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Developers struggling to recoup investments
Property developers in Ho Chi Minh City are trying to recoup their investments by launching huge numbers of apartment units for sale and at the same time joining hands with commercial banks to support buyers.
The apartment sector which has become stagnant since the global economic meltdown three years back has recently faced much more challenges following the government’s tightened credit policies to battle inflation.
So Thu Duc Housing Development Corporation (ThuDuc House) based in District 3 can do nothing but, after so much delay, launch 45 units at its TDH – Phuoc Binh project in District 9 earlier this month in a bid to recuperate investments as soon as it still can.
They should have been on sale right after the foundation was finished last year but the developer intended to postpone the launch till the market gets better, a company executive said.
It could, however, no longer continue stocking the units, waiting for a market comeback considering its huge amounts of money already pouring into the project, he explained.
Likewise, two other projects in Binh Tan District offering a combined number of 5,600 units have also been launched lately.
Mid-end apartments cover a larger share of those launched units, with exception coming from high-end projects like Cantavil-Premier in District 2 or Thao Loan Plaza in District 7.
Property consulting firm Savills Vietnam, with its parent company based in the UK, reported the developers of 14 other apartment projects introduced to buyers totally 5,000 units in the first quarter of this year.
Bank interest? We’ll help you, buyers!
Prices are now much lower despite rising input costs and more expensive lending, said Nguyen Xuan Loc, General Director of Techcomreal, a real estate arm of local lender Techcombank. Loc explained promotion and soft loans for buyers are the two main reasons.
Bui Tien Thang, Deputy General director of Sacomreal, a subsidiary of Sacombank, revealed many developers have had deals with commercial banks to ensure interest rates for their buyers are capped at 12-14 percent per annum. The developers will make up for any interest discrepancies, he added.
The developer of 4S2 project in Thu Duc District has even offered to pay 100 percent of the interest on loans used to buy its units.
With this kind of financial support, sales have been slightly improved in the mid-end segment, Loc said, elaborating positive signs have been seen as yet at apartments for middle- and low-income earners in District 2, 7, 9, and 11.
Those efforts have attracted more end-users to the mid-end apartment sector and thus improved market liquidity, according to Hoang Anh Tuan, director of real estate agent Tac Dat Tac Vang.
Tuan pointed out that ThuDuc House sold almost 30 units of the recently launched units in the first week thanks to an offer to pay 50 percent bank interest for buyers.
“It is very hard for the market to make a comeback given a current surplus of supply. However, green shoots can be found at projects where their developers are willing to support buyers,” he remarked.
Several developers have slowed down or even temporarily halted the construction of their projects owing to financial problems, according to Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association.
Many have lately launched their projects for sale to primarily raise more capital rather than look for profits from the market, Chau said.
“They need money to settle their debts and bank interest.”
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