Developers jump start southern city projects

Developers say building depends on policy shifts that make it easier for them to access capital

Among these returnees, Taiwanese firm Fu Tsu Construction Corporation has put its Saigon Happiness Square project back on track. The $150 million project has been on hold for 11 years, after being forced into stasis by the Asian financial crisis
Fu Tsu subsidiary Fei-Yued Vietnam will develop the project on a 2.4 hectare block, which will rise into two 14-storey office buildings, a trade centre, four apartment buildings of 22-24 stories, a hotel, and an underground parking lot.
Fu Tsu chairman Lin Chih Sheng said that the company has named C.Y. Lee, designer of the tallest building in Taiwan, as the design consultant for the project. “We want to develop the project as an architectural landmark in Ho Chi Minh City,” Lin said.
The first phase of the complex, which includes the two office buildings and commercial centre, should be finished within 24 months.
South Korea’s Kumho is another returnee. The firm will take over a 35 per cent stake from local partners, Saigontourist and the District 1 Housing Development Company, to go it alone on the once ailing Asiana Plaza office block. The $223 million project was licensed in 1996 and involved developing a 13,600 square metre complex, within the Le Duan, Hai Ba Trung, Nguyen Du and Le Van Huu street block. It includes an apartment building, a five-star hotel and retail outlets.
Meanwhile, several Vietnamese companies have moved to buy out foreign partners in a variety of stagnant joint ventures. Gemadept, Vietnam’s largest shipping agency, has bought out the 45 per cent stake held by Hong Kong’s Keangnam Enterprise in the Le Loi Plaza; a stalled 25-storey office building project in Ho Chi Minh City.
Foreign Trade Development & Investment Corporation (Fideco) recently announced it would resume lone development of an 18-storey office building, after cashing out VSC Properties of Thailand from the Building Investment & Services (BLS) joint venture.
Local firm A&B has taken over the 75 per cent stake formerly held by Hong Kong firm Crystal Centre Property International Ltd in a joint venture with Saigontourist to develop a 25-storey office building adjacent to the five-star New World Hotel Saigon.
Ho Chi Minh City is mulling over plans to set up a housing development fund to generate long- and medium-term investment for housing projects, a move that is expected to revive the dogged real estate market.
“The fund is vital cause in the city’s real estate development, which has ground to a halt and demands significant investments to expedite housing projects,” Vice Municipal Mayor Nguyen Van Dua said at a recent meeting on mobilising funds for the real estate market.
He asked the Ho Chi Minh City Economic Institute (HEI) to work with the municipal Department of Finance and other agencies to map out plans for the fund.
Dr Tran Du Lich, head of the HEI, said Singapore’s Housing Development Bank would be a good model for the city to follow. Accordingly, an investment fund of this kind would sell redeemable trust certificates or trust units to the public to pool money for property projects. He added that the fund could raise further capital by selling public land.
“We will seek approval for the securing of mortgages and the establishment of a real estate investment trust on a trial basis due to the absence of relevant regulations. This is an urgent requirement,” he said.
He also called for policies encouraging investors to cooperate on housing projects. It was necessary to allow investors to transfer ownership of housing projects to others, he said, adding that such a provision would help bring financially strong companies into real estate development.
Nguyen Van Khoi, director of the Housing Investment and Trading Joint Stock Company, said property developers were becoming tied to projects that demanded huge investment and from which they could not make significant returns.
“Investors have spent large sums securing land, paying compensation and site clearance fees while seeking bank loans for ongoing development. Now they are facing further challenges arising from policies that are unrealistic and unclear,” Khoi said.
“The local government has asked real estate companies to join in the development of residential areas and housing programs for low-income earners, but authorities have not offered assistance with resolving capital shortage problems,” he said.
Dang Cong Thuyen, the director of Him Lam Company, said local companies are in dire need of capital for site clearance and infrastructure development, but are refused loans by banks as they require land-use rights certificates as collateral. However, the city government does not grant such certificates until site clearance and infrastructure are complete.
“The city and the Ministry of Natural Resources and Environment should seek measures that facilitate bank loan accession. If not, hundreds of property companies, especially small and medium size firms, will go bust,” he said. However, bankers claim it is lending policies, not the fear of risk, that keep them from lending to housing developments.
Pham Van Thiet, deputy chief executive of Asia Commercial Bank (ACB), a large local bank, said the lack of security precluded the development of a financial market for real estate. He said ACB invests millions of dollars in government bonds, which are easily traded if needed, but would not consider purchasing housing bonds issued by the city, as they would not be liquid.
He said if the city issued housing bonds whose safety and liquidity was ensured, a large number of banks and financial institutions would get involved, thereby extending a huge financial option for housing development
The city has about 1,500 real estate companies, most of which are small businesses. The city has allocated more than 13,000ha of land to investors since 2000.




No. 772/July 31-August 6, 2006