The frozen property market has thrown many companies into a tailspin in the past two years as commercial banks have a warier attitude toward lending to property projects involving local cash-strapped developers. Searching for foreign funds is seen as an alternative for property developers to get out of the doldrums.

Major local property development companies believe that teaming up with financially strong foreign companies is a wise decision under the current circumstances.

Le Chi Hieu, general director of Thu Duc Housing Development Joint-StockCo. (Thuduc House) in HCM City, says that given the strong financial position of foreign partners, big-ticket property projects can easily get rolling.

In addition, local companies will have the opportunity to access latest design and construction technology, and good management practices when getting involved in joint ventures with foreign partners, he says.

Hieu's company and its Korean partner Daewon are developing a high-class apartment building project, Cantavil, on one hectare in HCM City's District 2.

Daewon has contributed both finance and know-how to attract local and foreign home buyers. In fact, Koreans who live and work in the country account for half the number of people who have registered to purchase apartments in the Cantavil project.

Due to the lack of funds, local investors have been unable to pay site clearance compensation for affected families on time, thus leading to the slow progress of their projects and the loss of customer confidence. This is the vicious circle in which many local property developers in poor financial condition are embroiled.

A HCM City Service of Planning and Investment source says that in recent times, many foreign companies and investment funds have come to the city to explore business opportunities in the property sector, such as a low-cost housing project the city is implementing for the benefit of low-income people.

Six business delegations from Korea, Malaysia and Taiwan have in the year to date visited the city to learn about the property market as well as Vietnamese regulations on real estate investment and development, according to the HCM City Service of Construction.

Trying before trusting is a philosophy of foreign property investors. This means that they try to find the right partners for the right projects, instead of partnering with any local companies that have projects. Therefore, only prestigious local companies can be the targets of foreign investors.

Figures from the HCM City Service of Finance show the city now has more than 1,000 property projects requiring over VND136tril (US$8.5bil) and occupying some 6,000ha of land.

Many of them are moving at a snail's pace due to limited finance, so this is an opportunity for interested foreign companies to participate. The city government has given priority to attracting foreign investment in the real estate sector this year and thereafter.

Late last year, the city introduced 132 projects in need of foreign investment, with most of them relating to infrastructure and property development.

However, the biggest hindrance to luring foreign investment is the unpredictable cost of site clearance. Pham Sy Liem, deputy general secretary of the Vietnam Construction Association, says many foreign investors walked away after they surveyed the projects they wanted to get involved in since it was extremely hard to project a budget needed for site clearance compensation.

As a rule, actual compensation payments are always higher than estimated. This explains why most foreign investors and investment funds have joined property projects in major cities like Hanoi and HCM City after local partners made land ready for construction.

Source: VietnamNet