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 Real estate still magnet for FDI.

Though overall foreign direct investment (FDI) attraction in Vietnam declined strongly in the first six months of this year, real estate and construction sectors continued to see strong FDI inflows.

According to the Foreign Investment Agency under the Ministry of Planning and Investment, there were 17 new projects in the real estate trading sector with the total newly registered and additional capital of US$692 million, an increase of 65% from the same period of 2013. In terms of value, the sector ranked second behind the manufacturing and processing industry only.

More foreign investors also joined the construction industry during the period, pouring US$465 million into 62 projects, up 520% year-on-year.

The figures suggested that many property groups from Korea, Singapore, Hong Kong and Japan were trying to complete projects underway or develop new projects in the country after staying quiet for a long time

Notably, China’s Texhong Group Joint Stock Company won approval to develop Hai Ha Industrial Park (IP) in Quang Ninh Province. The project will cover 660 hectares with total capital of US$215 million.

Texhong has plans to pour around US$950 million into the total area set aside for the IP in the Hai Ha Seaport IP covering 3,000 hectares. Meanwhile, Bay Water Co. Ltd. and Jen Capital also put huge capital into condo projects in HCMC.

According to the ministry, the real estate market up to now has attracted 423 FDI projects with total registered capital of nearly US$50 billion, or nearly 20.7% of the total FDI capital.

Meanwhile, there have been over 1,100 FDI projects in the construction sector with a total value of US$10.7 billion, or 4.5% of the total.

Experts in the industry said that foreign capital inflows have helped improve infrastructure in large cities and brought advanced construction tech into the

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Some localities expect to see stronger FDI inflows into the real estate market in the coming time. United Arab Emirates’ Nakheel Group has plans to develop Halong Star tourism complex in Quang Ninh Province, covering 125 hectares with total capital of US$550 million.

A consortium between Korea’s Lotte Group and Japanese investors will develop a smart complex in Thu Thiem new urban area in HCMC’s District 2 with a total investment of US$2 billion.

Neil MacGregor, managing director of property services firm Savills Vietnam, said that the local real estate market is now attractive as it has just bounced back from the bottom.

Idle capital of regional investors remains huge and they highly appreciate the real estate market in Vietnam compared to other countries such as Thailand and Indonesia, he said.

Vietnam real estate firms begin distress sales

A picture taken in April shows an aerial view of a central part of Ho Chi Minh City next to the Saigon River. High inflation and interest rates along with a government-imposed credit squeeze have led to lower prices and other incentives to entice residential buyers.

Local real estate companies may have reached a point where they can no longer play the wait-and-see game.

Hurt by a prolonged market slump, several companies have decided to go for distress sales, a move that industry insiders had said was unlikely to happen as recently as two months ago,

because it would mean zero profit and even losses for housing developers.

PVL, whose shareholders include subsidiaries of state-owned group PetroVietnam, was among the first companies to sell apartments at fire sale prices this year.

Prices of 85 apartments at its PetroVietnam Landmark project in Ho Chi Minh City's District 2 have been lowered by nearly 35 percent to VND15.5 million, or US$740 per square meter.

The price cut came as a surprise considering other nearby projects such as The Vista and Cantavil are still offering a high price range of more than VND30 million per square meter.

Hoang Ngoc Sau, general director of PVL, said his company was under the pressure of repaying bank loans.

PVL took a loan of VND100 billion ($4.76 million) from LienVietPostBank and the payment deadline is November 23, Sau told Thanh Nien.

If the company is unable to repay the loan in time, it will face a penalty interest rate of around 40 percent a year, he said, adding that PVL would be "paralyzed" in such a scenario.

Sau said he believes cutting prices and offering flexible payment plans to buyers is the only way out for developers.

Many property firms have been struggling this year as the market was quiet while both borrowing and construction costs were too high, he said.

PetroVietnam Landmark is a middle range project, but it would not be able to attract buyers in the current market situation unless prices are reduced, Sau said.

"If the company manages to sell all the apartments at the new price, it will still incur a loss of some VND70 billion."

Several other companies have followed suit, slashing home prices by between 20 and 30 percent.

Saigon Mekong, for instance, said it decided to go for a 25 percent price cut with the

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An Tien project in the outlying district of Nha Be.

The new price, at VND14.5 million per square meter, would be quite competitive compared to prices in other neighboring apartment projects.

In an attempt to boost sales, the company said it will only require a down payment of 30 percent from homebuyers and will also help arrange home loans with banks.

A representative of Saigon Mekong said financing is now a problem for both developers and buyers. Real estate firms, therefore, have no choice but to cut prices to attract customers.

Analysts said the new prices offered by PVL and Saigon Mekong will start a distress sale race among real estate companies. The competition will be harsh, they said.

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Property brokerage Knight Frank said in a report that the HCMC real estate market passed through the quietest period of the year in the third quarter, "with general confidence knocked by worldwide economic events and domestic uncertainty."

The company said downward price negotiations are happening, as well as longer payment schedules, bank loan support, lucky draws,

and discounts for buying in bulk. "The growing inventory of unsold stock in the primary market and the large amount of stock being marketed on the secondary market