Real estate ranks second in attracting foreign direct investment

Capital flows from Japan, Singapore, South Korea, etc. continue to be poured into the real estate market. More and more foreign-invested real estate projects are springing up compared to the previous period.

Internet photo

According to the Foreign Investment Agency (Ministry of Planning and Investment), in the first 10 months of 2016, the real estate business sector still maintained the second position in attracting foreign direct investment (FDI), just behind the processing and manufacturing industry.

There were 46 newly licensed projects with a total newly registered and increased capital of over 982 million USD, accounting for 5.5% of the total registered investment capital. This figure is less than half of the total investment capital attracted last year of 2.39 billion USD.

However, according to the observation of Ms. Duong Thuy Dung, Director of Research Department of CBRE Vietnam, although the number of commitments is lower than last year, we need to look at quality rather than quantity. Because over the past year, the disbursed capital flow is higher than the commitment. Meanwhile, in the period of 2007 - 2008, the committed capital in the real estate sector sometimes reached 25% of the total FDI capital, but the disbursed capital after that was very small.

Figures from the Ministry of Planning and Investment also show that Japanese, Korean and Singaporean investors are quietly pouring capital into the Vietnamese real estate market. Korean investors continue to lead with newly granted and increased capital to date of 5.62 billion USD, accounting for 31.9% of total investment capital in Vietnam. Japan is in second place with 1.92 billion USD, accounting for 10.9% of total registered capital and Singapore is in third place with 1.73 billion USD, accounting for 9.8% of total investment capital.

In fact, the market is experiencing a strong trend of business cooperation between Vietnamese real estate companies and Japanese, Korean and Singaporean people, especially in the Ho Chi Minh City market. We see that there are more foreign-invested real estate projects springing up than in the previous period.

In addition, foreign investors are also quite sensitive to the market. They not only participate in the high-end and luxury segments as before, but also promote cooperation to develop mid-range products, to meet the housing improvement needs of the majority of Vietnamese people, meeting the housing standards of Japan, Korea or Singapore.

Previously, this capital flow could be seen in many projects in Ho Chi Minh City such as Creed Group investing in City Gate of Nam Bay Bay, cooperating to develop the 500 million USD River City project with Phat Dat and An Gia Investment; or Hankyu Realty and Nishi Nippon Railroad cooperating with Nam Long.

Now, the Japanese continue to make moves in this field. Toshin Development recently proposed to invest in the Ben Thanh underground shopping mall project. JICA also just informed that the Japanese will help Vietnam invest in a flood prevention project in Ho Chi Minh City worth 211 million USD, and start implementation in 2017. In return, these businesses will then receive land worth equal to the total investment of the project, to develop a 20-storey apartment building.

A series of other Japanese names are eyeing to develop high-end real estate in Ho Chi Minh City by cooperating with local enterprises. For example, Maeda and Thien Dac are developing the high-end apartment project Waterina (District 2), Global Group is joining hands with Nha Mo Joint Stock Company to invest in a project in District 8; Pressance Corporation signed a cooperation agreement with Tien Phat to jointly buy a project and build 500 apartments, with a total investment of about 1,200 billion VND (including land cost).

In addition to new factors, many large corporations from Korea or Singapore are also accelerating their investment in this field. Notably, The Global (Japan) recently invested in cooperation with Nha Mo Joint Stock Company (Nha Mo) to jointly develop a project in District 8; Singapore's CapitaLand recently acquired a project in Cau Kho area (District 1) worth nearly 52 million USD to develop 2 apartment towers, with a scale of about 300 apartments.

Two Japanese investors, NNR and Hankyu, are also cooperating with Nam Long to develop affordable apartments in the East. Meanwhile, Keppel Land is also "joining hands" with Tien Phuoc to develop a number of mid-range apartment projects.

It is clear that among the capital flows into real estate, Japanese, Korean and Singaporean are always at the forefront of this investment wave. The middle class in Vietnam is forecast to have a strong growth rate in the next decade. According to HSBC, the rate may be the fastest in Southeast Asia, with the prospect of increasing from 12 million (in 2012) to 33 million people in 2020.

This will lead to an increase in demand for housing, education, healthcare, commercial services, etc., to improve the quality of life. Therefore, in recent years, domestic and foreign real estate giants have continuously poured capital into this market. The prospects of the high-end housing and resort real estate segments continue to be assessed as having great potential for breakthroughs.

According to Cafef