CLASSIFICATION OF CONSTRUCTION WORKS AND CONSTRUCTION ASSESSMENT METHODS

According to Article 3 of the 2014 Law on Construction, it is clearly stated that: “Construction works are products created by human labor, construction materials and equipment installed in the works, linked and positioned. with land, which may include below ground, above ground, below water and above water, built according to design. Construction works include: civil works, industrial works, traffic works, agriculture and rural development works, technical infrastructure works and other works.”

Question: Dear experts, I am about to set up a construction company. I want to ask what groups are construction works currently classified into?
Answer: Most recently, according to Decree 46/2015ND-CP on quality management and maintenance of construction works, construction works will be classified and classified on the basis of their use and function and will be classified according to the following categories:
Civil works: This is a group of residential works (both individual houses and apartment buildings) and a group of public works such as schools, clinics, public houses, commercial buildings, hotels - motels, houses for traffic and communication purposes, railway stations, bus stations, television and radio broadcasting stations, sports facilities.

Industrial works: Including mining works, oil and gas; Electronic industrial works; Works for light industry, construction industry, manufacturing; Works serving electronic technology - informatics, energy; Food service works; Buildings containing explosives; Production works; The building is used for metallurgical purposes.
Agricultural and rural development works: Including irrigation works such as lake works; Dam works, water pumping stations; Construction of water pipelines, ditches, canals; Animal husbandry, cultivation, aquaculture and other agricultural works.
Traffic works: Including items such as airports and yards; Railway, road and waterway works.
Construction works for national defense and security: Including works carried out on the basis of funds from the Ministry of Public Security or the Ministry of National Defense; The project is aimed at serving security and national defense.
Infrastructure and technical works: Including works used for wastewater treatment, water supply and drainage, construction; Dumping works, yards used for burying, filling and treating waste; The project has the function of urban lighting.

In addition, for works that are undefined or not included in the regulations, the Ministry of Construction will work with the Ministry of Management of specialized construction works to determine based on the utility and the criteria of the type of construction. construction.
Question: Currently, to determine the value of completed construction works, which valuation methods are used?
Answer: Construction works are a special type of property. In addition to the group of civil works that can be valued by the comparative method - a common method in the appraisal industry, most other groups of works are often on a large scale, built on a large area, rarely trading transactions on the market. Therefore, to determine the value of this group of properties, appraisers often combine many valuation methods, of which the most common methods include:

Cost method
The cost method is also known as the cost method. This is a fairly common method applied in the valuation of construction assets. The replacement cost method is to determine the value of the appraised asset on the basis of the difference between the replacement cost to create an asset similar to the appraised asset with the same function and use according to the price. prevailing market and the depreciated value of the appraised property. The replacement cost method belongs to the cost approach.
Formula: Estimated value of asset = Replacement cost (including manufacturer/investors profit) – Total depreciation (Accumulated depreciation does not include depreciation functional wear of the appraised asset already reflected in the cost of creating the replacement asset)

Income capitalization method
This is a method of estimating the value of a construction work by summing up the value of the estimated future net incomes brought by that construction to determine its present value. in. This method is very suitable for traffic or agricultural construction projects with stable income sources such as hydropower, irrigation, toll stations, etc.
Profit method
This is a method of valuing construction works based on the principle of calculating the profitability of that work. From there, the appraiser will estimate the value of that work according to the market price. This is a relatively suitable method for valuing profitable constructions such as cinemas, conference offices, halls, hotels...
Above is information on classification of construction works and common valuation methods for this type of property.