Nam Long has secured a range of advantages by focusing on developing affordable housing amid a stagnant real estate market.
The Nam Long Corporation has declared it will continue to invest in three projects - EHome 5, 6, and 7 - in 2014 and will prepare land for their development. The announcement impressed industry insiders, given the overall real estate market is predicted to be sluggish. Looking back on the corporation’s business results and the rate of consumption of the Ehome product line over recent years, however, reveals why Nam Long continues to expand its investment activities.
According to the corporation’s latest business reports it sold 900 units out of a total of 1000 launched in 2013. Sales at Ehome 3 West Saigon (Phase 1A, 1B, and 2A) reached over 90 per cent and EHome 4 North Saigon in the first phase sold 150 out of 332 apartments. As at December it had launched EHome 5 The Bridgeview project, covering 28 hectares in Ho Chi Minh City’s District 7. Consisting of two blocks of 11 and 17 storeys with a total of 592 apartments, in addition to facilities such as shopping centres, kindergartens, and parks, the project attracted the attention of many customers. On the first day of sales some 95 apartments priced at VND20 million ($952) per sq m were sold. Total revenue from apartment sales in 2013 stood at VND700 billion ($33.3 million) and after-tax profits were around VND99 billion ($4.7 million).
Affordable housing proved to be the strongest segment in 2013. Grade C was the market driver, accounting for 70 per cent of 5,800 successful transactions during the year, according to the Ho Chi Minh City Real Estate Market Quarter 4, 2013 report from Savills. Major factors that contributed to the strong performance included firm commitments to construction progress, developer credibility, effective distribution channels and continuing financial support from developers and bank partners.
Due to the potential consumption of affordable housing a number of businesses have recently begun to plan to launch “cheap apartments” on the market, but Nam Long have standardised its own affordable products since July 2012. Nam Long’s affordable housing model follow three criteria (Economy, Efficiency, Ecology), which are consistent with the needs and financial capabilities of the majority of Vietnamese people. Analysts said that with 12 subsidiary companies undertaking each specific task, including land clearance and compensation, design, construction, marketing and distribution, management and operations, etc., Nam Long’s projects are implemented and completed quickly.
The developer builds apartments, researches the market and identifies financial solutions to support buyers, so its inventory is always kept low. Its projects launched in 2013 gave buyers access to loans at preferential rates of 6 per cent in the VND30,000 billion ($1.4 billion) government credit package. Nam Long also actively cooperates with banks such as Vietcombank, VP Bank, OCB, and HDBank to give financial priority to their homebuyers, all part of its capital management strategy to fulfil its plan of developing 14,000 apartments in the 2012-2017 period.
At the end of 2013 Nam Long marked an important event, with the Indochina Capital Fund contributing 35 per cent of capital to develop EHome 3 West Saigon. This partnership added more value to Nam Long in general and the project in particular as Indochina Land has had great success in many projects around the world as well as in Vietnam. Besides Indochina Land, Nam Long also has strategic partners such as ASPL, Nam Viet Ltd, and VAF. Commenting on Nam Long’s performance, Mr Le Hoang Chau, Chairman of the Ho Chi Minh Real Estate Association, confirmed that it is a pioneer in the affordable housing segment. “Vietnam is in need of enterprises interested in building housing for the majority of people, as Nam Long is doing,” he said.
Mr Nguyen Vinh Tran, General Director of the Nam Long Investment Corporation, explained the decision to accelerate their investment in a stagnant market to VET’s Hoang Thu.
Why did Nam Long decide to invest in three more projects (Ehome 5, 6, and 7) at such a difficult time? What is the plan for the construction and completion of these projects?
We have never stopped our real estate investment activities over the last five years despite the sluggish market. We believe that businesses should not wait for the market to recover and need to be more active and innovative to identify opportunities during a crisis. With a population of 90 million people, Vietnam is a huge market for real estate developers. The most important thing is launching suitable products that meet the needs of the majority of people. Ehome project have seen positive results over the years by targeting those with actual demand for housing. We are now deploying EHome 5 and will hand over apartments in the first phase during the first quarter of 2015. With Ehome 6 and 7 we have almost completed preparations for capital investment. About 13 domestic and international organisations have expressed an interest in our issue of more than 25 million NLG shares for developing such projects. It is expected that we will start to build two projects this year and hand over apartments a year later.
The demand for affordable apartments remains huge. At least 7,000 apartments are needed every year in Ho Chi Minh City. Despite our best efforts Nam Long can only launch a maximum of 2,000 units each year. So if we do not accelerate our investment right now then demand will soon exceed supply when the economy recovers.
What role does your decision to list Nam Long shares on the stock exchange play in developing real estate projects?
Listing on the stock exchange creates a transparent information system for local and foreign investors considering investing in Nam Long Corporation in general and our projects in particular. This is in line with our preference to use mobilised funds to develop projects rather than depend on bank loans.
Can you give us more details about your cooperation with foreign shareholders?
In addition to supporting us in funding, strategic foreign shareholders also give Nam Long experience in management and development in the real estate sector. These help the corporation improve its ability to accomplish its business strategies. Nam Long has three foreign strategic shareholders, in which Mekong Capital helps us in business management, ASPL, under Ireka, the leading Malaysian real estate company, assists us in project development, and Nam Viet Ltd, which is 100 per cent owned by Goldman Sachs, helps us in improving our experience and expanding our relationship with other investors.
What are your thoughts on the prospects for the real estate market and the tastes of home buyers in 2014?
I think that the market will remain rather difficult. But it is also a pivotal year for good businesses to return to the market. Many have changed their structure, preparing to launch products that are more suitable to the needs of the majority of buyers. 2014 will be a year for affordable home buyers who have actual demand for housing. Hopefully the warming up of this segment will inspire recovery in other segments.
- Nam Long