Increased construction material prices, cement shortage, lack of capital all are making real estate developers suffer.
Mai Huu Tai, Deputy General Director of Binh Chanh Construction Company, said that the cement price increases have been giving him headaches for the last two months.
Tai said that his company needs cement in big quantities, therefore, he has to pay VND8-10,000/pack more as sales agents say they have to collect from different sources to get enough product.
Tai has estimated that the average investment rate for apartments now is VND8mil per sq m instead of VND5mil as previously. As for high-grade apartments, the construction cost has increased from VND9-10mil/sq m to VND11-12mil.
Tai fears that if the construction material prices keep rising, apartment and house projects will slow down. As investors set the sale prices of apartments before, they are experiencing losses due to the material price increases.
Currently, most investors are building apartments with capital mobilised from buyers (buyers pay for apartments in several stages, when the apartments are under construction, and get apartments later when the projects are completed). In the last few days, a lot of buyers have demanded money back and returned apartments to investors, abandoning their security money.
A lot of clients who registered to buy BMC Hung Long apartments in District 7, HCM City, asked BMC to pay back money, as they cannot arrange more money for further payments for the apartments. A client said that when the real estate market was hot, the right to buy BMC apartments was VND500mil. However, no one wants to buy the right to buy BMC apartments even at the low price of VND100mil.
“I have to borrow money from the bank at the interest rate of 1.9%/month to make periodic payments for the apartments. As I cannot afford the high interest rate, I have asked to give back the apartment,” a client said.
BMC’s representative has refused to comply, saying that the two parties need to respect the signed contracts.
Meanwhile, a lot of investors have chosen the solution of ‘taking no action’ to deal with the current material price “lift-off”.
The investor of Blue Diamond project, for example, has not moved on the construction of the apartments, though the project, made public last November, found buyers for its 180 apartments within one hour.
Deputy Chairman of Van Phat Hung Company, the investor of Blue Diamond, Tran Van Thanh, said that he has all necessary legal documents for the project, so he can start construction at any time. However, he said it is not the right time to kick off the project.
He added that as the real estate market is freezing and construction material prices are skyrocketing, it would be better to check the plan to execute the project and re-consider the investment rate.
Le Hoang Chau, Chairman of the HCM City Real Estate Association, said that the high inflation has been causing difficulties for everyone and every business.
Thinking that the current difficulties cannot be settled overnight, Chau fears that the real estate market will not recover for a year or two. Therefore, he has called on real estate developers, investors and clients to sit together to find the best solution.
Chau said that real estate developers should think of seeking partners in order to improve their strength, or join hands with banks in order to have good financial support.
He added that real estate developers can share difficulties with clients by extending the deadline for making payment, or allowing clients to pay back apartments with suitable financial punishments.
However, he said that surfing investors (short-term investors, who book the right to buy apartments to re-sell later to other clients to get profit) have no other choice than suffering losses.
Mai Huu Tai, Deputy General Director of Binh Chanh Construction Company, said that the cement price increases have been giving him headaches for the last two months.
Tai said that his company needs cement in big quantities, therefore, he has to pay VND8-10,000/pack more as sales agents say they have to collect from different sources to get enough product.
Tai has estimated that the average investment rate for apartments now is VND8mil per sq m instead of VND5mil as previously. As for high-grade apartments, the construction cost has increased from VND9-10mil/sq m to VND11-12mil.
Tai fears that if the construction material prices keep rising, apartment and house projects will slow down. As investors set the sale prices of apartments before, they are experiencing losses due to the material price increases.
Currently, most investors are building apartments with capital mobilised from buyers (buyers pay for apartments in several stages, when the apartments are under construction, and get apartments later when the projects are completed). In the last few days, a lot of buyers have demanded money back and returned apartments to investors, abandoning their security money.
A lot of clients who registered to buy BMC Hung Long apartments in District 7, HCM City, asked BMC to pay back money, as they cannot arrange more money for further payments for the apartments. A client said that when the real estate market was hot, the right to buy BMC apartments was VND500mil. However, no one wants to buy the right to buy BMC apartments even at the low price of VND100mil.
“I have to borrow money from the bank at the interest rate of 1.9%/month to make periodic payments for the apartments. As I cannot afford the high interest rate, I have asked to give back the apartment,” a client said.
BMC’s representative has refused to comply, saying that the two parties need to respect the signed contracts.
Meanwhile, a lot of investors have chosen the solution of ‘taking no action’ to deal with the current material price “lift-off”.
The investor of Blue Diamond project, for example, has not moved on the construction of the apartments, though the project, made public last November, found buyers for its 180 apartments within one hour.
Deputy Chairman of Van Phat Hung Company, the investor of Blue Diamond, Tran Van Thanh, said that he has all necessary legal documents for the project, so he can start construction at any time. However, he said it is not the right time to kick off the project.
He added that as the real estate market is freezing and construction material prices are skyrocketing, it would be better to check the plan to execute the project and re-consider the investment rate.
Le Hoang Chau, Chairman of the HCM City Real Estate Association, said that the high inflation has been causing difficulties for everyone and every business.
Thinking that the current difficulties cannot be settled overnight, Chau fears that the real estate market will not recover for a year or two. Therefore, he has called on real estate developers, investors and clients to sit together to find the best solution.
Chau said that real estate developers should think of seeking partners in order to improve their strength, or join hands with banks in order to have good financial support.
He added that real estate developers can share difficulties with clients by extending the deadline for making payment, or allowing clients to pay back apartments with suitable financial punishments.
However, he said that surfing investors (short-term investors, who book the right to buy apartments to re-sell later to other clients to get profit) have no other choice than suffering losses.
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