Real estate firms steer wheel in other directions
04-06-2012
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The shareholders’ meeting of Thai Binh Duong Real Estate and Infrastructure Development Company (PPI) has approved the plan of the board of management to make investments in some new business fields.
The name of the enterprise shows that it has two main business fields – infrastructure development and real estate trade. However, in the time to come, the name PPI would be also heard in the forestry, agriculture and seafood sectors as well.
Explaining the decision on starting business in new fields, the board of directors of the company said the company is facing too many difficulties with its core business field.
While real estate projects always need huge capital, commercial banks have tightened lending. Meanwhile, finished products have been selling very slowly. The company also should expect too much from the infrastructure development sector, since the government has cut down the public investment.
Therefore, trying new business proves to be the only solution for the company now. Pham Duc Tan, President of PPI has revealed that PPI would collect cassava, the product which is being used by China as animal feed. The company would only sign contracts when it is sure than the cost prices are lower than the sale prices.
PPI also considers trading rubber latex and seafood products. Tan said he can see great opportunities in the two fields, since the hydrological and soil conditions in Vietnam are very favorable for the business development. Even if PPI does not carry out production, it, as a real estate developer, has great opportunities to develop farming areas.
Tan believes that it can lease land for a long term of 50 years in some areas which it would turn into aquatic farming ponds with the cost of 200 million dong per hectare. If PPI re-leases the ponds, it would be able to recover the investment capital within three years.
A new trend for real estate developers
PPI is not in the only real estate firm which is considering jumping into other business fields. The difficulties in the real estate market have forced them to try everything they can to survive.
The noteworthy thing is that many real estate firms, which plan to diversify their business, consider doing business in the forestry, agriculture and seafood sectors.
The Phat Dat Real Estate Development Company, for example, decided in late April to add some new business fields into its business licenses, including the afforestation and poultry husbandry.
Meanwhile, NTB, a construction, investment and transportation work company, decided to pump 500 billion dong into Binh An Seafood Company to produce and trade seafood products. Especially, the sum of 500 billion dong proves to be beyond NTB’s capability if considering the company’s Q1 financial report.
Analysts have said that it is quite normal for enterprises to shift to other business fields when they meet difficulties with their core business fields. However, they have warned that risks are always latent for the investors who lack experiences.
In related news, the government in early May released the Resolution No. 13, reducing the land leasing fee by 50 percent in 2012 for the economic institutions in the trade, service sectors.
Meanwhile, the investors who meet financial difficulties would be able to delay the land leasing fee payment for 12 months at maximum.
