FDI Coming into Real Estate – The Game of the Strong

At the end of last year, Keppel Land, for example, went into a joint venture with Gami Real Estate Section (Gami Group) to invest in Hanoi Westgate Project with a total investment capital of USD 140 million.

Early this year, Sunwah Group, a Hong Kong real estate development company having been present in Vietnam since 1993, received the certificate of investment to be involved in a project in Binh Thanh District, Ho Chi Minh City with a total investment capital amounting to USD 200 million of which Sunwah held 48%. This is the third real estate projects of this group in Vietnam after Sunwah Tower and Saigon Pearl.

That Sunwah has invested in new projects in Vietnam has brought the total registered FDI in the real estate sector in the first quarter of this year to USD 288 million, accounting for 8.6% of the total FDI invested in Vietnam. Apart from Sunwah, there also are five other FDI projects registered as new or with increase in investment capital. The number of projects registered as new plus one, year-on-year. Though this figure is still humble, it indicates the return of foreign investors' interest in this sector. Last year, in this sector, 23 projects were registered as new against the number of 13 in 2012.

In 2007-2008, when the real estate market was booming, there was a time FDI flew into this sector made up over 50% of the total FDI invested in Vietnam. Nevertheless, that many of these projects have been canceled or merely exist in paper is due partly to the weak competences of investment owners. But, it's different this time. According to the Foreign Investment Agency, Ministry of Planning and Investment, most new projects recently have been invested by the familiar names in the Vietnam market such as CapitaLand, Chiaphua Group, Indochina Land or Sembcorp.

At the end of last year, Keppel Land, for example, went into a joint venture with Gami Real Estate Section (Gami Group) to invest in Hanoi Westgate Project with a total investment capital of USD 140 million. Although Keppel Land hasn’t disclosed any information about the project, according to sources close to the company, this Singapore company, together with domestic partners are carrying out site clearance, compensation and planning, detail correction to a scale 1/500 in preparation for project implementation.

Meanwhile, Chiaphua Group (Hong Kong), through its affiliated company Jen Capital Vietnam, has invested in a new project in Ho Chi Minh City. Last year, Indochina Land also invested in Ehome of Nam Long and Sembcorp Development invested in an urban zone project in Binh Duong Province.

Mr. Troy Griffiths, Vice Managing Director of Savills Vietnam, believed that the stable macroeconomy and the real estate market shows signs of recovery are the reasons for the return of foreign investors' interest. "FDI coming into real estate will certainly increase in time to come", he predicted.

Nevertheless, this doesn’t mean that they will be eager to inject their capital. In an annual financial statement 2013 sent to its shareholders, Keppel Land observed that there were clear signs of recovery in the Vietnamese market. According to Keppel Land, the company sold 170 apartments in Vietnam last year. By the end of February 2014, 73% of the total number of 96 villas in the Riviera Cove Project (District 9) of Keppel Land were sold. 43% of Riviera Point Apartments (District 7) and 90% of the apartments in phase 1 of The Estella Project (District 2) 2) were sold at the same time.

Keppel Land judged that 2014 and 2015 would be time for launching new projects and a new period for the projects having been built in Vietnam. Nevertheless, this company also stressed that the launching of new projects would depend on signs of the market. This proclaims prudence of Keppel Land.

In his judgment of the recent changes, Mr. Griffiths, Savills Vietnam, said: “The best establishment development companies will continue developing owing to their knowledge of the market, the way they respond to changes and know what to do meet demand".

CapitaLand, for example, several years ago, was targeted at the segment of houses for average income earners with its first project, PARCSpring (District 2, Ho Chi Minh City), a joint venture with Khang Dien. Indochina Land has also embarked on the more inexpensive segment by investing in Ehome Project while the high-class segment is no more as hot as before.

The change in direction of these companies has brought about initial results. At PARCSpring, only two months after opening for sale (since last December), as reported by investment owners, some 100 apartments have been sold and customers have also paid deposits for many other apartments in addition. It is not, however, that every foreign investor is lucky. Berjaya, for example, this company obtained permits for 5 projects in the period 2007-2009, with a total of investment capital of over USD 5 billion, but its 3 biggest projects are still in paper; and this company has to give up the Nhon Trach Urban Zone in Dong Nai and reduce the scale of the Vietnam Financial Center in Ho Chi Minh City. In Hanoi, one of the real estate projects laying motionless for the longest time is Booyoung of Booyoung Vina company (South Korea), which was granted license since 2006 but is still in a motionless state.

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