Foreign Investors Take over Many Real Estate Projects

 

Ho Chi Minh City is the largest market and is also the first to be affected by this recession. According to statistics, the city now has 52 underway construction projects, 168 delayed projects and 85 ‘failure’ projects. In the first six months of 2013, the largest city of Vietnam saw 2,453 new apartments sold while 12,447 apartments stockpiled. More than 10,000 units had been completed while the rest was under construction.

 

Only 32 people accessed to the real estate market support package of VND30 trillion with VND26.2 billion lent and VND3.2 billion disbursed. Although home credits are available, citizens difficultly access them.

 

Many commercial housing projects have to convert into social housing projects by splitting out original apartments. However, this will affect the overall functionality of the building because the new changes may not appropriate to initial designs. For example, after seeking agreement with bank, Hoang Quan Consulting – Trading – Service Real Estate Corporation (HQC) has not had approval for converting the CC1 Apartment Block into social housing project because the adjusted number of apartments increased to 1,735 units from initial 1,060 units.

 

According to statistics, listed real estate companies had to pay nearly VND2,800 billion for interest rates in the first six months of 2013. Huge interest amount has become an excessive burden for many companies. PetroVietnam Construction Corporation is paying nearly VND1 billion of loan interests a day, Vinaconex is paying nearly VND2 billion a day, and Ha Tien 1 Cement Company has to pay VND426 billion of interest in the past six months.

 

In fact, real estate industry made up 70 percent of bad debts at banks. According to experts, if banks and investors cannot deal with bad debts, the real estate market will hardly recover.

 

Illiquidity has forced many investors to sell their projects to recover investment capital. Some successful project handovers have caught the interest of the public. Vingroup announced to sell Vincom A Tower for a profit of VND4,300 billion and the buyer was a domestic company. Then, Hoang Anh Gia Lai Joint Stock Company (HAG) announced to sell most of its real estate and hydropower projects in Vietnam. Six hydropower projects of HAG were taken over by a bank, with Russian interests.

Currently, foreign investors are very interested in the HCM City property market, especially inoperable projects. Chris Brown, Executive Manager of Cushman & Wakefield Vietnam, a real estate company, said capital shortage has forced many investors to restructure their portfolios and focus on most important projects.

 

While domestic real estate companies have exhausted on insufficient capital. This has however become a great opportunity for new potential investors with long-term visions to acquire property projects sold by the order of the court. Currently, many investors from Japan, Taiwan, South Korea and Singapore are very keen on liquidated assets in Vietnam.

 

In addition, companies from Russia and the Middle East are ready to pour capital into the Vietnamese property market, especially in Hanoi and Ho Chi Minh City. Effective operating projects and projects on prime locations are their first choices.