HCMC: Urban railway promises big money for real estate

Real estate buyers are betting on the upcoming Ho Chi Minh City Metro to rail in big cash for them, as well as bring in external investment for the city and revolutionize urban infrastructure.

Building complexes on both sides of the Ben Thanh – Suoi Tien route in District 2, HCMC
Building complexes on both sides of the Ben Thanh – Suoi Tien route in District 2, HCMC

Administrative procedures for the first metro line in HCMC called Line 1 (Ben Thanh-Suoi Tien) is nearing its completion after being delayed time and time again due to disbursement complications. Despite its administrative roadblocks that puzzle the city’s authorities, the promised metro project has been railing in big cash for real estate investors and the real estate market in general.

Masteri Thao Dien in District 2 was one apartment complex that saw a huge surge in sales by virtue of being near the metro line. Previously hard to sell apartments have doubled or even tripled in prices, with many real estate investors and even the project’s main contractor pouring in big cash.

Near Thu Duc Intersection, the mid-segment Phuc Loc Tho apartment was seeing very few buyers until the seller thought to promote the place as having “connection” to the metro line. More than 300 apartments were sold within 15 days with a starting price of VND12 million per square meter (about US$515).

In reality, although many other real estate assets are being advertised as “being connected” to the coming metro line, nobody actually states in what way are they connected, if at all.

On the other hand, the government has made back a very little amount compared to the huge profit real estate investors have made, besides VAT, personal income tax and land levies.

That is because the lands around Metro Line 1 already belonged to real estate investors before the line was constructed, and the government only get profit from the terminal as a public service provider.

HCMC: Urban railway promises big money for real estate ảnh 1 Metro Ben Thanh – Suoi Tien crossing District 9

In a report in April 2020 from the Urban Railway Management Board to HCMC People’s Committee regarding consulting contractor bidding, and pre-feasibility of the second phase of metro Line 5 (Bay Hien - New Can Giuoc Bus Station). The route’s total length is 14.5km, with 13 stations and total investment of about US$2.2 billion.

The project was provided technical assistance, pre-feasibility and feasibility study by the Korea International Cooperation Agency (KOICA) in 2017. Environmental impact assessment, social impact assessment and resettlement plans have also been completed.

The line will pass districts 5, 8, 10, 11, Binh Thanh and Binh Chanh, estimated construction time from 2026 to 2031. PPP is an unprecedented form of investment in Vietnam’s urban railways, and required advice from the city on selecting a consulting party.

At the end of the day, the way to profit from the land fund at metro terminals to generate investment for the metro system and city infrastructure is still open to question.

In another development, HCMC in 2007 managed to make use of the land fund along both sides of Nguyen Huu Tho Street. The street is 7.5 km long and 210m wide, connecting Nguyen Van Linh avenue to Hiep Phuoc Industrial Park. The total area of expanded land is 68.7ha, in which 48,7ha was open for bidding. Constructions cost about VND430 billion (about US$18.5 million), but the acquisition and auctioning of land frontage along the route has brought more than VND800 billion (about US$34 million) to the state budget. It also helped the city organize resettlement for residents.