Motorcyclists ride past the construction site of the Richland Emerald in the suburbs of Ho Chi Minh City. The project has been halted since late 2010.
It was mid-2008, the real estate market was booming, and thousands of homebuyers and speculators were lining up to buy luxury apartments.
Nhat Quang, a property developer in Ho Chi Minh City, began construction on the Richland Emerald, a 28-story residential tower in an outlying district. It had high hopes for the US$40-million project and was planning to sell the apartments for around $1,250 per square meter.
The company, like many other developers, was caught unawares by the financial crisis. The real estate market went rapidly downhill in the following years as banks tightened lending while homebuyers, hit by double-digit inflation, tried to cut back on large spending.
Nhat Quang halted its only project in late 2010 even after all concrete works had been completed. A representative who requested anonymity said financial difficulties left the company with no choice.
Around the city, many other construction sites have also gone into hibernation.
The Good House Apartments project in District 8, for instance, has been stalled at the 15th story because its developer could not find VND50 billion ($2.4 million) to complete the construction. Officials of the company said it is trying to raise funds from customers in order to pay debts and carry on with the project, failing which it will have to face foreclosure.
Dang Hoang Vu, general director of Thanh Binh Real Estate, said around 90 percent of property firms are basically dead because they can no longer borrow from banks or sell their products.
With the market struggling since 2009, many companies have seen a big dent in their assets, Vu Anh Tam, vice chairman of the Ho Chi Minh City Real Estate Association, told Vietweek. Not only were they unable to make profit, their projects could be taken by banks, he said.
"Many companies have cut prices by half but there are no buyers," he said. "They are half-dead now."
The association last week called for new measures from the government to help revive the sector, including lowering lending interest rates to 14-16 percent.
Property prices in the country are too high compared to those in regional countries and need to be reduced, the association wrote in a new proposal sent to the government. Lower lending rates will allow the sector to grow normally and steadily, it said.
The association said the real estate market will continue to face difficulties this year as market liquidity is weak and housing stock is large.
Property firm Knight Frank said in a quarterly report this month that after the Tet holiday period, the apartment market in HCMC continued to witness low transaction rates even though many developers have decreased their prices. The demand for villas and townhouses is expected to remain relatively weak and buyers are likely to be cautious in making any purchasing decision, it said.
"Knight Frank remains conservatively optimistic about the real estate market in 2012 and it will be interesting to monitor whether the recent positive news for Vietnam's economy translates into growth in the property sector," the report said.
The State Bank of Vietnam lifted restrictions on real estate lending earlier this month. It also cut policy rates and lowered the dong deposit cap by one percentage point.
Following the cuts, the central bank said several lenders have cut lending rates for exporters and low-income homebuyers to 13.5-16 percent. At some other banks, home loans are still offered at around 20 percent.
The eased credit access came as good news for the real estate market, but some developers don't know if they can survive any longer to wait for a recovery.
Le Ngoc Tu, chairman of Binh Dan Real Estate Company, said he was seeking permission from tax authorities to use land lots as payments because he could not find enough money to pay the land use fees for a suspended housing project.
"If we borrow from banks now, we don't know if we can have enough money to repay the loan later. It would be even worse.
"We can't afford to pay taxes. The worst scenario is the government will foreclose on our project, but we don't deserve it because we have invested a lot of money already."