VNRE - Experiencing one of the toughest times seen in Vietnam’s real estate market because of tightening monetary policy, real estate developers must realize that harvesting short-term profit by speculating and/or investing without a long-term strategy is no longer the best course to take. Investment in “smart” and “green” buildings represents an avenue of escape not only because developers can enjoy a range of incentives from the Government but also because these are unquestionably the trends of the future. And developers are, indeed, making some initial moves into the segment.
In July this year Saigon M&C signed a Memorandum of Understanding with Cisco Systems Vietnam to cooperate in developing a “Smart and Integrated Community” in Vietnam, in which Saigon M&C, as the real estate developer, will apply “smart and integrated” solutions provided by Cisco Systems Vietnam when designing and building large projects. “Although the location, quality, and progress of the project and the price are the common criteria in evaluating apartments and office buildings, developers can still create a competitive advantage by focusing on added value in their projects,” Mr. John Huynh Nguyen, Managing Director of M&C, told the “Smart + Connected: New Trend in Housing and Urban Development” conference, held jointly by Cisco, the Ministry of Construction and the Ministry of Information and Communication in July 2011.
But not many developers have joined the new trend like Saigon M&C, as integrated building solutions mean more capital investment. The truth is that only 20 percent of government buildings and 10 percent of civil buildings have building management systems (BMS). It is worth noting that there are yet to be any smart buildings in Vietnam with a fully-functioning integrated system, with the Saigon M&C Building to be the first.
While the Building Automation System (BAS) has been applied in Vietnam for a long time, the Building Management System (BMS) has only recently been introduced into a small number of projects, but none fully applies the Integrated Building Management System (IBMS), which monitors and controls a variety of systems and functions at an optimal level of efficiency. BMS is an effective way of controlling energy consumption efficiently. For example, the optimal level of air conditioner power use in the building will be adjusted in accordance with the number of people inside and the outside temperature, and the electricity will be disconnected when the system notices that there is nobody in the room. So although it costs more in terms of initial investment and time of return, the economic return is clear when the buildings are occupied. As for the social benefit, the system will make a building become a green, environmentally-friendly building thanks to its efficient energy consumption.
Real estate investors in Vietnam still seek only to minimize their investment and get a return soon as possible. “There are many reasons leading to indifference among developers towards BMS,” Mr. Nguyen Anh Tien, Director of IBS, an integrated building solutions provider, told VFR. “The most important thing is that the long-term benefits of the system have not been fully recognized by developers as yet, so the system is still considered a luxury with a low return on investment.”
The tough times for the real estate market also present further difficulties for BMS suppliers, as more and more developers have decided to delay construction. Execution of BMS will also be delayed and, of course, it will be more difficult to recover debts, if any, from developers.
At the “Promoting Energy Saving in Buildings” conference on August 18, Mr. Nguyen Cong Thinh, a specialist from the Department of Science and Technology at the Ministry of Construction, said that if energy systems in old buildings were improved it could save between 15 and 20 percent of energy costs, and if energy saving systems or BMS were applied the figure could be as much as 30 or 40 percent.
According to Mr. Tien, the total cost of installing BMS means it is not a “luxury” at all, accounting for just 0.7 to 1 percent of a project’s total investment. And investment in a building with BMS could be returned within four to five years, he said. It is worth noting, however, that in Vietnam investors are not always the operators, and it is understandable that the initial investors are not so interested in equipping the building with the best infrastructure for optimal energy efficiency. Despite the reasonable cost and long-term social and economic benefits, BMS is often ignored by real estate investors.
Government support needed
Mr. Thinh released a survey reporting that many high-rise buildings waste energy not only because of the attitude of users but also because the incomplete government regulations.
The Law on Using Energy Economically and Efficiently was introduced in 2010 but it only acts as a guideline on how to save energy during the construction process and in public lighting. Decree No. 73 dated August 24 introduced sanctions on violations of using energy economically and efficiently. Article 20, Item 3 of the Decree, entitled “Violating Regulation on Managing and Using Energy Economically and Effectively at the Dominant Energy Consumption Unit”, applies penalties by warning the head of the dominant energy consumption unit who does not fully follow the content of the energy management model contained in Article 8 of Decree No. 21/ND-CP dated March 29. But this Article is only for encouragement purposes, and so fails to comprise any specific mandatory standards.
Talking about the potential of the integrated and smart building solutions market, Mr. Duong Phong Thien, CEO of NTC, a BMS integrator, said that “the current freeze in the real estate market is only short term. As Vietnam is still developing, the demand for construction and energy saving is still growing, especially in the context of rising electricity, oil and gas prices. Sooner or later, the BMS market will have a bright future when there is more concern given to efficiency in building management.” As the application of such systems will bring about social benefits, the Government should introduce regulations making it compulsory for certain large-scale buildings to apply BMS, he suggested.
Higher energy prices make energy-saving buildings more attractive. But because of the higher initial investment, without any compulsory regulation coming from the government it will be difficult for the application of BMS to fully take hold.
Source: Vietnam Financial Review