Foreign investment in real estate drops

Real estate development lured US$1.86 billion in foreign investment in the first eight months of this year, according to the Ministry of Planning and Investment’s Foreign Investment Agency (FIA).

The figure, consisting of investment of $1.69 billion in new projects and an additional $171 million in existing projects, was $24 million less overall than in the same period last year due to the global economic downturn, said FIA director Phan Huu Thang.

With property development heavily dependent on financing, he said, with many projects requiring investors to borrow up to 70 per cent of the costs, the credit crisis this year put the brakes on a number of projects that had already received investment licenses, said Deputy Minister of Construction Nguyen Tran Nam.

Early last month, Japan’s Riveria Group, investor in a Ha Noi hotel project with a total budget of $500 million scheduled to break ground in 2010, withdrew from the project.

In June, Luxembourg’s Coralissa Co, investor in Ha Noi City Complex on the capital city’s Lieu Giai Street temporarily halted construction.

Thang said the decline in foreign investment in the real estate sector would reduce the supply of new properties on the market in the future and would likely drive up the prices of projects that proceeded to completion.

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