The method of calculating the payment for land plots provided by the public authorities of the region for rent without bidding

Abstract

The article describes a methodology for calculating rental rates for state- and municipal-owned land plots available for no-bid rent. Similar methodologies applied in the regions tend to lack any economic estimates of the involved indicators and coefficients. This is the reason to dispute the rental calculations by the land tenants and to lose the income for the regional and local budgets. The paper analyzes the evaluative characteristics of the land plots which affect their market price, models the profitability of the land plot by their evaluative characteristics, defines and calculates the economically feasible rental rates which reflect the parameters of the land plots both qualitatively and quantitatively. The model for calculating a rental rate was derived from the factors of the land plots’ market price with K1 and K2 adjustment factors to the cadastral price of the land plots. K1 factor is defined by the type of the allowed usage of a land plot with regard to the correlation between the profitability of similar plots in the market and standard profitability defined by the investment into low risk public securities. K2 factor reflects the correlation between the profitability of the tenant’s business activity estimated by industry average return of sales and the key rate of the Central Bank of Russia. The methodology complies with the principles of rent calculation determined by the legislation of the Russian Federation. The proposed methodology was tested by comparing the actual and calculated rental payments to the budget of Perm Krai in 2020. Implementation of the proposed methodology is likely to increase the incomes of regional and local budgets and maintain the balance of public and private interests.

Keywords: land use, state-owned land, municipal-owned land, land rent, rent calculation, no-bid rent

For citation

Lapin A.V., Mityushkina E.N. Rental rate calculation methodology for no-bid rent land plots provided by regional public authorities. Perm University Herald. Economy, 2022, vol. 17, no. 1, pp. 49–64. DOI 10.17072/1994-9960-2022-1-49-64

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