Cash-strapped apartment projects stall, buyers distressed

Thao, a migrant worker, has been waiting for three years for an apartment at the D's Gold building in HCMC's Binh Tan District.

She has paid VND700 million ($28,226), or 70% of the apartment's cost, so far but found construction has come to a standstill over the past year.

She said: “The apartment I visited last year and this year looks the same. The same wall, the same ceiling, the same floor. No more construction. No improvement.”

Due to the stalled project, she has to keep renting a house for VND4.5 million a month.

She and a dozen of other apartment buyers have taken blankets, mosquito nets and food to the construction site and are carrying on a live-in protest against the developer.

“We have paid for our apartments, but are now begging for them.”

Hang has paid for an apartment of nearly 50 square meters costing VND780 million at D's Gold using bank loans.

“I have to pay the bank nearly VND3 million interest a month.”

Two years after she started paying, she still has to rent a room in a boarding house for VND1.5 million.

She and her husband have lost their jobs, and are living in the first floor of the under-construction apartment.

She said: “The bar where my husband used to work as a security guard closed two months ago. I was diagnosed with lung cancer two years ago, and so I'm not sure I will be alive when the apartment is built.”

Many buyers at the Kingsway apartment project in the city's Binh Tan District are in the same situation.

Thanh, who has paid some 70% of the price, said construction has more or less stalled since the pandemic began.

The veteran, who has lost an eye, said: “Apartments have not been painted yet. Entrances have not been built yet. Weeds have grown everywhere.”

Thanh has to spend his entire war invalid's allowance of VND6.5 million for renting an apartment elsewhere.

“With her monthly salary of VND4 million, my wife, a clerk at a primary school, has to cover all the household expenses and school fees for our kid.”

Many people who have borrowed money to buy apartments are in trouble since they have to keep borrowing to pay the balance and also pay rent elsewhere even as lending interest rates are surging.

But if they choose to rescind the purchase contract, they are liable to pay big fines.

They can try and sell the apartment, but prices are likely to be lower than what they are paying because of the low liquidity in the real estate market.

According to central bank statistics, in the first nine months loans owed by property developers increased by only 7.35%, and indication they are facing difficulty in getting bank loans.

Tran Trung Khin, general director of An Nhan Development & Investment Corporation, the developer of D's Gold, said the project could not be completed in December 2020 as scheduled mainly because of the pandemic, which caused the prices of some construction materials like steel and glass to surge by up to 200% and interrupted the supply of imported elevators and electrical systems.

With tightened credit and higher lending interest rates , An Nhan has had to mobilize funds from shareholders and apartment buyers, he said.

“Our project cost is some VND700 billion, including VND360 billion raised by issuing bonds.”

His company is hoping to hand over apartments to buyers from February 2023, he added.

Recently Le Hoang Chau, president of the HCMC Real Estate Association, called on the government and central bank to consider increasing credit quotas by 1-2 percentage points to support the economy, including property developers.

The existing cap for this year is 14%.

The government would consider increasing the cap, Prime Minister Pham Minh Chinh said earlier in November.