Lacking capital, real estate developers induce to sell projects

As commercial banks have tightened their loans to fund real estate project development, a lot of investors have fallen into dilemma. Having no money to continue developing projects, they have to sell the projects to more financially capable investors.

Difficulties of someone could be opportunities for others

A source from Chuong Duong Company said the company is negotiating with foreign partners on the transfer of the Golden Land project in Thu Duc district in HCM City. This is a project of a shopping mall and high-rise apartment building to be located on an area of 15,000 square meters, which has the estimated investment capital of 880 billion dong in total.

Meanwhile, An Khang Real Estate Development Company (KAC) is following legal procedures to carry out the transfer of the project on Tan Tao A residential quarter in Binh Tan district to a foreign investor – Da Cin Holdings Pte. Van Phat Hung Company has also said it plans to sell some small projects.

Besides a lot of affairs which are under the negotiations, many other real estate projects changed the hands in the first quarter of 2011. These include the Thuy Loi 4 apartment project in the Binh Thanh district which was transferred by the Hydraulic Construction Corporation No 4 (HYCO4), to the Hydraulic Real Estate Investment No 4A Company.

Vinaland Limited, a member of VinaCapital, has sold all the stakes of a housing development project in district 9 in HCM City to a Vietnamese partner.

Nguyen Hong Phuc, General Director of the Nha Viet Investment Construction Trading Corporation (NVC), said these are just the “tip of the iceberg”. A lot of other real estate projects have changed hands, but the information has not been released, especially in the cases, when the investors are small enterprises which are facing difficulties due to the lack of capital.

Doan Nguyen Duc, Chair of Hoang Anh Gia Lai Group has confirmed that his group has received a lot of offers to sell real estate projects recently. Lacking capital proves to be the most important reason which has forced many real estate developers to sell projects in order to avoid the freezing of their assets.

Duc said that Hoang Anh Gia Lai is still considering the offered projects to choose potential projects before it sits into negotiation table.

“It is now the difficult period of the real estate market, but it is now the golden opportunity to buy projects. The difficulties of some enterprises could be the opportunities of others,” Duc said.

 

Dieing on the heap of property

Bui Tien Thang, Deputy General Director of Sacomreal, the real estate project transfer market has been operating since 2009, but it has become more bustling since the second half of 2010.

Thang said that the deal where a South Korean investor had to sell its capital contribution to Blooming Park project (now Imperia An Phu in district 2 in HCM City) to Prudential Vietnam investment fund in 2010, should be seen as an example showing that even foreign investors also faced big difficulties and had to withdraw capital.

Thang went on to say, that real estate developers have been put under the hard pressure of the policy on tightening the credit to the real estate sector.

“Real estate developers cannot borrow capital to develop projects, while clients cannot borrow money to purchase apartments. If investors do not try to transfer projects, they will get bogged down in difficulties,” Thang said.

Phuc agrees that many investors are thirsty for capital, especially the ones who are carrying out a series of projects at the same time. “They will “die on the heap of property” if they do not restructure the investment portfolios,” Phuc said.

Tags: Vietnam Property market, vietnam real estate market