory.
Article 16 When using the benchmark land price coefficient adjustment method, the valuation shall be based on the city’s current benchmark land price data. When the floor area ratio set for the valuation of industrial or warehousing land exceeds the floor area ratio specified in the benchmark land price, adjustments may be made by referencing the floor area ratio adjustment coefficient for research and development land in the same area.
Article 17 When using the market comparison approach, three or more transaction examples from public auctions, tenders, or negotiated transfers of land with the same use within the same administrative district and land grade over the past three years shall be selected as comparables. If there are insufficient comparables, examples may be selected from transactions within the same administrative district at an adjacent land grade level, or from transactions within a similar administrative district at the same land grade level.
If the transaction prices of the comparable cases involve special circumstances such as correlated adjustments, the responsible appraiser shall apply adjustments to the comparison factors based on the appraised land value.
Article 18 When using the cost approach for valuation, the appropriate method of land acquisition for similar land should be analyzed based on the location of the subject property and the surrounding land structure, following the principle of conversion from lower-grade to higher-grade land, and the land acquisition cost should be reasonably determined.
Article 19 When using the income capitalization approach, it is advisable to apply the formula for land lease or real estate rental. When calculating real estate rent, the comparable examples used shall have the same designated use and building type and quality as the subject property; the capitalization rate may be determined by referring to the recommended values in the city’s benchmark land price results.
Article 20 When using the residual approach for valuation, the formula for “land value contained in existing real estate” should be selected. The transaction price of the existing real estate should reflect the designated use and be determined using the market comparison method; comparable examples should be transaction cases within the same area, with the same land use, and the same building type and quality, occurring within the past three years.
Article 21. The adjustment for the land use term shall be calculated using the adjustment formula specified in the “Regulations on Urban Land Valuation,” and the value of the land capitalization rate may be determined by referring to the recommended values in the city’s benchmark land price results.
Article 22: When determining the appraisal result for the price of land use rights, the weighting ratio of the results calculated using the benchmark land price coefficient adjustment method shall not be less than 50%.
Article 23 Where a land use right grant contract stipulates the refund of land price for the remaining term upon the revocation of the land use right, the land grant price for the remaining term shall be calculated by multiplying the ratio of the remaining term to the contractually agreed grant term by the land grant price specified in the contract.
Article 24. When appraising the price of allocated land use rights, the technical approach of deducting land appreciation gains from the price of granted land use rights shall be adopted. The price of granted land use rights shall be appraised in accordance with the aforementioned provisions, and the proportion of land appreciation gains relative to the granted land price shall be determined between 30% and 40% based on the actual conditions of each region.
Article 25. When appraising the price of leased land use rights on state-owned leased land, the market rent component of the residual rent under the income capitalization method shall be calculated by converting the land use right price for granted land appraised using the aforementioned method. When appraising the price of land use rights contributed as capital (or equity), the appraisal shall be conducted by reference to the land use right price for granted land. When appraising land use rights for authorized operations or land use rights for granted land acquired through a “no-use” arrangement, the appraisal shall be conducted by reference to allocated land use rights.
Article 26 For industrial land with comprehensive performance evaluation results classified as Class A or Class B, the land use right price shall be calculated and determined based on the valuation results obtained in accordance with the above provisions, taking into account the upward adjustment ratio for land use right prices established through collective government decision-making.
Chapter III Valuation of Buildings and Interior Finishing Costs
Article 27 The replacement value of buildings (including houses and structures) and their decoration and renovation shall consist of replacement cost and the depreciation rate, calculated as follows: Replacement Value = Replacement Cost × Depreciation Rate.
Article 28 The replacement cost of a building consists of construction costs, management expenses, interest on investment, and development profit.
Article 29 Construction costs include construction and installation engineering costs, survey, design, and preliminary engineering costs, infrastructure construction costs, other engineering costs, and indirect development expenses.
(1) The calculation methods for construction and installation engineering costs include the division-by-item method, the unit comparison method, the labor and material measurement method, and the index adjustment method. When conducting an appraisal, one of these methods shall be selected based on the characteristics of the appraisal subject and the available data.
When using the item-by-item method, the quantity and unit price or cost of each sub-project or item shall be specified.
When using the unit comparison method, the construction standards of the selected comparable buildings shall be described, and information such as price sources and construction dates shall be noted, along with an explanation of the rationale for adjustments and the calculation method.
When using the labor and material measurement method, the types and quantities of building materials, building components, and equipment, the number of construction machinery shifts, the number of labor hours, as well as the corresponding unit prices and labor standards shall be specified.
If the index adjustment method is used, the historical construction and installation costs of the valuation subject, as well as the source of the cost adjustment index and the rationale for the adjustment, shall be specified.
(2) Infrastructure construction costs include the construction costs of facilities such as roads, water supply, drainage, power supply, telecommunications, gas, landscaping, sanitation, and outdoor lighting within the project’s redline boundaries, as well as the connection fees for these facilities to municipal utility networks. During the appraisal, attention must be paid to whether these costs are already included in the land appraisal price; they must not be double-counted.
(3) Other engineering costs and development-period expenses generally include engineering supervision fees, completion inspection fees, civil air defense project fees, and other fees charged by relevant authorities.
Article 30 The interest rate for investment interest shall be calculated based on the bank’s one-year loan interest rate, and the interest calculation period shall be reasonably determined according to the scale of construction.
Article 31: The development profit margin is generally set between 5% and 8% based on the characteristics of the industrial project.
Article 32. The methods for appraising the replacement cost of interior decoration and renovation include the comprehensive unit price method, the unit comparison method, and the index adjustment method; one of these methods shall be selected for the appraisal. The unit comparison method is generally applicable to preliminary appraisal projects or estimation work where high precision is not required, while the index adjustment method is generally suitable for interior decoration and renovation projects recently completed with relatively complete settlement documentation.
Article 33 The formula for calculating the depreciation rate is
Depreciation Rate = 1 - (1 - R) × t/N
Where: R—Residual value rate
t—Years of use
—Service life
The service life of a building and the residual value rate can generally be determined by referring to the table below.
Table 1 Reference Values for Building Service Life (N) and Residual Value Rate (R)
When a building is determined to have safety hazards, the value of the condition rate should be reduced based on the actual condition of the building.
Article 34: The condition rate for interior decoration and renovation may be assessed as a comprehensive condition rate based on the overall condition of the decoration and renovation, or as separate condition rates for each sub-item. The condition rate is generally determined comprehensively based on the useful life of the decoration and renovation, the years of use, and maintenance and upkeep conditions.
Chapter IV Valuation of Machinery, Equipment, and Production Materials
Article 35. The appraised value of machinery, equipment, and production materials includes relocation and installation costs for machinery and equipment that can be restored to working condition, the replacement cost at new value for machinery and equipment that cannot be restored to working condition, and relocation costs for production materials.
Article 36. Machinery, equipment, and production materials shall be reasonably located within the land parcel and buildings of the valuation subject and recorded in the corresponding asset ledgers of the enterprise’s financial statements.
Article 37. Machinery and equipment capable of being restored to service refers to machinery and equipment that can continue to be used at a new location after cleaning, disassembly, packaging, transportation, installation, and commissioning. Relocation and installation costs generally consist of transportation and handling fees, disassembly fees, and installation and commissioning fees. The calculation formula is: Relocation and Installation Costs for Machinery and Equipment = Transportation and Handling Fees + Disassembly Fees + Installation and Commissioning Fees.
Relocation and installation costs for machinery and equipment capable of being restored to service shall be assessed based on market prices as of the valuation date, with each item determined individually according to the actual circumstances of each piece of machinery and equipment.
Article 38 Freight and handling charges, dismantling fees, and installation and commissioning fees for machinery and equipment may be assessed directly based on the type, specifications, and corresponding transportation methods, as well as the dismantling, installation, and commissioning processes; alternatively, they may be calculated by applying appropriate rates for freight and handling, dismantling, and installation and commissioning to the replacement cost of the machinery and equipment.
Article 39 The replacement cost of machinery and equipment includes necessary and reasonable costs, profits, and related taxes and fees incurred in the purchase or construction of the machinery and equipment.
The replacement cost of machinery and equipment may be calculated using the market inquiry method, the replacement cost calculation method, or other appropriate methods.
Article 40 The market inquiry method is a method for directly determining the replacement cost of machinery and equipment based on market transaction price data.
For general-purpose equipment for which market price data is readily available, it is appropriate to use the market inquiry method to calculate the replacement cost of machinery and equipment. During the valuation, the current market sales price of identical products is obtained directly from the market; however, attention must be paid to the timeliness, regional nature, and reliability of the price data.
Article 41 The replacement cost calculation method is a method for determining the replacement cost of machinery and equipment by separately calculating each cost component.
For non-standard or self-manufactured machinery and equipment for which price data is difficult to obtain from the open market, the replacement cost calculation method is appropriate for determining the replacement cost of the equipment. During the valuation, material and manufacturing costs are generally calculated separately based on components and production processes.
Article 42. Non-relocatable machinery and equipment refers to machinery and equipment that cannot be disassembled or moved; or where disassembly or movement would likely cause damage rendering it unusable; or where the costs of disassembly, relocation, and reinstallation exceed the residual value of the machinery and equipment. Machinery and equipment custom-made to fit the dimensions of a building may be appraised as non-relocatable machinery and equipment.
The formula for calculating the replacement value of machinery and equipment that cannot be restored to service is: Replacement Value of Machinery and Equipment That Cannot Be Restored to Service = Replacement Cost × Newness Rate.
Article 43 The replacement cost of machinery and equipment that cannot be restored to service consists of the replacement cost of the equipment itself as of the valuation date, plus transportation and handling charges, and installation and commissioning fees.
Article 44. The depreciation rate for machinery and equipment that cannot be restored to working condition shall be comprehensively assessed based on the economic life of the machinery and equipment, the number of years in use, and factors such as maintenance, upkeep, and usage.
Article 45. The base cost of machinery and equipment refers to the expenses incurred in constructing the foundation, including material costs, labor costs, and machinery costs.
When appraising the foundation costs of machinery and equipment that can be restored to working condition, the depreciation rate may be disregarded; when appraising the foundation costs of machinery and equipment that cannot be restored, the depreciation rate shall be taken into account.
Article 46. Production materials primarily include raw materials, semi-finished products, finished goods, inventory, purchased goods, office furniture, and low-value consumables.
Relocation costs for production materials are calculated based on transportation and handling fees. Transportation and handling fees are generally calculated by measuring the quantity of materials to be relocated using units of measurement such as vehicle trips, pieces, batches, weight, or volume, and determining the unit price of transportation and handling fees based on market conditions to calculate the total relocation cost. The formula is: Relocation Cost of Production Materials = Quantity Relocated × Unit Price of Transportation and Handling Fees.
Chapter 5: Losses from Production and Business Suspension and Related Adjustments
Article 47: Where losses from suspension of production and business operations are assessed as a certain percentage of the comprehensive value, they shall be determined according to the A, B, C, or D performance categories of the comprehensive performance evaluation results for industrial land.
(1) For industrial land classified as Category D, business interruption losses shall be determined at a rate not exceeding 3% of the sum of the appraised values of the land use rights and the buildings (including fixtures and fittings);
(2) For industrial land classified as Category C, business interruption losses shall be determined at a rate not exceeding 5% of the sum of the appraised values of the land use rights and the buildings (including interior decoration and fittings);
(3) For industrial land classified as Category A or B, the loss due to suspension of production and business operations shall be determined at a rate not exceeding 8% of the sum of the land use right value (including the government-mandated upward adjustment ratio) and the value of buildings and structures (including interior decoration and renovation).
Article 48 Where losses due to suspension of production and business operations are assessed based on relevant supporting materials regarding production benefits from the preceding three years provided by the land use right holder, such materials shall be verified by the district government (Management Committee). The losses shall then be calculated based on corporate income tax payment receipts and the income statement, using the annual average of the after-tax net profit over the three-year period. For enterprises that have been in operation for less than three years, the losses shall be calculated by multiplying the monthly average after-tax net profit from the date of commencement of operations to the valuation date (valuation point) by 12 months.
Article 49 Where the district government (Management Committee) organizes relevant departments to investigate and determine that the use of industrial land involves damage to the ecological environment or violations of production safety requirements, the responsible appraiser shall conduct a value adjustment assessment based on the cost estimates for ecological restoration or the elimination of safety risks, in accordance with the relevant plans for the appraised plot.
The responsible appraiser may commission other professional institutions with the appropriate qualifications or hire professionals with the necessary capabilities to provide cost estimates for ecological restoration or the elimination of safety risks, and shall explain this in the valuation report. If a professional institution issues a cost assessment report for ecological restoration or the elimination of safety risks, such report shall be included as an appendix to the comprehensive value assessment report for the industrial land.
Chapter VI Supplementary Provisions
Article 50. The appraisal service fee for the comprehensive value appraisal of industrial land shall be determined through negotiation between the responsible appraiser and the client based on the project’s workload, complexity, and other factors, in accordance with the principles of “legality and compliance, fairness and reasonableness, cost control, and quality assurance,” and shall be stipulated in the appraisal commission contract.
Article 51 The Shanghai Association of Land Appraisers shall be responsible for interpreting these Technical Guidelines.
Article 52 These Technical Guidelines shall take effect on the date of issuance.
