Vietnam developer seeks to get out of housing project

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Local property developer 584 Company has announced a plan to turn one of its residential projects into a hospital due to huge losses, a move that spells yet another piece of bad news for the real estate market.

According to news website VnExpress, the company is buying back all the apartments it has sold from the Tan Kien project in Ho Chi Minh City to transform it into a 1,000-bed hospital. The plan has been approved, in principle, by the city government.

The company's officials said even though most of the 976 apartments had been sold, many homebuyers struggled with making payments after local banks tightened lending to the real estate sector.

They said apart from difficulties in recouping its investment, the company had to face a loss of at least 20 percent due to high interest rates and increases in construction costs over the past few years.

VnExpress said the company promised to compensate all the homebuyers with a monthly interest of 1.5 percent for their payments so far.

More than 70 percent of the buyers have accepted the offer but many others still insisted on receiving their apartments. The company said it will come up with a solution for these clients later this month.

According to VnExpress, the local real estate market is going through the third consecutive quarter in crisis, mainly due to tightened credit policy and falling prices. Capital problems have forced many developers to delay or even sell their projects to prevent further losses.

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