Abundant real estate opportunities surround HCMC

By Nguyen Van Hau*

Wed, May 4, 2022 | 7:08 am GMT+7

In provinces neighboring Ho Chi Minh City, legal proceedings for projects are settled in 1.5 to two years, whereas in the city, it takes four to five years.

Furthermore, pricing and abundant land funds there assist businesses in developing diversified products, saving extra expenses, and increasing profits.

Following information on state plans to turn some HCMC areas like Can Gio, Cu Chi and Binh Chanh into districts or upcoming transport infrastructure projects, housing and land prices there have soared by 20 to 50%. Cu Chi and Hoc Mon are showing signs of a land fever.

In the past few years, many real estate projects in HCMC have stalled partly due to legal entanglements. Only a few projects are eligible to open for sale each year.

According to the Department of Construction, only 31 housing projects, with 15,135 apartments and 1,617 townhouses, in HCMC are qualified to open for sale products that will take shape in future. In the past six years (July 2015 to June 2021), the metropolis allowed only 339 eligible projects to do so. The small figure falls far short of demand.

Even for projects like the one our company Asian Holding is working on in HCMC's Binh Chanh district near National Highway 51, handling legal procedures is complicated and extremely slow.

Our company concluded negotiations and began cooperating with partners four years ago since we received in-principal agreement from city authorities, but what has been completed so far is merely planning approval for the area.

Moreover, localities that are satellites to HCMC are rolling out the red carpet to encourage investments from big companies, a more open market.

Aside from legal complexity, HCMC basically has had no land fund to develop real estate projects since 2019. Especially in the apartment segment, with land funds largely in the hands of big real estate companies, legal proceedings are too slow.

Thus, major real estate firms like Vingroup, Novaland, Dat Xanh, Hung Thinh Corp, Phu Dong, and others have shifted to satellite provinces like Long An, Binh Duong, Dong Nai, Ba Ria-Vung Tau, and now Binh Phuoc, in search of investment opportunities and land funds. Apart from land funds, pricing is also a strength of satellite provinces.

Among factors that pushed real estate companies to leave the HCMC market, the most important is the ideal profit margin of real estate in nearby areas, which is higher than that in the city.

The capital cost of project investments in areas adjacent to HCMC remains low. The size and abundance of land in these locations are ideal for diversifying products and meeting diverse tastes among investors and customers.

Aside from the segment of land with infrastructure, which is robustly developing in areas neighboring HCMC, provinces near rivers, lakes, or hills would draw many firms to invest soon.

As people's attitudes on owning a "second house" are changing due to the Covid-19 pandemic, "green", utility-driven and location-related elements would certainly boost a project.

While considering how to develop large-scale, high-quality urban projects, provincial authorities must mull over how to attract residents and experts to these areas. The fact is there are residential developments and urban districts already in place, but no one lives there.

For areas neighboring HCMC, the demand to buy real estate as an investment is higher than for residential purposes. The bank lending rate is currently low, while many people are pouring money into real estate and securities. Thus, satellite areas are more suitable to invest. As a real estate developer, I would like to advise investors to develop quality mega urban area projects.

State investment capital is being channeled into transport infrastructure in satellite provinces. Expressways HCMC - Thu Dau Mot - Chon Thanh, Bien Hoa - Vung Tau, and Ben Luc - Long Thanh, road upgrading and expansion projects, as well as those that bolster regional linkages would make travel more convenient in the next few years. This is a powerful incentive for real estate developers to become the "early birds" in satellite provinces.

*Nguyen Van Hau is General Director of Asian Holding Real Estate JSC