According to many analysts, a rebound for the market was not in sight early this year, because of a decline in investment by companies and banks aiming to prevent inflation.

Previously, commercial banks could use 40 percent of their short-term deposit funds to make medium-and long-term loans, with most loans being invested in real estate. But the rate has been reduced to 30 percent.

Problems in the market were also caused by oversupply.

According to market research company, VietRees, existing real estate projects can provide as many as 9,000 apartments this year, and double that number in 2011, exceeding demand.

Seeking solutions

Many real estate companies have tried to find their own way out. Most have resorted to building medium-cost flats that don’t require huge investment, for people with medium incomes.

Issuing project bonds is another solution for developers. 

In 2008, Saigon Thuong Tin Real Estate JS Company (Sacomreal) issued project bonds worth VND750 billion ($39 million) at an interest of 12 percent per year to seek capital for the construction  of its Phu My apartment block in District 7.

Each bond holder is offered the right to buy one apartment at a discount of 8 percent of the value of the apartment.

Just three days after issuance, the company collected the capital it needed.

Construction of the Sacomreal block called Belleza has been completed and on January 23, 2010, when the company called for buyers, 75 percent of the bond holders paid deposits on apartments.

Dang Hong Anh, chairman of the Management Board of Sacomreal, said: “To be successful in an issue of project bonds to mobilize capital, the issuing company must satisfy two factors: first, being prestigious and reliable to customers; and second, assuring potential buyers that investing in such bonds would be more profitable than investing in other projects.”