Protection Status

Real Estate Investment Fund: Important Boost to Property Market

Starting from 1 July 2013 the real estate investment fund will be put into operation. This demonstrates the efforts of the Government of Vietnam in the recovery of the property market which has been frozen for too long.

Enhancing the professionalism of market
The creation of a strong legal framework to facilitate the real estate market in Vietnam to develop in the right direction is the long desire of all management levels. When the market does not have a strong sanction to tackle fraud in raising capital, abusing capital, the market management still faces many difficulties and challenges. So more than ever, building a legal framework as a basis for building funds and professional real estate investment fund at this time will be a significant milestone highlighting professional step of Vietnam’s real estate market.
Under the guidance of Circular 228/2012/TT-BTC, real estate investment fund will offer fund certificates to the public and not purchase required by investors, with the aim of making a profit from the investing in real estate. Accordingly, investments in real estate funds were allowed to be traded in accordance with the law on real estate trading and real estate has to be completed house or construction.

For projects under construction, according to regulation, the fund may invest only if they meet the conditions such as transactions contracted with the prospect customer; construction projects on schedule by the time fund capital contribution, the total value of real estate projects in the construction process does not exceed 10 percent of the total net asset value of the fund.

Assessing market opportunities after this Circular is applied, Mr Tran Duc Dien, Director of Maxland Property Trading Floor said that this is one of the best opportunities for the recovery of the real estate market. The introduction of real estate investment fund is an opportunity to unleash the flow of capital to the market, reduce the dependence of the business capital, and put real estate into credit channel which have uncertainties in the process of implementing, thus making the real estate market more stable.

Property experts also said that real estate funds will create advantages in attracting idle capital and diversify investment sectors such as residential, office and apartment for rent. Professional management apparatus will be the basis for real estate investment fund to speed up seeking and implementing the transfer of project quickly. When the fund certificate is listed, the transparency of the fund in the stock market will also improve in the eyes of investors.

Real estate investment funds will also open up opportunities for businesses in supporting transfer of real estate project and facilitate the enterprises to switch to other investment projects that do not have to depend too much on bank loans.

Opportunities for market recovery
Most real estate companies are expecting the market warming. Mr Trinh Van Quyet, Chairman of FLC Group said that after July 1, 2013 Vietnam’s real estate market is likely to witness an explosive wave of investment from the real estate investment fund. With the adjusted and closely monitored legal framework, income from real estate investment fund will be larger and relatively stable, along with the advantages of growth of value of assets compared to stocks, bonds and treasury certificates (as prescribed, real estate investment funds to spend at least 90 percent of the profits made during the year for interest payments to investors), the funds attract huge interest from investors.

However, there are difficulties and shortcomings in the formation and operation of real estate investment fund model, first of all is objective difficulty in from the doldrums of the real estate market and stock market which will be a major influence on capital mobilization.

Mr Tran Duc Dien said that the property market will not recover in the short term, therefore profit from operations of investment funds is difficult to bring in the short term, meanwhile, the fund's portfolio of real estate investments is quite strictly ruled such as to invest in completed project is quite safe, but in fact it also makes the profit lower.
Besides, the Vietnam real estate investment funds must also face fierce competition with foreign real estate investment funds long operating in Vietnam market and already confirming brand, in addition to many international real estate funds is planning to participate in Vietnam’s market.

Even so, Mr Dien insisted that the introduction of real estate investment funds in the current period will bring a breath of fresh air for the real estate market, which will have a lasting impact on the real estate market in the country and will be a channel for capital mobilization in the future of the market.

Everything is just the beginning; the performance of real estate investment funds as well as the ability to meet the expectations of investors anywhere depends on many factors, of which the most important factor is the evolution of the real estate market along with the field of investment funds investment council.

Luong Tuan