Vibrant Real Estate FDI

In the first five months of 2010, FDI in real estate posted 3rd in all sectors.

In the first five months of 2010, investment in real estate accounted for 17 percent of additional registered capital. In spite of several suspended real estate projects, big projects registered in early 2010 continued to focus on real estate such as Conference and Exhibition Centre, Ba Ria - Vung Tau Commercial Centre by SkyBridge Dragon Sea (US) capitalized at US$902.5 million, project of Daewon Binh Khanh in Ho Chi Minh City with US$120 million, project of CZ Slovakia Vietnam with US$100 million, commercial centre of Promenada Canany Thailand with US$95 million, in particular, an FDI project of Emerging Markets Group (US) in Van Don – Quang Ninh worth US$3 billion.

 

Real estate continues to attract FDI, especially with political stability, high GDP growth rate and better living conditions, Vietnam will be a bigger market for real estate.

 

According to Mr Vo Tri Thanh, Deputy Head of Central Institute of Economic Management, real estate sector relating to offices, tourism, industrial zones, infrastructure will have great potential as the economy is entering Phase 2 of development relying on productivity, quality and compositeness. Therefore, it is logical that investors are investing in real estate.

Though the real estate market has been expanded, foreign investors still have many difficulties in access to land and project approval.

 

Foreign investors are somewhat bewildered at high rate of suspended projects. In Ho Chi Minh City alone, 40 FDI projects with total registered capital of US$1.77 billion have their licenses withdrawn due to slow implementation, licenses expired or bankruptcy of parental company.

For its case, Rong sea and eco-tourism project in Quang Nam worth US$4.15 billion of Tano Capital, LLC and Global C&D, Inc., after receiving license could proceed only one month with inaugural formalities.

 

 As most of big real estate and hotel projects are located in big cities as Hanoi and Ho Chi Minh and areas without master plan, the land clearance becomes difficult and projects suspended. Creative City project in Phu Yen of Galileo Investment Group, Inc. (US) with investment in Phase 1 of over US$1.68 billion could only start the project in few late months of 2009.

 

As investors always look for safe or low-risk investments, good macro policy will attract FDI for efficient and sustainable development. Business environment is essential for investors to increase their investments in Vietnam. It is some how encouraging that foreign investors rated Vietnamese business environment from 7-8 points in 10-point scale.

Vietnamese business environment is higher than other countries. I rated 7 points. Therefore, we decided to increase our investment in Vietnam. Our company has just signed a project agreement worth US$170 million to build high-class apartment buildings in Hanoi. Financing and real estate sectors are very important for economic development in Vietnam.

 

Project implementation in Vietnam is longer than other countries. To overcome it, leading officials should set examples in simplifying and clarifying project endorsement process so that investors are aware of investment requirements without unexpected incidents. It would improve and accelerate the development of real estate sector. Regarding high banking interest rate, the real estate market is very sensitive to Vietnamese monetary policy. Therefore, high interest rate will adversely affect the real estate market. Higher expenses will have impact on project development and increase prices of real estate.

 

In 2010, FDI in Vietnam will increase for two reasons: One, investors have more confidence in Vietnamese economy; Two, Vietnam has favourable conditions such as political stability, abundant human resources, increasingly improved infrastructure and especially government commitments to encourage foreign investments. With 10-point scale, we will rate 8 points for Vietnamese business environment.

After the economic crisis, Vietnam should have an orientation for foreign investments. Currently, the biggest part of investments focuses on real estate, resorts and gastronomy service. In 2011-2015, there will be a planning for FDI investments. Foreign Investment Agency will prepare a list of key projects calling for investments in such areas as high technology, bio-technology, seaports, airports, energy, schools, hospitals, and mineral, agriculture, forestry processing industries. Preferential policy will also be applied, for examples, exempt of land rent for BOT projects, high-profit projects for BT investments (in real estate), tax exempt for projects in certain sectors.