What can US$3.05 billion worth of FDI bring to Vietnam?
Real estate ranked third among business fields which received the most FDI (foreign direct investment) capital in 2017, with US$3.05 billion committed, accounting for 8.5% of total registered FDI capital, according to the Foreign Investment Agency.
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FDI flow to the real estate sector has been increasing steadily in the last five years. There are two special characteristics of capital flow. First, most of the foreign investors registering their projects are from Asia. Second, they have recently begun paying attention to the northern market, especially Hanoi, while they previously mostly targeted the Ho Chi Minh City market.
Whether the big FDI capital flow into the real estate sector is good or bad remains a hot topic of debate among analysts. While some believe that Vietnam should focus on attracting FDI to the manufacturing and service sectors which can bring advanced technology and generate added value, others believe Vietnam still needs to continue luring FDI to real estate.
Su Ngoc Khuong from Savills Vietnam said foreign capital brings additional resources to Vietnam, thus accelerating growth.
Foreign investors, with their experience and relationships, bring Vietnam closer to other developed markets in the region. The capital helps diversify products, so it helps the market develop in a sustainable way.
The presence of foreign investors in Vietnam creates a healthy competitive market, thus bringing bigger benefits to customers. The cooperation between Vietnamese and foreign investors will help ease reliance of real estate firms on banks’ capital.
Hence, the banking sector can provide capital to fund the projects in many other business fields, including agriculture, manufacturing and service.
Commenting about the role of Asian investors in Vietnam, Khuong said the last three years have been witnessing hefty investments from Singapore, Hong Kong (China), Japan and China.
In the past, foreign investors only joined the commercial real estate market segment by developing shopping malls, serviced apartments and offices, but now they are pouring money into the housing market segment through cooperation with domestic developers.
Nguyen Hoai An from CBRE commented that many foreign investors now eye the northern market, particularly Hanoi.
One of the most noticeable projects inked in 2017 was by BRG Group and Japan’s Sumitomo Corporation Group to develop a US$4 billion smart modern city, the Nhat Tan-Noi Bai project.
Ho Chi Minh City’s real estate sector attracted US$984.4 million in FDI during January-November of 2017, triple the figure from the same time in 2016.
