Real estate projects that fail and are abandoned halfway are no longer strange in the Vietnamese market. Although there are many reasons for this, the Land Use Planning report by Savills Vietnam has analyzed the importance of land use planning when developing a project.
Mr. Troy Griffiths, Deputy Managing Director of Savills Vietnam
Land use planning helps determine the most appropriate land use options as well as the allocation of infrastructure, planning, transportation and environmental impacts for the project.
Mr. Troy Griffiths, Deputy Managing Director of Savills Vietnam, commented that the land use plan creates a detailed and effective plan for land and resource allocation, thereby aiming at the sustainable development of the project in particular and the real estate market in general. By determining the type of real estate development, scale, phase, price and sales strategy, the land use plan ensures that the development is efficient, minimizes environmental impact and is financially feasible.
“A failed land use plan is one that develops products, infrastructure and facilities that do not deliver financial, socio-economic and environmental benefits. Poor planning can result in products that are not marketable, and infrastructure and facilities that do not meet community needs. Poor land use planning or failure to implement the plan can expose stakeholders to significant financial risk and even investment failure,” said Troy Griffiths.
For example, in the south of Hanoi , an investor developed a 9,000-unit apartment project with a scale of 3,500 m2. However, this enterprise did not comply with the original plan but converted offices and commercial spaces into apartments, making the apartments smaller and increasing the number of apartments significantly. These changes put great pressure on the infrastructure and utilities were not enough for the number of residents. This led to many conflicts between resident groups and a decline in the quality of life in the project.
The expert said there are many projects with good products that still fail because the plan does not take into account the development of corresponding infrastructure.
“Even if a project has suitable residential or commercial products, if it lacks roads, drainage systems and public utilities, the quality of life will still be incomplete and inconvenient. This will lead to ‘ghost’ urban areas with no residents,” he said.
Another example mentioned by Savills is Nha Trang City, where many projects have a construction density of up to 70%. The disregard for the city's construction requirements has led to a level of development that is incompatible with Nha Trang's infrastructure and social infrastructure planning.
“Proper land development and planning requires considering both favorable and unfavorable scenarios, including taking into account risks, identifying viable sales strategies, product offerings and sales stages, thereby minimizing the risk of failure and maximizing the opportunity for success,” said Troy Griffiths.
In contrast, the Vietnamese real estate industry also has successful examples of comprehensive and optimal land use planning. Phu My Hung in District 7 (HCMC) and Ecopark in Hung Yen are two examples of product development planning, phasing and sales strategies supporting project success.
According to Savills analysis, Phu My Hung in District 7 with a scale of 433 hectares has an "ambitious" start with the goal of turning a vacant land into a leading financial, residential, commercial, industrial and educational center in the south of Ho Chi Minh City.
The project has a clear, comprehensive development plan in each phase spanning 30 years. During that process, the investor has complied with international development standards, including sustainable development, ensuring construction is consistent with socio-economic development and compliance with all design and construction regulations.
“Before starting to build or invest, careful and thorough planning is essential. Good decisions are based on objective market indicators, development case studies and considered proposals. Market analysis is important to understand the appropriate type and scale of development. Financial viability must also be determined through cash flow forecasting to determine which type of development is most feasible, at the time of implementation. This helps to avoid investment risks, optimize profits, and minimize risks,” Mr. Troy Griffiths emphasized.
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