Foreign direct investors return to the real estate market

VNRE - Though the global real estate market cooled down after the economic crisis, international real estate developers have still been pouring their capital into Vietnam. This explains why real estate remains the sector which has been attracting most of the foreign direct investment.

In the last two years, the foreign direct investment (FDI) in the real estate sector in Vietnam has been decreasing sharply after reaching its peak in 2008 with the total registered capital of $23.6 billion, accounting for 39 percent of the total investment in Vietnam. In 2009, the registered capital for real estate project dropped to $7.6 billion.

The latest report by the Foreign Investment Agency under the Ministry of Planning and Investment shows that by the end of the third quarter of 2010, foreign investors had disbursed over eight billion dollars for the projects in Vietnam. The scale of every real estate project remains relatively big, at 144.9 million dollar per project.

A lot of foreign investors remain brave enough to pour more capital into Vietnam’s real estate market. Capitaland Vietnam, for example, has joined forces with Mitsubishi Estate Asia (MEA) and GIC Real Estate under GIC investment fund belonging to Singaporean Government to set up a joint venture with the total investment capital of $215 million. The joint venture plans to focus its investment in high grade apartments in HCM City and Hanoi.

The joint venture will develop a high grade apartment project in Mo Lao new urban area in Ha Dong district in Hanoi. This will be a four-block apartment project which comprises 960 apartments. Besides, there will be another project with 962 apartments in district 2 in HCM City and a series of big shopping malls in the two big cities.

Indochina Capital has announced it is raising about $180 million in funds which it will invest in the high end housing market in Vietnam. The investment fund is also planning two other investments in Vietnam’s real estate market, including the sum of $190 million in HCM City and $533 in Hanoi.

Malaysian Gamuda Land Group has bought back 60 percent of stakes ($82.7 million) of a project in HCM City developed by Saigon Thuong Tin Tan Thang Loi Real Estate Corporation. Meanwhile, South Korean Daewon Group has decided to join forces with a domestic enterprise to develop a project capitalized at $120 million.

Analysts believe that the development potentials in Vietnam’s real estate market remain very big. In Hanoi, every year, accommodation projects provide 1.2 million housing square metres, while the figure is 3.5 million in HCM City. In total, 2500 housing projects and new urban areas projects, covering an area of 80,000 hectares, are under implementation.

Though Vietnam’s real estate market has been very hot with a series of investment projects which require huge sums of capital, real estate developers have been relying mostly on commercial bank loans. Therefore, many property projects would have be delayed once banks tighten their credit policies. Analysts have called on the state management agencies to apply necessary measures to control the foreign capital flow to the domestic market in order to ensure that the market can develop in a sustainable way.

Some days ago, HDReal, a real estate trade and development company joined forces with Saigontourist, a travel firm, to carry out a marketing programme in Japan, where Vietnamese investors emphasized that Vietnam is really a good investment destination for real estate developers, especially in the fields of tourism and resort real estate.

The forum attracted the participation of 130 delegates from Vietnam and Japan, including representatives from big Japanese groups such as Mizuho Bank, Development Bank of Japan, Capital Partners, Sumitomo Mitsui, Nomura, Orix, Kanematsu, and Hasegawa.

At the forum, Saigontourist and HDReal introduced 12 projects on hotels, resorts, complexes which are seeking capital.

According to Vu The Binh, Director of the Travel Department under the Vietnam National Administration of Tourism, in 2010, 4.5 million foreign tourists arrive in Vietnam, up by 38 percent over 2009. Vietnam now has 210,000 hotel rooms. As such the demand for tourism accommodations such as hotels, resorts is very high.

Source: VietnamNet