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JLL: Real estate FDI in 1H down but potential remains

Released at: 13:18, 07/08/2019

JLL: Real estate FDI in 1H down but potential remains

Photo: Viet Tuan

Lower year-on-year FDI in first half only due to stellar first half of 2018, according to JLL.

by Doanh Doanh

Total registered FDI in Vietnam’s real estate sector in the first half of 2019 stood at $1.32 billion, a fall of 76 per cent compared to the same period of 2018, which stood at $5.54 billion, according to the latest report from real estate consultants JLL.

This is largely due to the substantial amount of capital for real estate in the first half of 2018, primarily in two projects: Smart City in Hanoi, with total investment of $4.1 billion from the Sumitomo Corporation, and additional capital of $1.1 billion in the Laguna project in central Thua Thien Hue province from a Singaporean investor. Though lower than in the first half of last year, registered FDI into real estate in the first half of this year was still higher than in the first halves of 2016 and 2017, when it stood at some $600 million and $700 million, respectively.

“We expect foreign investors to continue showing a keen interest in and strong commitment to Vietnam’s real estate market, and that the market still has the potential for growth,” said Ms. Khanh Nguyen, Senior Director, Capital Markets, Vietnam, at JLL. “Although M&A activities may potentially occur at a slower pace and at a lower frequency over the remaining two quarters of this year due to lack of ‘clean’ and ‘clear’ projects readily available to invest in, we forecast that ongoing investigations by authorities into the real estate sector will ultimately improve transparency in the market. This will ensure Vietnam’s competitiveness and attract even more investors from the region.”

M&A activities in the real estate market this year started off with Keppel Land’s divestment from the Dong Nai Waterfront City project. According to a company announcement, Keppel Land will divest 70 per cent of its interest in Dong Nai Waterfront City to the Nam Long Investment Corporation for a total consideration of VND2.313 trillion (approximately $100 million). Both Keppel Land and Nam Long will jointly develop the 170-ha residential township.

Keppel Land has also recently announced its acquisition of three land parcels in Ho Chi Minh City. Through its wholly-owned subsidiary, Keppel Land has entered into a conditional sale and purchase agreement with the Phu Long Real Estate Corporation to acquire a 60 per cent interest in the three sites for a total consideration of VND1.304 trillion (approximately $56 million).

The Lotte FLC Joint Stock Company, a joint venture between the FLC Group and Lotte Land, a subsidiary of the Lotte Group, has been established with charter capital of VND556.5 billion ($24.1 million) and will operate in the field of real estate, according to the National Agency for Business Registration. Lotte Land will own 60 per cent and FLC and its affiliates the remainder.

There have recently been investigations by Vietnamese authorities of real estate projects that were allocated inefficiently in the past, either through no formal bidding process or a sale at less than the market price. Authorities’ drive to clamp down on corruption may have some impact on business profits in the short term, as certain projects are put on hold while investigations proceed, which may potentially lead to a temporary shortfall of projects readily available to invest in. “However, we expect that ultimately it will help the sector overall, as transparency will improve, ensuring fair practices in the market and boosting both foreign and local investor confidence in Vietnam’s real estate sector,” Ms. Nguyen said.

With “clean” and “clear” land banks for residential and commercial projects being harder to find in the CBD or in well-known areas of Ho Chi Minh City, JLL has observed a number of investors and developers looking to expand their footprint in neighboring provinces.

As US-China trade tensions have escalated recently, the trend towards shifting manufacturing away from China to Southeast Asia will continue to benefit the region as a whole, including Vietnam. There is continued strong interest in industrial and logistics assets, with both existing and new investors actively seeking joint ventures with local industrial developers and/or the acquisition of land banks and operating assets.

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