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Vietnam Real Estate - Foreign direct investment (FDI) is increasingly flowing into the local real estate market at a time local investment in this sector is dwindling due to the tightening monetary policy, according to a forum last week in Danang City.

At the international forum on real estate development over the weekend in the central coast city, many said restrictions on bank loans for local developers have given way for investment funds, most of them foreign institutions, to emerge as the key source of financing for the real estate market. Meanwhile, foreign direct investment into this sector is also surging due to the attractiveness of the market, they said.

Tran Kim Chung of the Central Institute for Economic management told the forum that the higher lending rate has forced many local investors to postpone their property projects. Meanwhile, the Government is waging a war against inflation, tightening its purse string for new investments, especially disbursement for new properties, Chung said.

"As a matter of course, when banks restrict credits for the real estate sector, other investment funds will emerge to fill up the vacuum," Chung said.

Central Vietnam in general and Danang City in particular has been witnessing a strong increase in FDI for the property sector.

Peter Ryder, general director of the investment fund Indochina Capital, told the forum that his institution was investing US$500mil in Quang Nam and Danang to develop resorts, hotels and trade centers. "In addition, we are also making strong investment in industrial parks in Quang Nam, Danang, and Quang Ngai provinces," Ryder said.

Several other investors are also involved in large-scaled developments in the central region, including VinaCapital, Kingdom Hotels Investments, and Oaktree, the last-named investor recently announcing a plan to invest US$5bil to develop a huge resort in Danang City's Lien Chieu District.

Nguyen Manh Ha, head or the Housing Management Department under the Ministry of Construction, told the gathering that FDI committed into the real estate sector now occupy an increasing proportion in the total amount of foreign investment.

In 2007, the amount of FDI pledged in the real estate sector totaled US$8.5bil, or up to 42% of the total FDI committed last year. In the first quarter this year, this amount continues to increase strongly, amounting to US$5bil, Ha said, adding the strong property investment has also helped bolster other economic sectors.

"This source of invested capital (for the real estate sector) has helped other sectors to develop and boost income for provincial budgets. In some provinces, the revenue for the State Budget is as high as 50%," Ha said.

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