In the following interview, the director of the US$42 million Indochina Land Holdings Rick Mayo Smith talks about real estate development prospects. Excerpts:
What is your assessment on the local real estate market at present and what does the future hold?
The real estate market has seen rapid growth in recent years. However, it is quite hard to give any forecast for the next years. However, housing development segment will be likely to maintain its robust growth in the near future because demand of houses and apartments for Vietnam people is on the rise.
Previously, many local people did not want to buy apartments. However, this attitude has changed in few recent years because the construction quality of apartments has improved. Thus, future demand of apartments is very likely to rise.
Is that a reason why Indochina Capital has decided to establish Indochina Land Holdings?
It is a reason but the more open policy of the Vietnam government and continuous improvements of investment law are more important factors. For the time being, local banks are providing longer-term loans with various kinds of mortgage that are more favourable to buyers and investors. High-class apartments are also affordable to some class of population because they are facilitated with state-of-art conveniences.
What are the criteria to select projects of Indochina Land Holdings and who are your target clients?
We focus on high-class apartments and complex homes. In the future, if the government of Vietnam expand its investment encouragements, we will invest in projects of houses for medium-and-lower income earners. We plan to invest in building of around 300 apartments for medium- to low-income earners. We also expected to develop a resort area in Hoi An township of the central coastal city of Da Nang. We are looking for opportunities of investment in Hanoi and Con Dao.
How are real estate developers faring in Vietnam and do they need support from the government?
Although the land law has been promulgated, there are many obstacles regarding procedures of registering land-use rights of land for construction and home use. The government should consider allowing foreigners and overseas Vietnamese or Viet Kieu [who are not working in Vietnam] to rent houses for duration of 50 years and allow tenants to re-let if they want to.
The real estate market is considered overheated but according to many, the heated market is illusory because of the rampant speculation. What is your point of view?
The government of Vietnam has made the right decision to try to unbridled speculation in land. Thus, investors have shifted toward building apartments and houses for sale instead of simply buying and selling land lots. It is not true to say the real estate market in Vietnam is a ‘virtual market’ because of the high amount of speculation. The increase in the number of houses and apartments for sale might decrease prices but it is still a small number compared with the overall real estate market.