Vietnam’s first real estate investment fund IndochinaLand Holdings of the Hong Kong-based Indochina Capital was set up in May 2005 with an initial capital of US$42 million. After more than one year, IndochinaLand Holdings decided to set up the second real estate investment fund in Vietnam with an estimated capital size of US$150-200 million.
A promising landAccording to specialists, the landing of foreign financial funds into Vietnam has proven the fertility and potentiality in this country. First of all, its high economic growth of 7-8 per cent a year, only after China, its increasing foreign investment capital inflow, its growing overseas remittance volume, its upcoming WTO entry and its improving legal environment make the Vietnamese market in general and the real estate market in particular attractive to foreign investors.
Besides, according to foreign investors, Vietnam has a young population (about 70 per cent of the population aged under 35) and higher and higher per capita GDP. According to the figures of Vina Capital, about 5 per cent of population has a monthly income of over US$1,000 and 12 per cent earn US$500-1,000 a month. With a high proportion of young high-income earners, it is not very difficult to buy an apartment.
Besides, the urbanisation rate in Vietnam is very high. According to an estimate, the population in Hanoi and Ho Chi Minh City will double in 10-15 years; hence, the demand for houses in Vietnamese urban zones will increase very sharply. From now until 2010, Vietnam needs more than 100 million square metres of houses while the Government is able to satisfy half. All these figures are very convincing to international financial investors.
Mushrooming real estate investment fundsMaking present in Vietnam in nearly 2003, Vina Capital soon saw potentiality of the Vietnamese real estate market. And, it decided to set up Vietnam Opportunities Fund (VOF) to invest in the fields of finance, securities and equitisation of State-owned enterprises, and selective real estate projects. VOF’s two first projects were Sofitel Metropol Hotel restructuring and Hung Vuong Plaza consulting.
In 2005, from its good business results, Vina Capital was able to persuade investors to raise VOF’s capital from US$95 million to US$171 million and set up the Vinaland Fund with a capital of nearly US$200 million for real estate investment. Mr. Peter Dinning, Real Estate Manager of Vina Capital, said Vinaland will invest in “hot” real estate fields in Vietnam, including houses for low-income earners, seaports, airports, roads and bridges.
Unlike Vina Capital, Indochina Capital follows the “slow but sure” business strategy. After successfully investing in Saigon Centre office building and Furama Resort (Danang City) in the 1900s, Indochina Capital began setting up the real estate fund Indochina Land Holdings to carry out several real estate and resort projects in central Vietnam like Indochina Riverside Twin Tower, hotel and luxury rest-house complex in Ngu Hanh Son District (Danang City) and Nam Hai Resort (Quang Nam Province). In the near future, Indochina Capital will establish the second real estate fund in Vietnam with an estimated capital of US$150-200 million.
After successes of foreign investors, domestic investors begin its penetration into the real estate market. The Bank for Investment and Development of Vietnam (BIDV) has founded the Vietnam Investment Fund (VIF) with a mobilised capital of over US$100 million. This fund is shared among more than 20 Vietnamese economic groups. Besides, several Vietnamese funds are operating on the housing market, including Vietcombank 1, Vietcombank 2 and Vietfund.
Able to defreeze the market?According to real estate experts, the Vietnamese freezing real estate market has buried large volumes of capital of domestic banks and investors. However, for foreign investors with enormous financial capacities, the freezing market is the potentiality.
According to Vina Capital, this is the right time for foreign investors to pour money into Vietnam and the real estate is very interested in 2006. The International Urban Investment and Development Joint Stock Company will organise large-scaled investment promotion programmes in Singapore and Malaysia to introduce the Vietnamese potential property market to foreign investors. Nearly 100 projects of new urban zones, apartments, offices, tourist sites, hotels and industrial zones in Vietnam will be announced. The programmes expect to draw the attention of nearly 400 regional leading companies.
However, many investors said the Vietnamese capital market has been unable to develop many financial supporting services for the real estate market. The penetration of foreign investment funds will play a significant role in de-freezing the Vietnamese property market.
Lan Anh
Vietnamese
