Real estate firms deal with a ‘frozen’ market

Real estate companies in Vietnam are trying to seek ways to minimise their risks in the context of the ‘frozen’ property market.
According to financial analysts, currently, banking interest rates of 25-27%, along with soaring prices of construction materials and labour, have pushed costs up by 30-40%. Projects carried out in this environment may not even cover the initial investment.
Many companies have been forced to halt or delay projects.
Many real estate companies have been considering renegotiating with their partners so they can hand over the properties themselves, instead of repaying their loan.
Besides the new fiscal austerity measures, the State Bank of Vietnam has issued policies to restrict loans to non-manufacturing sectors, which is expected to curb credit growth to 16% by the end of this year.
The current outstanding loans in the real estate sector are estimated at a total of VND222 trillion (USD10.77 billion), including VND95 trillion (USD4.6 billion) in Ho Chi Minh City, compared to VND235 trillion (USD11.4 billion) at the end of last year.
Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, said, in the first six months of this year, only five large real estate projects were started in the city, the lowest amount in recent history.
Many real estate companies have had to rethink their operations. There have been a slew of halts and delays in various projects, as well as mergers and acquisitions. This climate is forecast to continue at least until the end of the year, which may leave many firms bankrupt.
Currently, the apartment segment is facing the most difficulty, as a number of investors are simply insolvent.
Mekong Plaza project in Hoai Duc District, Hanoi – invested in by Mekong Land Joint Stock Company – is a typical example. The project was widely advertised by the secondary investor, Nam Phuong Invest JSC, late 2010.
After a one-year contract, signed between clients and investors expired in May, the clients were not able to purchase their homes, and asked for a refund. However, Nam Phuong Invest JSC complained to the media that the clients were unsympathetic to their difficult situation. – Vietbiz24

Tags: Vietnam Property market, Vietnam property sector, vietnam real estate market

Posted by VBN on Aug 17 2011. Filed under Real Estate. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry