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Foreign funds for real estate market reduced to a trickle
The withdrawal of many foreign real estate investors from Vietnam has caused rumors of worse things to ripple through the real estate market. However, the Ministry of Planning and Investment is not worrying.
One year ago, concern was expressed that too much foreign direct investment (FDI) was pouring into Vietnam’s real estate. Registered FDI in the sector amounted to 1/3 of the total FDI capital inflow in 2008 ($24 billion of $71 billion).
Now economists and real estate professionals are worried about the opposite thing: the FDI flow into the real estate sector has fallen sharply, and a substantial number of licensed investors have pulled out. VNEconomy provides details.
Global economic crisis slams big projects
Economists have warned that the present contraction in investment could result in a shortage of real estate products in the future. Registered FDI going into the real estate sector unexpectedly decreased in the first eight months of 2009 to a mere $1.8 billion out of the total $10.4 billion. There were 28 newly licensed projects ($1.689 billion) and two expanded projects ($171 million).
The economists have every reason to worry about a supply shortage, especially when the investors of some big projects have officially left Vietnam. The failure of two closely-watched projects sent tremors through the real estate sector.
Japan’s Riviera Group, instead of pressing to completion of a high-profile, half-billion dollar five star hotel project in Hanoi, walked from the project in August, two years after it got its investment license, citing financial difficulties.
In early June, SA Coralis, the Luxembourg-registered investor of the 65 storey Hanoi City Complex project on Hanoi’s prestigious Lieu Giai Road, also gave up, citing financing prolems. This 100 percent foreign invested project caught the special attention of Hanoians thanks to the big scale of the project and the promised high quality of the apartments. The construction site has been closed and it is unclear when the project implementation will be resumed.
Deputy Minister of Construction Nguyen Tran Nam has said that the departure of some foreign investors in the context of the global economic crisis is understandable. Looking on the dark side, however, some analysts predict that the number of investors to quit projects or pause construction will keep increasing. Most investors have to rely on borrowed capital to implement projects, and it is really not easy to mobilize such capital at this moment.
MPI Official: Everything is on track
The Director of the Foreign Investment Agency, Phan Huu Thang, says there’s no reason to worry. Withdrawals like Riviera’s and Coralis’s have been anticipated, and everything is still going on according to plan.
Thang acknowledged relatively lower FDI capital flowing to the real estate sector but, he insists, nearly $2 billion worth of new investment is still a big figure.
It is quite normal that FDI so far this year would be lower than a year ago, because the global economy is still in crisis, Thang explained. Because Vietnam anticipated the decrease in availability of foreign investment, it has focused on pushing up domestic spending instead of trying to attract investment.
Thang admitted that he cannot say if the shorter supply of capital from foreign investors will affect real estate prices. He stressed that the real estate prices are a result of many factors.
VietNamNet, TBKTVN
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