VIETNAM'S booming economy - the fastest growing in Asia, after China - is crying out for real estate developments. But until in recent years, Singapore companies have largely shunned the Vietnamese real estate market.

While they have been active in the country since the late 1980s, Singapore developers and supporting firms have been largely engaged in serviced apartment and hotel projects in Vietnam, according to Tham Poh Cheong, director of infrastructure and environmental services division at International Enterprise Singapore, the government agency pushing Singapore companies to go international.

But he says changes in local regulations in recent years which now open Vietnam to foreign developers of residential housing for sale - and the country's membership of the World Trade Organisation - have sparked Singapore's interest in the country's real estate market. This is a market that is seeing a rising Vietnamese demand for quality housing.

'Vietnam's real estate industry has grown at a fast pace over the last few years,' Mr Tham says. 'This is fuelled mainly by the increasing demand for housing, serviced apartments and office space in the country.'

Already, Singapore companies have made their presence felt. Keppel Land, through a wholly owned subsidiary, Portsville, has teamed up with the Dong Nai General Agriculture Service United Cooperative and Vietcombank Fund Management to build a residential township on a 509-hectare site in the fast-growing Dong Nai Province, just 28 km north-east of Ho Chi Minh City.

This will be Keppel's second township project in Vietnam. Its first is called Saigon Sports City, an integrated residential, commercial and recreational sporting hub built on a 64-ha site in Ho Chi Minh City's prime An Phu Ward district.

CapitaLand, which got its foreign investment licence for its residential development in An Phu Ward, soft launched its first residential project in Vietnam last month. More than 200 units were sold within the first two hours of the launch.

Allgreen Properties in May this year inked a conditional joint venture pact with Phu My An Investment Construction Joint Stock Company to acquire and develop a prime residential site of about 16,500 square metres in Ho Chi Minh City.

And GuocoLand has been awarded an investment licence to develop a 240,000 square metre mixed development project on a 17.ha site in Binh Duong Province, 17 km north of Ho Chi Minh City.

What's more, Singapore-based architects like Ong & Ong, DP Architects, CPG Consultants and RSP Architects have also been busy in Vietnam.

Supply crunch

Demand currently outstrips supply in the Vietnamese residential market. According to IE Singapore, Ho Chi Minh City is facing a supply crunch in good city centre locations. 'Prices of top apartments could reach US$3,500 per square metre and US$1,850 per square metre in prime locations in Ho Chi Minh City and Hanoi respectively,' Mr Tham says.

In both cities, service apartments are enjoying high occupancy rates of over 95 per cent.

'With the growth of tourism and new business activites springing up in Vietnam, the future looks bright for real estate in this market segment,' Mr Tham says.

Rental rates for retail and office space in Hanoi and Ho Chi Minh City are creeping up steadily and occupancy rates continue to stay higher despite recent increase in supply. The trend is tipped to last for at least another few years.

'As a benchmark, Grade A office rentals in Ho Chi Minh City has hit US$42 per sq m per month and is likely to see a further 10 per cent rise in the next six months, while that of Hanoi has reached US$45 per sq m per month and growth is likely to reach 9.0 per cent this year,' Mr Tham says.

To meet demand, the Vietnamese government is planning several real estate projects in the country.

In Ho Chi Minh, Vietnamese planners envisaged a modern urban town with commercial, residential and recreational buildings in the Thu Thiem Peninsula in District 2. The new town, to be built in the next 20 years at a cost of US$20 billion, will house a population of 110,000 to 120,000 people. It will be linked to the current city centre by five bridges and a tunnel.

Other areas zoned for mega residental projects include Saigon South and the North West Metropolitan Area within Ho Chi Minh City. In the north, the potential for real estate development exists in Hai Phong and Hai Duong near Hanoi.

All these hold great promise for foreign real estate players, for whom the door is now thrown wide open. IE Singapore notes that Korean, Japanese and Taiwanese developers have already arrived there. Local developers, meanwhile, have grown big enough to move into the high-end segment of the market and take on relatively huge projects.

Leading edge

But Mr Tham thinks Singapore developers still have an edge over many of its competitors in Vietnam. 'Singapore-based real estate players are able to offer the entire value-chain of services, from master-planning, architectural services, property development and facility management,' he says. 'Companies can also team up to jointly participate in the larger scale projects offered in Vietnam.'

IE Singapore has been busy pushing and helping Singapore companies to break into the real estate market in Vietnam. It has led business mission to introduce Singapore companies to the opportunities open to them in Vietnam, and to showcase their expertise to the Vietnamese.

'IE Singapore plays an active role in assisting and encouraging Singapore companies to participate in the real estate boom in Vietnam,' Mr Tham says. 'From 3-8 September 2007, IE will be organising an urban infrastructure mission to explore business opportunities offered in Hanoi and Ho Chi Minh City as well as the outlying areas surrounding the two cities.'

Besides holding seminars and leading business missions, IE Singapore also has overseas centres in Vietnam to offer on-the-ground support for Singapore companies venturing into the country.