The prospect of the domestic property market is forecast to remain glum in the new year. So local developers are finding ways to adjust their business strategies for survival.

Bleak outlook

Last year was a really challenging year for players on the realty market. Most businesses in the sector found it hard to sell their products despite their promotion efforts. In the face of tough market conditions, there have appeared game changers.

HCMC-based Construction and Investment 8 Joint Stock Company (CIC8) is calling for its shareholders to share the difficulties by using last year’s dividends to buy the unsold condos and land lots. Still, CIC8 will pay cash dividends for those not joining the plan over a period of one year with a monthly interest of 2%.

Phat Dat Property Development Corporation set the targets of VND1.1 trillion in sales and VND360 billion in pre-tax profit for all of 2011. But in November last year it had to revise down those respective targets to a meager VND148 billion and VND8 billion.

The dismal market has resulted in multiple companies downsizing their operations and investments or even transferring their projects underway to reduce their exposure to realty market uncertainty. For instance, Phat Dat has cut this year’ investment plan to VND400 billion from the initial VND1.4 trillion.

Venturing into new spheres

Phat Dat has taken industry players by surprise upon its announcement of a plan sent to shareholders that it will join forest and agricultural tree planting projects, a brand new business area for this company.

Chairman and general director Nguyen Van Dat said real estate remains Phat Dat’s core business operation but the company needs to look for new investment channels to prop up its difficult core business. Rubber cultivation is an option under consideration as this promises higher returns under current circumstances, he noted.

Dat said the development of the agricultural industry is encouraged by the Government, so his firm may be able to break even after six to seven years of rubber farming.

Hoang Anh Gia Lai, a well-known property developer, has already got involved in rubber plantation for years. The agricultural sector does not guarantee as high and quick profit as in the property sector but is highly valued for its stability.

Vo Tan Thanh, deputy general director of Phat Dat, stressed that investing in the agriculture sector is a great change for his enterprise. The strategy change will help diversify investments and sources of incomes to temporarily pull the company out of the current woes.

The plan sounds rational but whether leaders of Phat Dat will be able to persuade all shareholders to jump on the bandwagon in an unpredictable economy is unknown.

Exploring local demand

The housing and property management department under the Ministry of Construction has pointed out an imbalance in the housing structure as proven by a shortage of medium and small-sized condos with reasonable prices.

Among the 35,000 apartments completed before 2011 in HCMC, around 37% of them are classified as high-class, 38% as medium-cost and 25% as low-cost.

Le Hoang Chau, chairman of the HCMC Real Estate Association (Horea), said each housing segment has its own customers. The reality is the medium-cost housing segment has been doing good business given strong demand.

Local traders said housing demand remains huge, especially for the medium-cost segment, in big cities. The lackluster property market over the past four years has eroded the confidence of individual secondary investors.

Therefore, numerous investors have managed to focus on medium and small-sized apartment projects, and adjusted existing schemes to meet the actual needs of consumers.

Saigon Thuong Tin Tan Thang Investment Real Estate Joint Stock Company (TTJSC) last week started marketing its Celadon City condo project covering over 82 hectares with about 7,000 units in HCMC’s Tan Phu District. To meet demand, the developer narrows the area of each apartment from 90 square meters to 65 square meters.

Similarly, Thu Duc Housing Development Corporation (Thuduc House) plans to develop low-cost housing projects alongside the medium segment. These small condos cost VND500 million to VND600 million per unit.

Singapore’s CapitaLand is targeting middle-income people for its projects, with an apartment building in District 2 and another in Binh Chanh District.

Source Saigon Daily