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Real estate developers told to keep patient
The frozen real estate market and lack of capital have put big difficulties on real estate developers. However, they have been advised to keep patient and wait, as big opportunities are still ahead.
Nguyen Tran Nam, Deputy Minister of Construction, Chairman of the Vietnam Real Estate Association
The demand for accommodations of residents in urban areas proves to be very big at present and will remain so in the future. Currently, the housing density is 11 sq m/head, while Vietnam strives for 14 sq m/head by 2011. There are 22mil people living in urban areas, and in order to have 1 sq m/head more, Vietnam needs to have 22 mil sq m more.
In general, the potential of the real estate market proves to be very big. Foreign investors well understand this, thus they have injected a lot of money in real estate projects in Vietnam. They have committed $19.6bil worth of foreign direct investment in real estate projects in the first half of the year, accounting for 60% of total investment ($31.6bil).
So, I think that the current difficulties are just temporary. Vietnamese real estate firms need to be patient and find suitable solutions for them in the immediate time to survive the current difficult period and well prepare for the better times to come.
Pham Sy Liem, Deputy Chairman of the Vietnam Association of Construction
The real estate market includes a lot of market segments and I think that only the enterprises specialising in high-grade apartments have been facing difficulties, while investors in other market segments have been able to sell their products well.
The market of offices for lease, for example, is still growing well as the supply is lacking, while the prices are skyrocketing. I have to say that many enterprises have been facing difficulties not because of the current difficulties of the national economy (inflation, tightened monetary policies), but because of mistakes they made in assessing the local markets where their projects are located.
Real estate developers, in general, borrow money from banks to pay for site clearance and project design, while they mobilise capital from buyers to build apartments. By doing so, they can find long-term and stable sources of capital and not worry about outlets for their products.
However, this proves to be not the best solution, because there is no guarantee for buyers. We still can mobilise capital from buyers, but we can avoid problems. Real estate developers can open accounts at banks. Those who want to buy houses need to remit security money into their accounts. Commercial banks later lend to real estate developers at low interest rates after considering the sums of money in the accounts. With this method, buyers do not fear they may lose money, while real estate developers still can get money to implement projects.
Real estate firms have been complaining that they cannot arrange capital for the projects, because banks do not lend money. I think that banks have every reason to do that. If enterprises cannot sell products, banks will suffer because they cannot take back capital.
In current conditions, I think, the most suitable solution is that real estate firms should have rapid capital turnover, and in order to have rapid capital turnover, they need to have suitable profit rate.
Dang Hoang Vu, General Director of Thanh Binh Real Estate Company
Real estate firms now tend to seek capital by issuing bonds. However, this should not be seen as the main capital mobilisation channel. Sometimes we rely on bank loans, sometimes we rely on the capital mobilised from the public and foreign investors.
I have to say that mobilising capital by issuing bonds is just a contract on borrowing money. The contract on contributing capital is better than the contract on borrowing money, because it is controlled by the Civil Law.
VNN
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