Cash is king as credit cuts sting developers

Cantavil Premier An Phu has secured 40 sales contracts

It is a trend reflected in a number of recent high-end residential projects in the country’s largest city.

Howang Yu Nam, general director of Daewon Construction Limited Company said: “We will go ahead with the project’s construction as scheduled and have just borrowed a small portion of the total development cost from commercial banks. With the estimated interest rate of about 20 per cent a year, it is too expensive for us to ask for credit from banks. In the mean time, we are having to finance ourselves for the rest, and for the majority of our investment capital in Vietnam.”

Daewon last week launched the model houses for its second-phase Cantavil Premier An Phu project at District 2’s An Phu ward. With total investment capital of more than $47 million, the Cantavil Premier An Phu project, which will complete in 2013, is to comprise two 36-storey blocks, featuring ground-level commercial and entertainment facilities, 200 luxury apartments and office space.

Selling prices for the second phase of Cantavil Premier An Phu will range from $1,580 and $1,900 per square metre, just a little higher than the average $1,200 level in the project’s phase one launch six years ago.

“These are very affordable prices given the increasing costs of materials and rising construction costs,” Nam added.

There have been 40 customers already signing contracts to buy apartments and more than 40 clients booking in advance to buy apartments at the complex. Especially, there have been some customers registered for the complex’s duplex-penthouse at price of up to $1 million.

According to the general director of a local real estate company whose high-end residential project is taking shape in District 7, the current economic situation is putting pressure on all developers in Vietnam. But those who can finance themselves and are well prepared can expect a bright future.

“We [the company] have financially prepared for this project for at least five years, so the current tighter credit situation has only hit us in terms of buyers’ financial capability,” said the director, who preferred to remain anonymous.

According to State Bank forecasts, total credit growth for the real estate sector this year will drop to 16 per cent against 23 per cent previously.

Currently, total outstanding loans for property sector account for 23 per cent of the banking system’s total credit. The number is expected to hit 22 per cent by the second quarter and 16 per cent by the end of this year.

And economic experts believe the real estate market will experience credit cuts of about $5 billion credit this year against 2010. Don Lam, managing director and founding partner of fund management firm VinaCapital, said in a recent interview with VIR that “real estate developers in Vietnam will be kings if they have cash.”

He said that properties prices were bound to rise for anyone with cash, which was completely out of the government’s recent tightened monetary control, could make the most of future market growth.