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Investors face deadlock in real estate market

Updated: 14/10/2013 | 11:06:41 AM
Many domestic and foreign investors, individuals and companies are struggling to avoid financial ruin as a result of Vietnam’s real estate debacle.

Public attention recently focused on the famous artist Phuoc Sang, following claims that he owed VND5 billion ($238,000) to his lender. Although the dispute was resolved between the two sides, it was reported that Phuoc Sang’s debt resulted from his real estate investments which he could not divest.

Phuoc Sang is not alone. Many other individual investors are facing bankruptcy after pouring large sums of money into real estate market.

Dang Thi Kim Dung, an former employee of the Seafood Import and Export Association, went to a darker extreme. She used fake documentation to take a total of VND42 billion ($2 million) from customers who made deposits to buy a home in Van Canh Residences project in Hanoi. Dung was later imprisoned for fraud.

For a long time, the big benefits from the real estate market had made every people to jump into this field. The market was so popular market that there is a slogan “every family trades property, every person trades property.

Big companies have also been hammered by real estate investments that plummeted.

Mai Linh Group, the second-largest taxi operator in Ho Chi Minh City, is poised to sell 1,000 old cabs next year to pay its investors.

Company’s chairman Ho Huy confirmed that the company had mobilised some VND500 billion ($24 million), from 800 individual investors to fund its operation but is now financially incapable of repaying them on time. The main cause for the company’s financial crisis, Huy said, was the use of short-term loans from investors to invest in long-term projects, including real estate.

Huy said the company had failed to repay debts to investors over the last three months.

Meanwhile, Vinaconex – one of the leading investors in real estate and construction materials — recently decided to quit two major development projects: the Splendora and ParkCity.
Vinaconex said it is withdrawing from these two projects to concentrate on its core field – construction material production - rather than spread its resources too thinly.

Questions have been raised about the capability of Vinaconex to continue these projects in a difficult time currently. Toward the end of 2012, reports released by this company showed losses of dozen thousands of billions Vietnamese dong.

Economist Pham Chi Lan said there were numerous investors who are in very difficult circumstances after jumping into the real estate field. “This is an unhappy story for enterprises, but we all know that risks are waiting for any company when it comes into fields which are not their core business,” Lan said.

“Mai Linh would not have been in such bad circumstance if it ignored real estate market and focused only on its core business – transport operation,” Lan added.

After achieving some success in real estate, Lan said, companies needed to review all of their business, in order to know when to pull back.

A representative from Son Ha International Joint Stock company recently released that it would divest some real estate projects, in order to focus more on its retail business.

Son Ha now owns different real estate projects in Hanoi such as Kien Hung – Ha Dong residences, Paradise Garden, and an office building for lease in Huynh Thuc Khang street.

Another big investor, VinaCapital has confirmed plans to put many of its many premium property assets in the nation up for sale. VinaCapital said that it wanted to restructure its portfolios in an aim of higher benefit.

The company now is offering stakes for sales in other projects such as Metropole Hanoi, Sheraton Nha Trang and Movenpick Saigon and several other residential developments.