Is Affordable Housing in High Demand in HCMC?

By: Keely Burkey

One of the keywords in Vietnam’s real estate today is urbanisation. Today, 34.1 percent of the country’s population live in cities, and this number is rapidly growing. The biggest question remains: where will everyone live? With an increasing FDI presence, a rising middle class and an influx of expatriates from wealthier countries, there’s no simple answer to this question.

Nguyen Van Duc, the founder and owner of Dat Lanh Real Estate Company Ltd., a real estate developing company that focuses exclusively on affordable housing in Ho Chi Minh City, knows this only too well.

houseImage source: by Thinh

With the help of his son, Nguyen Hung Tam, who acted as interpreter, Duc explained why he began devoting his life to affordable housing in 1976. He pointed out an obvious advantage to affordable housing development: “The land available is on the outskirts of the city, so it’s cheaper.” So far he’s built dozens of housing projects for low-income workers, mostly in District 12, and this demand will not let up anytime soon.

Adding Up the Numbers

Thousands of Vietnamese have been pouring into the city limits, attracted by the prospect of employment and educational opportunities. While this increase is clearly good news for manufacturing factories and schools, it has caused strain on the city’s housing and infrastructure developments.

houseImage source: tapchitaichinh.vn

One problem? Foreign Direct Investment (FDI) has been funneling into HCMC’s high-end real estate projects, but has so far turned a blind eye towards affordable housing. Duc considers the question for a moment before answering: “From my knowledge, there’s only been one foreign company that is investing in affordable housing. And I don’t know the name. It’s not a big presence.”

For local investors it’s also notoriously difficult to gather the money to complete these projects through bank loans. Dat Lanh Real Estate Company Ltd. has found another way to complete Duc’s projects: crowdsourcing from potential tenants.

Many low-income workers and families will learn of a real estate project and will invest money to ensure a place to live when the project is finished. I ask how many projects have required help from tenants, and Duc’s response is immediate: “Most of them.”

Rising Demand and a Shifting Future

Middle- to high-income apartments are only viable for 20% of Vietnam’s population. Recognising the need for change, the real estate market has already seen a shift in development. Last December, for example, Vingroup’s residential sector, Vinhomes, announced plans to develop condos with a VND 700 million price tag in the outer districts of Hanoi, HCMC, Nha Trang and other larger Vietnamese cities. While this goes in the right direction, more substantial plans are required to address the needs of the millions of students and workers who want affordable living space.

For Duc, the question of an adequate supply of housing depends on several factors. He’s adamant, for example, about the need to revise the necessary amount of square metres per apartment. In HCMC, every apartment needs a minimum of 45 m2; Duc would like this to be changed to 30 or even 20 m2, like the building limits in Binh Duong.

houseImage source: baotainguyenmoitruong.vn

Duc expressed his desire to find a like-minded foreign partner who could help fund affordable housing projects in Districts 12 and 9, though many foreign companies are likely put off by the low return on investment (around 10 to 20 percent). “It’s true,” he said, “the profit is not very high. But the benefit is, we always run out of the product.”

Banner image source: by Thinh

 


Bring on the Green Energy: LEED Construction in HCMC

By: Jesus Lopez Gomez

Go out on any warm day and you’re likely to hear the collective “whoosh” of the city’s many air conditioner units perched outside residences. Truth be told, Vietnam isn’t known for green energy initiatives but some developers are looking to change that.

Sectors Doing Green in Vietnam* (measures green buildings that are certified and/or registered with LEED, LOTUS, EarthCheck, BCA GreenMark or following GreenStar).

leed

Total: 41

  • 42%: Factory
  • 22%: Office
  • 19%: Hospitality
  • 8%: Supermarket
  • 6%: School
  • 3%: Residential

 

*Source: “Is There a Future for Green Buildings in Vietnam?” by Solidiance

A centralised air conditioning system would be more cost effective and friendly to the environment, but the reason you don’t see these and other sustainable practices adopted more widely in construction is partly just short-sightedness. LEED expert and Colliers International Vietnam General Director David Jackson explained that the benefits of green building are buyer- and tenant-centric. (LEED stands for Leadership in Energy and Environmental Design, a US rating system for the environmental performance of a building.)

leedImage source: deutscheshausvietnam.com

“The issue with residential is that a lot of people won’t invest because the benefits (of having more efficient equipment or construction materials) stay with the owner rather than the builder,” he said. Never mind that the cost between building a sustainable structure and a conventional building is “minimal”, he added.

LEED vs. LOTUS

Interest in LEED certification has grown to a point where a separate, more locally oriented set of standards has been developed, LOTUS. Those standards have been slow to take hold. Vietnam’s Green Building Council reported in December that just 12 projects had sought and acquired LOTUS certification.

leedImage source: refico.com.vn

In 2013, the council reported that 41 buildings had received some kind of sustainability certification, either from LEED, LOTUS or a comparable metric. While office buildings like the Deutsches Haus account for 22 percent, the majority, 42 percent, were factories. The residential sector had the smallest share of certified buildings, 3 percent. “Green building adoption has been limited in Vietnam,” the council wrote in its 2013 report, which also pointed out that “factories have led the way thus far”, like the LEED certified Colgate-Palmolive Plant in Cu Chi, the first one to obtain the certification in the country in the summer of 2016.

leedImage source: deutscheshausvietnam.com

The Binh Duong province plant, which opened in 1996, worked with international engineering firm Royal HaskoningDHV to remake the 18,600-square-metre facility. The plant employs around 1,200 people and makes 250 million products annually.

“Slowly, Asia’s Factories Begin to Turn Green,” read a New York Times headline in 2014 describing a Vietnam Intel plant with a water-reclamation system and one of the country’s largest solar panel clusters. The developments resulted in questions from local authorities: they were reportedly seeking direction on what kind of standards the Vietnamese government could impose on its country’s manufacturers.

Deputy Managing Director of Savills Vietnam Troy Griffiths said the regulatory framework that would support greater green building development is largely absent.

leedImage source: refico.com.vn

“Until you get to a very mature city level … with tax incentives, development incentives … it’s going to be very hard to push for [sustainable development],” he said.

Some development incentives do, however, exist right now. Jackson described a Ho Chi Minh City building code that allows builders to add an extra floor to their edifice if sustainability standards are met.

A Green-Tinged Future?

Looking forward, Jackson said firms are going to need to figure out how to help developers frame their sustainability interests in terms of market value for buyers. In other words, “what people look at here in terms of development is which one is going to sell my property more,” he said.

leedImage source: deutscheshausvietnam.com

“And I think people will focus on LEED” because of its international recognition, he said.

Jackson said developers need to involve a green building consultant early in a project. “By bringing on a green consultant at an early stage of a project … they will guide you in terms of cost savings,” he said.

Vietnam has also eased this process by making sustainable appliances more widely available. “When you’re looking at green products, five, six years ago, it was very difficult to find low flush toilets,” Jackson said. “You can get that here now.” Vietnam has an edge in the green building space because of its wealth of architects and international architecture firms. At the end of the day, “you’re going to make savings in the long term,” Jackson asserted.

With the decreasing costs and greater sensitivity to environmental issues, Jackson said there’s reason to be optimistic about the adoption of sustainable building practices – he’s even certain about it. “For me, all buildings should be green buildings,” he said. “I think with technology (becoming less expensive) and more experience in the market, all building is going that way.”

 


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