They are taking advantage of a legal gap. At present, the Vietnamese government is still embarrassed to control the method of selling houses on paper

Increasing numbers of foreign developers are mobilising funds within Vietnam to develop real estate investment projects instead of raising funds overseas.

Nguyen Mai, chairman of Vietnam’s Association of Foreign Invested Enterprises, said many foreign investors mobilised funds inside Vietnam for property projects, especially residential and urban projects.
A survey conducted last year by the Central Institute for Economic Management (CIEM) discovered that foreign property developers had to borrow 80 per cent of capital, in which a big part was mobilised from the domestic market.

The situation had not changed this year and foreign developers had even mobilised more capital inside Vietnam, said Mai. Singapore’s CapitaLand and its Vietnamese partner Hoang Thanh Company early this year underscored the trend by signing a $60 million credit agreement with Vietinbank. The Singaporean developer said the financial package would support the development of $170 million Mulberry Lane project in Hanoi’s Ha Dong district.

Previously, Indochina Capital, a leading foreign fund management firm in Vietnam, also signed credits with Vietcombank to borrow $44 million and $39 million to develop Indochina Plaza Hanoi and Hyatt Regency Danang Resort and Spa, respectively.

Furthermore, the fund management firm borrowed funds from Vietcombank to invest in Quang Nam province’s The Nam Hai resort and Indochina Riverside Towers in Danang.

Another foreign-invested project, Silver Shores International Resort in Danang, also received an $80 million loan from BIDV, while Phu My Hung Corporation, the owner of Ho Chi Minh City’s Phu My Hung urban area, last July borrowed $63 million from five Vietnamese banks to build the Crescent Mall project.

Dang Hung Vo, former vice minister of Natural Resources and Environment and a property expert in Vietnam, said foreign investors not only borrowed from Vietnamese commercial banks, but also mobilised funds from Vietnamese homebuyers who have to pay for apartments or villas even before a project completes construction.

Like domestic developers, all foreign housing developers in Vietnam mobilise development capital from homebuyers for investment projects. “They are taking advantage of a legal gap. At present, the Vietnamese government is still embarrassed to control the method of selling houses on paper,” Vo said.

Mai said what the government could take back from foreign-invested property projects was just small land rent, “while Vietnamese people have to pay lots of money to buy apartments at those projects”.
“In other words, foreign property developers are using Vietnam’s money and land to make profits in our country. They just pay a little capital in advance,” said Mai.

The CIEM report said foreign investors mobilising funds inside Vietnam would be an obstacle for local enterprises to mobilise funds. Mai said it was time for the government to change its policy to foreign property developers such as “giving directions to domestic commercial banks and the close control of mobilising funds from customers”.