With local capital sources sometimes reliable, sometimes not, real estate firms hope to seek foreign capital to get real estate moving again.

According to developers, a five-star hotel and a complex of office buildings with trading centre will soon go up next to Thanh Nhan Park on Tran Khat Chan Street in Hanoi. Apartment blocks for low-income residents will also be built on 15ha in Thanh Tri District, and new residential areas will soon be available in Dong Anh District, with some funds to refurbish older houses in the inner districts. But all of those projects need capital.

Real estate projects in HCM City and Hai Phong are hungry for funds as well, and some companies have taken advantage of the situation to act as brokers calling for foreign investment.

In late 2005, the HCM City Real Estate Association organized a trip to Singapore and Malaysia for a group of 40 developers, and next month the Investment and International Urban Development Joint Stock Company (IDJ) will bring a group of real estate firms to present projects south again.

Though organizers are optimistic, analysts are sceptical. According to an official at the Ministry of Planning and Investment (MPI), investors such as Keppel Land of Singapore have a list of projects calling for investment in Vietnam but remain reticent. Under the agreement between Vietnam and the European Union (EU), European investors are permitted to conduct wholly foreign-owned real estate projects in the country, but for the past two years no such project has been carried out.

After the trip to Singapore and Malaysia last year, the HCM City Real Estate Association said that the results of the trip were very good but mentioned nothing about specific projects. Pham Sy Liem, Deputy Secretary General of the Vietnam Construction Federation, said the greatest challenge for foreign partners in Vietnam is site clearance and compensation for site clearance, which is difficult to forecast. “Compensation for site clearance changes once a year or even twice a year, so how can we attract investors?” he asked.

Another problem: in large cities like Hanoi and HCM City, investors can’t find land in favourable locations. The Ever Fortune group, after its success in the Pacific Palace project on Ly Thuong Kiet Street, Hanoi, wants to continue investing but can’t find a suitable site, often a precondition of projects on the 'list'.

“In the field of real estate, investors will go to a potential market. It is important to give them incentives to stay,” said Nail Thurson, Executive Manager of the Hanoi Lake View building. That proved true with the West West Lake project. Korean companies asked permission to invest four years ago and just received a licence for the 200-ha project.

To attract foreign investors, Hanoi officials are set to create incentives this year. Tran Duc Vu, Deputy Director of the Hanoi Department of Planning and Investment, said that the city would pay for construction works beyond the retaining wall on certain projects, help investors with site clearance and ensure the one-price mechanism for services. In addition, the city will build three belt roads, three routes for tramcars and three bridges across the Red River to meet basic requirements for developments.

HCM City also plans to issue regulations to further attract foreign investment, including preferences for real estate projects. The city will announce annually the list of real estate projects calling for foreign investment and establish a company specializing in preparing land and conducting public services related to land.

Peter Dinning, Director in charge of real estate investment at VinaCapital, is hopeful that the real estate market will open further. If the Vietnamese economy continues to grow, urbanization continues and government policy catches up with current practice, the market will thrive, he believes.

Vinacapital is raising US$50mil to establish the Vinaland fund to invest in real estate projects in Hanoi, HCM City and the central region. After the success of the Indochina Land Holding fund, Indochina Capital also plans to raise more capital to invest in real estate.

Source: Vietnamnet, 21/02/2006