Le Chi Si, director of strategy for Thu Duc Housing Development Corporation, also known as Thuduc House, highlighted the important role of capital at an investment conference held in HCMC last week that the local property market was dependent on various elements for stable development, with capital being most important.

Si said the market had been facing financial constraints as developers were not financially strong and a conductive legal framework was not in place to facilitate capital flow into the market.

Most local developers are small and often cash-strapped, so they often call for capital from secondary investors in addition to their limited equity and traditional fund-raising channels such as bank loans.

Among the different finances, selling corporate bonds is considered an effective tool for realty firms. Notably, such mobilization has been standardized in the newly issued Decree 71/2010/ND-CP which will take effect on August 8 this year. That is believed to make life easier for realty firms to quench their thirst for capital.

The new decree allows developers to issue corporate bonds to mobilize funds for their projects alongside with traditional sources. However, it limits developers from granting a privilege to bond buyers to buy an apartment.

Regarding the issuance of corporate bonds, Sai Gon Thuong Tin Real Estate JSC (Sacomreal) last year conducted a successful bond sale to raise about VND100 billion from individual investors.

The company pledged to give priority to those holding VND500 million worth of bonds of less than six month to buy an apartment at an 8% discount and at the same time enjoy an 8% annual interest.

Given the success of the first issuance, the realty firm launched a second bond issuance worth VND750 billion to implement a condo project in HCMC’s District 7.

Some other property developers are mulling a similar plan to seek funds for their projects.

Nguyen Hai Nhu, general director of FLC Joint Stock Company, told the Daily yesterday that issuing corporate bonds was what the Hanoi-based company would resort to so that its property projects could get off the ground in future.

At present, the company is preparing necessary procedures to go public this year, listing some 10 million shares on the Hanoi Stock Exchange in coming months. Like other companies, FLC considers going public as an additional channel to mobilize funds, as well as a way to leverage its business activities, making it more professional.

She says the company, besides using its own capital, is seeking funds from banks and customers to develop its property projects, including the FLC Landmark Tower designed with office and commercial sections and some 300 apartments, a complex project called Mandola with sections for hotel, office and serviced apartments in Vinh Phuc Province.

In the investment conference, Si of Thuduc House suggested revising regulations to make it possible to deploy other capital source channels such as investors and property funds, which Real Estate Investment Trusts (REITs) has applied successfully in other countries.

Si says that the market is in its development trend, corporate bonds and property funds will be used as funding sources for property developers in the short term.

The Saigon Times Daily