Real Estate Gamble

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Vietnam‘s real estate is still far from the day of gaining huge benefits whenever with any investment. Instead, now investors have to assume risk and find a way to survive. “To be or not to be” is becoming a big question for real estate businesses during this period.

For a long time, the real estate market in Vietnam grew too hot, money flowing into this market made large profits, making many investors blind and as a result, a series of huge projects were launched. The large number of condominiums launched during this period is expected to meet the demand for housing until 2050, according to many experts’ opinion. Statistics from the Ministry of Construction shows that in the country, currently there are 3,665 projects with a total area of ​​87,170 hectares, including 2.77 million apartments covering 32,303 hectares of building area.

Due to the way of making profit only in short term, investors mainly make money to “raise” projects depending entirely on the people buying flats on paper and paying according to the project schedule. However, in actual situations, it is a totally different scenario in which the economy is facing many difficulties, property prices go beyond the limits of the people’s capacity to pay, which leads to the freezing of the real estate market. When people stop pouring more money into real estate, real estate projects are also at risk of not having adequate capital to be continued, thus a series of projects got halted indefinitely, pushing some businesses in real estate to the edge of bankruptcy due to the previous bank loan. Some enterprises have to eliminate some categories or withdraw from the market.

Typical is the case of Son Ha Company, an enterprise well known for the production of water bottle, which was forced to divest in a number of real estate projects in order to focus on the retail market. Hoa Sen Group was also forced to withdraw from the real estate field at the end of 2011 to focus on its traditional business, which is steel. Vietnam Electricity (EVN) is also forced to divest from fields which are not its traditional business including real estate.

The above mentioned companies are those that operate not mainly in real estate. There’s an unpleasant fact that many companies specialising in real estate which have strength in experience as well as a large number of customers are now also forced to say goodbye to the real estate market. Thu Duc Housing Development Company, considered “big brother” in the property market, is forced to convert business objectives into agricultural export, link agricultural areas to agricultural trade and support farmers. The company is expected to invest in fertilizer in the near future.

Vinaland, a well-known real estate company in Ho Chi Minh City, is forced to try in the new business of market construction for lease, with the aim of bringing income to the company in the context of freezing real estate market. Phuc Duc Real Estate Company, once well- known in Ho Chi Minh City in real estate consulting, brokerage and project development, has also switched to business in flowers, ornamental plants and project tree.

Although the property market is becoming the most vivid instance where the law of supply gets over demand and the risk of line collapse is getting bigger, currently more businesses continue to pour money into real estate venture. Those businesses themselves are still confident about their market approach. For instance, Phu Thuong commercial and resettlement housing project in Tay Ho district, Hanoi of Machine JSC has been submitted to the Hanoi People’s Committee for approval; commercial housing project at 29, Linh Nam Lane 218, Hoang Mai of Hanoi Livestock Process JSC and Hattoco project of Ba Dinh Investment and Construction Consulting Corporation are being restarted after being approved by a company which agreed to jointly invest in project construction, with the capital of VND500 billion.

In tough economic times, investing may bring many risks. In the field of real estate, many investors fail, many investors having decades of experience in the market are also forced to convert business purposes. However, many more businesses continue to pour capital into the real estate market which is becoming the centre of attention. It is hoped that these firms do not go into the footsteps of previous failing businesses.

Luong Tuan

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