Low-cost apartment developers face big challenges
VietNamNet Bridge - The limited supply of low-cost housing has prompted many real estate developers to jump into the market segment.


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In mid-2012, the Hanoi real estate market woke up when Muong Thanh Group put low-cost apartments up for sale at VND10 million per square meter, a surprisingly low price which no other real estate developer could offer. 

Within several days after the apartments were marketed, Muong Thanh sold hundreds of apartments, though the market was in crisis at that time and apartments in other projects remained unsold.

Some other low-cost projects marketed since that that time led to a rush by n investment. This was attributed to the short supply. Only state-owned corporations such as Viglacera, Handico 5, HUD and Vinaconex, and privately run companies such as Muong Thanh and Thu Do Invest were interested in low-cost projects.

The limited supply of low-cost housing has prompted many real estate developers to jump into the market segment.

Since real estate developers focused on high-end products, they missed the opportunities in the low-cost market segment. And those who saw the potential of the low-cost market segment could pocket big money.

However, the low-cost market segment appears to have cooled down in the last two years, after problems were found in some low-cost apartment blocks, including rapid degradation of buildings, poor facilities and lack of firefighting equipment. 

Low-cost apartments is often associated with ‘low-quality'. 

In such conditions, a lot of big players, well known for luxury projects, have decided to jump into the low-cost market segment. The announcement by Him Lam, FLC and Vingroup to develop low-cost apartments instead of only focusing on medium- and high-end products is expected to trigger fierce competition in the market segment. 

Dang Hung Vo, former Deputy Minister of Natural Resources and the Environment, said the market will become more transparent, in which buyers will be able to access products at the most reasonable prices. 

Meanwhile, existing investors will have to change how they implement projects and bring them to the market.

This explains why some low-cost project developers are willing to pay tens of billions of dong to implement utility items which they had only implemented in high-end projects.

The investor of Gelexia Garden in Hoang Mai district in Hanoi, launching a project at the price of VND18 million per square meter, promised to develop infrastructure items such as swimming pools, playing yards, parks and shopping malls. 

The investor of Ecohome project in Long Bien district, which has the selling price of VND16 million per square meter, has also committed to developing outdoors swimming pools, amusement parks for children and gym centers.


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Kim Chi

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