Foreigners are no guarantee in the property sector

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Several years ago, Hanoi’s real estate market witnessed a string of team-ups between local developers and foreign firms, intending to pool resources and expertise for project execution.

For instance, private company Hoang Thanh Investment and Infrastructure Development JSC shook hands with Singaporean CapitaLand to expedite the Mulberry Lane project in Hanoi’s suburban Ha Dong district.

Likewise, Vinaconex-Hoang Thanh JSC stroke a cooperative deal with Perdana Park City from Malaysia, to develop the ParkCity Hanoi hi-end residential project, also in Ha Dong district.

The list goes on, featuring an endless stream of big guns, including leading state-owned contractor Vinaconex and Korean Posco E&C, who formed a consortium to implement Splendora North An Khanh New City project, or a joint venture of Malaysian Berjaya and local Handico 12 to carry out Gardens City project, to name but a few.

Teaming up with foreign partners brought the projects enormous added values at first, particularly in terms of pricing.

Accordingly, in 2009, when the Mulberry Lane hi-end residential project was still on the drawing board, the investors willingly paid 50-60 per cent higher than for similar projects in the vicinity, more than VND30 million ($1,370) per square metre.

At Splendora, due to the South Korean partner’s engagement, investors willingly accepted a price difference of several billions of Vietnam dong (dozens of thousands of US dollars) for a villa in the project, though they were highly overpriced compared to local firms’ projects positioned in nearby urban areas.

In contrast to investors’ initial expectations, not all of these projects produced benefit, despite the involvement of foreign partners.

Particularly, nearly a decade after kicking-off construction works, only a fragment of Splendora New City has been completed.

Albeit the Korean partner is a powerful group, pushing up the project’s pace has encountered hardships, partly because the two equally-involved parties failed to reach a consensus on project deployment.

Similarly, lasting contradictions in project implementation caused long delays to ParkCity Hanoi and triggered complaints from customers. The problem came about regardless of the foreign partner’s ample finances.

Not entirely typically, the story ends on a high note. After long delays, the local partner ultimately accepted to pull out of the project, transferring the entirety of the stakes to the Malaysian partner.

After the acquisition, Perdana Park City quickly pushed progress, completing the first phase and handing over apartments to customers. Following the initial success, the developer has engaged in the construction of the second phase.

Customers at the Hanoi Gardens City still found their investment a bitter pill to swallow, as the project has been in delay for many years now, despite their trust in the foreign partner’s hefty finances.