Developers cast net in new capital

Former vice minister of Natural Resources and Environment Dang Hung Vo said that finding new investment capital sources was a “must-do”.

Vo’s proposed solutions included a rethink of current regulations to permit foreign banks to engage in mortgage activities.

“The investment flow from foreign bankers is one of the most important alternative solutions for the thirsty domestic investment market,” Vo said.

Currently, the Vietnamese government does not allow these mortgage activities because it does not recognise the ownership of foreigners who are not investors.

Vo said mortgaging by foreign banks would create strong investment flows to the domestic market and also meet strong demand from the stock market, since it would pave the way for more use of the mergers and acquisitions  between Vietnamese and foreign companies.

He said that setting up the policy of allowing mortgages from foreign bankers might be difficult but that it was also a must. This was especially true as Vietnam was now a member of the World Trade Organization, he added.

The second way to mobilise investment flow to the domestic real estate market was to increase the attraction of foreign direct investment to the real estate market. In order to create favourable conditions for attracting foreign investors, Vo said one of the most important factors was to create favourable conditions  for land access.

It was also vital to find ways to make foreign investors pour more real cash into the country, but not from selling their products to mobilize cash from domestic buyers as currently, when project was still on paper.

The third solution for the cash starved market was to allow developers to sell off the plan, said Vo.

 According to the Ministry of Construction, in the next five years, Vietnam’s real estate market will need about $20 billion investment capital annually to establish around 400 billion square metres of accommodation. The mobilisation of capital from for real estate businesses is conducted through several channels including capital contribution contracts with customers, bonds, stocks, foreign investment funds among others.

However, the mobilisation of capital for property channels is also very limited. Real estate investment products still fail to mobilise idle funds. The majority of funding for the property marketderives from the credit and banking system and through raising funds directly from home buyers in the form of a capital contribution contract.