| Apartments for common people, a way out for developers |
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(Listed Jul 4, 2008) |
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 According to the HCM City Real Estate Association (Horea), a lot of real estate developers may go insolvent as the market is freezing with no buyers. Experts say real estate firms should focus on the segment of houses and apartments for common people.
High-grade apartment investors running away
Real estate transactions have been at a standstill for the last many months. Successful transactions just accounted for 2% of the total transactions. The money real estate firms made in the last few months is not worth mentioning, while they still had to spend big money to maintain their operation.
Horea said that several of its members are facing bankruptcy due to difficulties in capital.
Dang Hoang Vu, General Director of Thanh Binh Real Estate Company, said that the company now finds it hard to find buyers though it is offering the 'soft' price at VND10mil/sq m while the investment rate was VND9-10mil/sq m. To date, the company has suffered losses equal to 20-30% of the value of the assets.
Developing apartments for common people?
Analysts say that in the last few years, very few housing projects were licensed, which caused a wide gap in supply and demand. Real estate developers only focused on developing high-grade apartments to optimize profit. As a result, low income earners did not have opportunities to buy houses. While real estate developers cannot sell their high grade apartments, which prove to be very expensive, most residents in big cities still cannot purchase apartments.
According to Le Hoang Chau, Chairman of Horea, the demand for houses and apartments of common people, newly married couples, newly graduating students and old people in HCM City is very high. The clients need accommodations with the space of 25-40 sq m. The majority of them are living in narrow boarding houses with poor facilities. Therefore, Chau said, building houses for these clients proves to be a good solution.
Nguyen Van Duc, who initiated the building of small space apartments, Deputy Director of Dat Lanh Real Estate Company, said that 60-70% of labourers in HCM City have the demand for accommodation and can pay VND300-500mil for houses and apartments. However, the market of houses for low income earners remains open.
Duc said that this segment of the market is a way out for real estate developers. Dat Lanh plans to kick off a plan to build apartments for common people in two or three months. There will be 3-4 blocks of small space apartments (25,000 sq m/block) with 1,000 apartments in district 12 and Go Vap district in HCM City.
While waiting for the government’s instruction on the model, 1,000 clients have registered to buy small space apartments.
“Real estate developers did not pay appropriate attention to the very important segment of the market," Duc said.
Source: Vietnam Net
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