Vietnam - FDI investments in real estate must have financial commitment

Foreign direct investment (FDI) in real estate sector must have financial commitments. This is content of a new scheme on FDI management in real estate sector built by the Vietnamese Ministry of Construction (MoC).

Particularly, implementing the instructions of the Prime Minister on strengthening the implementation of FDI management, MoC will coordinate with the related ministries, branches and localities to build a scheme to improve the investment quality, state management efficiency and FDI orientation in real estate sector in 2011-2020 period.

It is expected that the scheme will be submitted in May 2012.

According to an expert of the Ministry of Planning and Investment, past years have seen many cases that FDI enterprises were investing in real estate projects but they did not have enough financial capacity. They registered to invest in real estate projects with a low amount of capital then raising capital in the local market to invest, making it difficult for management. The expert gave an example of a real estate project with registered capital of up to $150 million but actually $90 million was loan from a local bank. The investor is selling the project for $1.6 billion.

In many localities, due to the demand for economic development, these localities are attracting investments less selectively and have approved a number of projects that do not have real potentiality and even are breaking the planning.

According to economic experts, to restrict FDI projects in borrowing capital or raising capital in the country, especially real estate projects, it is necessary to pay attention to the financial commitment of investors and make regulations on capital proportion of the investor when carrying out projects.

VietBiz24

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