Real estate developers report losses, give up projects

Published: 08/06/2011 05:00



VietNamNet Bridge – The low purchasing
power plus the credit tightening policy have both have put a hard pressure on
real estate companies and pushed them to them to the verge of bankruptcy.

Big difficulties make real estate
developers shrink

In fact,
real estate companies once faced the credit tightening policy in 2008. However,
they still could survive the difficulties. Meanwhile, analysts think that the
current difficulties are much bigger than that in 2008, which have made many
real estate developers financially exhausted.

Le Hoang
Chau, Chair of the HCM City Real Estate Association, also said that the
challenges faced by real estate companies in 2010 are as twice as bigger than
in 2008, and that it is very likely that many of the companies will get

Chau said
that the target enterprises have set up for themselves is to survive, not to

“Too many
waves have rushed down which have made real estate developers flounder,” Chau
said. “The bank loan interest rates have become unbearably high, while the
purchasing power is too low”.

In order to
boost sales, real estate developers have been trying to run sales promotion
programs. They offer flexible payment methods, offer gifts in cash, saving
books, or even give gold to buyers. However, the promotion programs do not help
much. People do not want to buy houses and apartments at this moment, because
they believe that in the gloomy market, the prices would further decrease.
Meanwhile, those, who really have the demand, cannot buy now, because they
cannot pay the overly high bank loan interest rates.

Ashton, Managing Director of Savills Vietnam, agreed that the current
interest rates are now overly high, which is a big challenge to investors.
Especially, even if investors accept the high interest rates, they would still
find it difficult to access bank loans. Especially, commercial banks have urged
real estate developers to pay bank debts, so that they can reduce the
outstanding loans to non-production sectors to 16 percent as requested by the
State Bank

The laden difficulties
can explain why many real estate companies have reported losses or sharp profit
falls for the first quarter of the year.

Phat Dat
Company, for example, has reported the loss of 14 billion dong for the first
three months of the year. Van Phat Hung has reported the modest profit which is
just equal to 14 percent of that in the same period of the last year. Can Nha
Mo Uoc Investment Company has reported that the post tax profit of the company
dropped by 75 percent.

Chau said
that many companies have to delay their projects because of the lack of
capital. Others have to transfer projects or bargain away in order to get money
which allows them to maintain business.

Besides the
projects which have been transferred recently, Chuong Duong Company is following
necessary procedures to transfer the Thu Duc Apartment project to another
partner. After purchasing Phu Gia Hung Apartment project from Ha Thuan Hung
Company, Dat Xanh Group has got a project in Thu Thua district in Long An
province which has the total area of 20 hectares.

Van Phat
Hung Company is planning to sell a part of its land fund and transfer some
projects in districts 2 and 9. Most recently, Singaporean CapitalLand, through
its subsidiary - CapitaValue Homes Ltd – has purchased 70 percent of the stakes
of the project on building 974 apartments in Binh Trung Dong ward from Khang
Dien Saigon Company.

Difficulties serve as the
opportunities to filter businesses

believing that the tightened credit would be a big challenge to many enterprises,
experts think that this is now the golden chance for the market to “filter
enterprises”: the enterprises which have short term investment strategies and
weak experience and financial capability will be killed, while only the
strongest can survive.

Nguyen Thai, a senior executive of CB Richard Ellis, a real estate service
provider, said that there must not be a real estate market, in which all can be
investors. This must be the “playing field” of the enterprises which have
experiences and financial capabilities.

Ashton from Savills Vietnam
also said that there always exist opportunities. In the difficulties, many
companies would get exhausted, while many others would prosper thanks to low
cost projects

to the HCM City Construction Department, there are some 6000 real estate
enterprises, 1 percent of which are foreign invested.

Source: TBKTSG

Provide by Vietnam Travel

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