Real Estate Attracts High Level of FDI into Vietnam

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HCMC – With 20 newly licensed projects worth a total US$1.13 billion, Vietnam’s real estate sector has attracted the second highest amount of foreign direct investment (FDI) in the country.

According to Vietnam’s Ministry of Planning and Investment, in the first seven months of 2014 foreign direct investment for both new and expansion projects amounted to US$9.53 billion. The processing and manufacturing industries attracted the highest level of FDI.

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While South Korea is Vietnam’s biggest foreign investor, Singapore and Japan are the top two investors into the real estate sector. In the first half of 2014, Singaporean investors poured US$513 million into a variety of projects in Vietnam. Linson Lim, CEO of Keppel Land Vietnam, a Singaporean investor with many projects in Vietnam, reaffirmed that he has always believed in the growth potential of Vietnam’s real estate market. His company just increased their shares from 55 percent to 98 percent in The Estella apartment project in Ho Chi Minh City.

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Additional notable property projects for 2014 include:

  • The Alma Resort in Central Khanh Hoa Province – a US$300 million investment by Israel’s Alma Group;
  • Hanoi West Lake apartment complex project  – a US$234 million investment by Hong Kong’s Sun Wah Vietnam Real Estate Limited; and
  • Ward 22 Binh Thanh District apartment complex project – a US$200 million investment also by Sun Wah.

Foreign investors tend to focus on offices, hotels, and residential real estate. As Vietnam is becoming a tourist hub in Southeast Asia, the demand for hotels is rising and FDI inflows into this field are also increasing. Additionally, Vietnam’s young population and growing middle class have created many opportunities for residential real estate investors.

Both the housing sector and the office and residential building sector are expected to see rising prices at the end of this year, making the real estate market much more attractive to foreign investors. According to Savills Vietnam, the supply of apartments in Hanoi has not yet met the real market demand. Savills forecasts that the housing segment for middle-income earners will become hot in the remaining months of the year. In Ho Chi Minh City, even though office rents and sale of real estate have not yet increased significantly, there are positive signs of recovery.

With the gradual completion of infrastructure projects, road connectivity among cities and provinces has also been spurring the recovery of Vietnam’s real estate market.

Vietnam’s government has been making a number of legislative efforts to jumpstart the real estate sector. Recently, the Ministry of Finance issued Circular 48/2014/TT-BTC guiding the implementation of Governmental Resolution 01/NQ-CP regarding the extension of the payment of land use charges. The Circular took effect on June 10, 2014, and allows many real estate projects to delay the payment of their land use charges for up to 24 months.

Additionally, at a National Congress meeting on June 18th, many Congressmen expressed their approval towards the 12th Draft Law of Residential Housing, which proposes more opportunities for foreign organizations and individuals who wish to purchase housing in Vietnam. The draft that allows foreigners to purchase property in Vietnam also helps increase the demand and create incentives for investors to pour capital into the market.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email vietnam@dezshira.com or visit www.dezshira.com.

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