Property developers suffer amid poor market

Hoang Anh Gia Lai Joint Stock Company, which is developing a range of apartment projects in Ho Chi Minh City and Danang,  declared an after-tax loss of VND114 billion ($5.5 million) in the second quarter.

Industrial property developer Kinh Bac Corporation posted a total loss of VND92.6 billion ($4.47 million) in the first half of the year.

Ho Chi Minh City-based developer Intresco also reported a loss of VND17.2 billion ($831,000) in the first six months. 

Others also saw profits plummet in the first half.  Hanoi-based Tu Liem Urban Development gained a profit of VND64.5 billion ($3.1 million) during the period, a drop of 80 per cent compared to the same period last year.

Higher borrowing costs as a result of the government’s tightening monetary policy and a gloomy real estate market with transactions at a standstill are attributed to lower profits and losses of listed property developers.

Top of the list of property firms with high liabilities is Hoang Anh Gia Lai which recorded a total debt of VND5,710 billion ($275.8 million) in its newly-released 2011 second quarter financial report. Sacomreal  had total debts of VND4,219 billion ($204 million). Other realty firms such as Binh Chanh Investment, Ho Chi Minh Infrastructure Investment, Hoang Quan, Nam Bay Bay, Quoc Cuong Gia Lai  and Van Phat Hung  also struggled with debts to the tune of hundreds of billiondong.

Vu Cuong, an analyst from SSI Securities Company said, alongside the low liquidity of property products, the high interest rate was the main reason for the high borrowing costs of property firms, leading to plummeting profits and huge debts.

In the second quarter of 2011 Hoang Anh Gia Lai’s borrowing costs were VND235.6 billion ($11.3 million), up fourfold year-on-year.

Sacomreal’s borrowing costs were VND78 billion ($3.7 million), up nearly five times year on year.

However, Sacomreal deputy director Nguyen Thanh Son said that while borrowing costs of listed property companies was high, they were not worried as most of their loans were long-term.

“If having good projects, we will still borrow money from banks to develop them,” said Son.

Phat Dat Corporation deputy general director Tran Thi Huong said financial resport figures did not tell the whole story when it came to the business status of listed property companies.

Huong said many companies only recorded their turnover for sales of residential units in their projects in financial reports when the units were handed over. However, they obtained cash for the sales beforehand. When the units were handed over, developers’ financial reports would record sudden high profits.

For instance, by the end of the second quarter, Phat Dat had sold more than 200 units in The EverRich 2 condominium project but the turnover was not recorded in the company’s financial report.