| How real estate developers contriving in the age of inflation? |
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(Listed Jul 2, 2008) |
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 High construction material prices and lack of capital both have been handicapping real estate developers. They have to either to sell their projects to foreign investors, or take no action and wait for brighter days to come.
More and more domestic real estate developers are now seeking foreign partners to develop their projects. The developers can get land for projects allocated, but they are not financially capable enough to develop the projects.
Meanwhile, according to the HCM City Real Estate Association, many foreign investors are eyeing real estate projects in Vietnam. They mostly come from South Korea, Malaysia, Singapore and the Middle East.
However, observers said that except for a small number transactions in which shares were transferred at low prices, the market has not witnessed any successful deals so far.
According to Le Quoc Duy, General Director of Hoa Binh Housing Joint Stock Bank, foreign investors have become more cautious when making deals. The investors are only interested in big scale projects with cleared land which aim to high-grade products. Therefore, not many investors can become partners of the foreign investors.
Besides, Duy said, negotiations have been becoming very tough, as domestic real estate developers want to sell projects quickly, while foreign investors do not hurry to wrap up deals. Duy said that he knows of several projects, the investors of which cannot find suitable partners even when they lowered the sale prices by 20-30%.
Meanwhile, other real estate developers have decided not to sell projects to foreign investors and not to carry out the construction at this time and wait… to see what will happen. It is clear that they will incur heavy losses if they implement projects right now, when the construction material prices are skyrocketing daily, and they have no way to access bank loans as banks are now trying to limit real estate credit.
Nguyen Ba Duong, Member of the Management Board of Phu Hung Gia Real Estate Investment Corporation, said that despite big difficulties, most real estate firms can still survive this difficult period, while only a few companies are facing bankruptcy.
The companies with powerful financial capability said they will stay idle for a little more time and take no action, accepting to leave their capital tied for the time being in construction works.
Analysts said that despite the frozen real state market, some types of products are still selling well. The demand for leasing high-grade apartments is still increasing and the demand for the houses and apartments with a sale price of around $1,000/sq m also remains high. Very luxurious products can also be salable at this time.
Ho Dac Hung, General Director of Vinaland, said that it is quite acceptable for powerful real estate investors to leave capital idle for a period of time, or to suffer a loss of 10%.
(Source: TBKTSG) |
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