Local property developers are finding ways to survive the gloomy property market which experts say is unlikely to recover in 2012.
For instance, Ho Chi Minh City-based Construction and Investment 8 Joint Stock Company (CIC8) is encouraging shareholders to share the difficulties by using last year’s dividends to buy the unsold condos and land lots. But CIC8 will still pay cash dividends for those who don’t join the plan for one year with a monthly interest of 2 percent.
Phat Dat Property Development Corporation, which had to revise down its targets of VND1.1 trillion in sales and VND360 billion in pre-tax profits for 2011 to a meager VND148 billion and VND8 billion last November, has decided to cut down this year’ investment plan to VND400 billion from the initial VND1.4 trillion.
It has also announced its plan to invest in forest and agricultural tree planting projects, which is a brand new area of investment for this company.
Phat Dat Chairman and General Director Nguyen Van Dat said in addition to real estate, which will remain its core business, the company needs to look for new investment channels. Rubber cultivation is an option under consideration as this promises higher returns under current circumstances.
Dat said the development of the agricultural industry has been encouraged by the Government, so his firm may be able to break even after 6 to 7 years of rubber farming.
According to Phat Dat deputy General Director Vo Tan Thanh, investing in the agriculture sector is a great change for his enterprise, which is expected to help diversify investments and sources of incomes to pull the company out of the current woes.
Observers said the plan sounds rational but the question is whether leaders of Phat Dat will be able to persuade their shareholders to jump on the bandwagon.
Meanwhile, Hoang Anh Gia Lai, a well-known property developer, has already been involved in rubber plantation for years. The agricultural sector does not guarantee high and quick profits as the property sector, but it is highly stable.
The Agency of Housing and Real Estate Market under the Ministry of Construction pointed out an imbalance in the housing structure as reflected in a shortage of medium and small-sized condos with reasonable prices.
Among the 35,000 apartments completed before 2011 in HCMC, around 37 percent of them are classified as high-class, 38 percent as medium-cost and 25 percent as low-cost.
Le Hoang Chau, chairman of the HCMC Real Estate Association (Horea), said each housing segment has its own customers. The reality is that the medium-cost housing segment has been doing good business given strong demand.
Local traders said housing demand remains huge, especially for the medium-cost segment, in big cities. The lackluster property market over the past 4 years has eroded the confidence of individual secondary investors.
Therefore, numerous investors have managed to focus on medium and small-sized apartment projects, and adjusted existing schemes to meet the actual needs of consumers.
Saigon Thuong Tin Tan Thang Investment Real Estate Joint Stock Company (TTJSC) last week started marketing its Celadon City condo project covering over 82 hectares with about 7,000 units in HCMC’s Tan Phu District. To meet demand, the developer plans to narrow the area of each apartment from 90 square meters to 65 square meters.
Similarly, Thu Duc Housing Development Corporation (Thuduc House) will develop low-cost housing projects alongside the medium segment. These small condos cost VND500 million to VND600 million per unit.
Singapore’s CapitaLand is targeting middle-income people for its projects, with an apartment building in District 2 and another in Binh Chanh District.
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