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Investment firms set to buy in Vietnam as developers struggle to get funds

The Vietnam property industry is relatively new and suffering more than many others in Asia. There is still demand for apartments, offices, hotels and shopping malls but developers are struggling to finance projects because of the global credit crisis.

High interest rates and limitations on bank lending have forced smaller developers to delay projects or sell assets to raise money.

Now Indochina Capital and the VinaCapital Group say it is a good time to invest in the markets. VinaCapital, Vietnam's biggest fund manager, is to start its second real-estate fund early next year.

Indochina Capital plans to increase the size of its property fund to between $400 million and $500 million when it closes in the first half of next year, from the $155 million it raised in July.

'The opportunities have never been better. A number of projects have halted in Vietnam due to lack of financing. We see people bringing us projects and land where they need investors or they want to sell to finance some of their other projects,' said Rick Mayo-Smith, co-chairman of Indochina.

It could be the only source of funds for struggling developers. The central bank has capped this year's credit growth at 30% and restricted lending to property and securities companies and inflation has risen at the fastest pace since 1992.

'There is a huge demand for mid-level residential units as the credit crunch has wiped out small and medium-sized developers that were building them,' said Don Lam, chief executive officer of VinaCapital.

According to analysts condominium prices in Ho Chi Minh City and Hanoi have fallen between 20% and 50% in the secondary market from their peak a year ago and may be almost hitting a bottom.

'Now that sales are going to the end-users the speculators are still stuck with the properties they bought last year so it's hard for them to get back in the market,' said Brett Ashton of Savills Vietnam unit. Speculators accounted for about 80% of sales in the fourth quarter of 2007, fueling a property bubble.

'If you have a good project, it will get funded. As I look out my office window, I can see seven construction cranes moving, so somebody is getting funding,' he added optimistically.