Korean developers get feet stuck in cement

The rough and tumble of Vietnam’s property market has irked many Korean developers

According to Daekeun Chung, lawyer and deputy director of the law firm Logos, many Korean-backed projects have exited the market since the beginning of the year.

Among those, Chung said, were the Daewon Binh Khanh Investment Company, an affiliate of Korea’s Daewon that withdrew in early 2012 from the 2,200-apartment Binh Khanh Resettlement Residence Project in Ho Chi Minh City.

In another project, GS Cu Chi Development Co., a subsidiary of Korea’s GS Engineering & Construction Corporation, in March 2012 sold its 36-hole golf course project of 200 hectares in Cu Chi district, Ho Chi Minh City to Vietnam’s C&T Group.  

In August this year, the Ninh Thuan provincial authority also ended its agreement with MK International – a Korea company which planned to invest a $900 million eco-city project in Phan Rang-Thap Cham city.

And in September, Long An Provincial People’s Committee revoked investment certificate of a $52 million property complex invested by Korea’s DM Lee. The developer could not implement the project after three years since the certificate granted.

The main reason for these exits, Chung told VIR, was caused mainly by the global economic hardship. “We must be aware that the year 2012 has not been a good time for investors,” he said.
Meanwhile, many Korea-backed projects also are facing delays or conflicts with their house buyers.

A range of Korea’s backed projects is delaying. Among those Booyoung Vina in Ha Dong district of Hanoi has been delayed for more than six years.

Meanwhile, some other on-going foreign-invested projects are facing different troubles. Posco E&C, one partner in a joint venture to develop $2.1 billion Splendora in Hanoi, are facing heated complaints from its customers.

The customers claim they have incurred big losses because the consumer price index (CPI) was used as a barometer for setting the prices  in semi-detached and villas and that developers have used substandard materials.

According to Chung, the withdrawal by Korean investors would be good opportunity for Vietnamese and other countries’ investors to jump in those projects.

“Other investors may purchase the Korean investors’ projects cheaper than the original price, but the investors must think and evaluate why some Korean investors are withdrawing from the particular projects,” said Chung.

According to Logos statistics, Korean investors now still own eight projects relating real estate sector in big cities of Vietnam with total investment capital of more than $1.1 billion.