Nam Long: a successful case-study of affordable housing developer

On September 6, real estate developer Nam Long Investment Corp will launch the second phase of residential project Ehome 5 - The Bridgeview in Ho Chi Minh City.

Located in the second city’s District 7, just about four kilometers from the central downtown district, Ehome 5 - The Bridgeview is the fifth affordable housing project that Nam Long has been developing in Ho Chi Minh City over the past six years.

The real estate developer named its affordable housing projects under Ehome brand. This means Nam Long offers apartments to home buyers at three criteria in terms of economy, environment and efficiency.

Established in 1992 by architect Nguyen Xuan Quang, who is now the firm’s chairman, Nam Long has grown to be one of the leading real estate developers in Vietnam south. But unlike other real estate developers in Vietnam which focus on developing residential projects of hi-end segment, Nam Long has selected its solutions in affordable housing segment from early on.

The biggest business segment

Since 2008, when Vietnam’s real estate market was booming nationwide and most developers competed to introduce hi-end housing projects at skyrocketing prices, Nam Long went its own way to introduce Ehome brand, focusing on affordable segment to serve the need of middle and stable income home buyers. The movement was opposite to the trend of other developers at that time.

“When the market was booming during 2006-2007, we looked through other neighbouring markets and learnt that the real demand would make the huge demand, and we decided to focus on the segment with the bigger demand,” said Quang explaining why Nam Long had decided to invest in affordable housing projects rather than luxury housing projects.

Indeed, Nam Long’s strategic planning has helped the developer overcome the downturn of Vietnam’s real estate market in the recent years, when many developers were stuck in unmarketable hi-end projects while prices slid.

During 2008-2013, Nam Long developed five Ehome projects and sold out nearly 3,000 affordable apartments, pricing between $25,000 and $50,000 each. The prices equal three to five times the average annual income of most households in Ho Chi Minh City.

Just in 2013, the company sold out over 1,000 affordable residential units and in the first half of this year it continued selling additional 700 apartments to the market. This has contributed to fulfilling the estimated demand of about 70,000 housing units a year from low- to mid-income earners in the city.

At the present, the company’s markets broadly cover Ho Chi Minh City and other growing cities such as Binh Duong, Can Tho and Long An with the total land bank of up to 572 hectares.

From 2008 and 2018, Nam Long said it would continue to develop Ehome projects, providing around 14,000 apartments to the market, at an average of 2,000 to 3,000 units a year.

Nguyen Vinh Tran, CEO of Nam Long said that with the population of over 90 million with around two thirds at the ages of 30-40 years, and while the urbanlisation was still growing at a high rate, the need for housing in Vietnam was still huge.

“While the real estate market is slowly recovering, reducing some of the inventory in the hi-end segment, the affordable housing segment will continue to grow and lead the market in the next three years,” Tran said about the potential of the future real estate market.

When Nam Long started its affordable housing business in 2008, it faced little competition from other rivals due to others’ focus on hi-end projects with higher profit expectations.

But now, Tran affirmed that he saw a fiercer competition in the affordable segment, since more and more developers realised that developing affordable housing projects to meet the real market demand was more sustainable. However, he believed that competition will bring choices and better products for the homebuyers.

To make Ehome projects more attractive in the market, he said Nam Long tried to develop the projects as committed to home buyers and ensure the best quality products.

More partners

Being a fast-moving developer incorporated by 14 dynamic subsidiaries and associates, Nam Long is a preferred choice for both local and international investors. At present, Nam Long is partly owned by three international strategic shareholders including ASPL (an investment fund owned by a major Malaysian property developer, Ireka), Nam Viet Company, a wholly-owned subsidiary of investment bank Goldman Sachs, and Vietnam Azalea Fund of fund management firm Mekong Capital.

In February 2014, the International Finance Corporation (IFC), a member of the World Bank Group invested in Nam Long. IFC, in a statement released recently, stated that the $7.5 million equity investment would support Nam Long’s plan to build more housing units under its Ehome brand with the target of building 8,000 apartment units for mid-income homebuyers in Ho Chi Minh City by 2017.

In addition to the financing package, IFC is helping the company improve its environmental and social practices, and adopt higher energy-efficiency standards for its buildings. On one project, Nam Long is participating in a pilot programme to reduce energy consumption by 20 per cent and is a step toward raising industry standards and promoting sustainability and energy efficiency in Vietnam.

“Nam Long sets the quality benchmark for affordable housing in Vietnam with well-planned and well-built developments. By supporting the company, we help more of Vietnam's growing middleclass achieve their dreams of home ownership,” said Simon Andrews, IFC’s regional manager for Cambodia, Lao PDR, Myanmar, Thailand, and Vietnam.

Andrews added although the last few years there had been challenging for Vietnam's property market, there was still strong and fundamental demand for affordable housing as Vietnam continued to urbanise.

Needless to say, Nam Long’s executives understand this opportunity in the future, and they want to further expand the business in the segment they have insisted on.

Tran said the company was seeking to partner with more land owners or other financial investors to invest in more Ehome projects. “We have already had plans to develop projects of Ehome 12, 13 and 14 in the future,” he emphasised.