Developing empty land into residential areas for sale has emerged as one of the thriving new businesses in the capital and it is expected to boom this year, according to many pundits.
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From Nahai village on Thadeua road in Hadxaifong district to Nonsengchanh near the National University of Laos campus in Xaythany district, earthmovers can be seen hard at work clearing and levelling land.
Over the next few months, the empty land in these two districts, which are located some 20 km outside of the city centre, will become new residential areas of Vientiane.
The investors expect to sell the land to local people at prices of between 175,000 kip (US$21) to 500,000 kip (US$62) per square metre, depending on the location and the infrastructure on the land.
Real estate developers said that demand for residential land in Vientiane has been rising rapidly over the past five years, thanks to the government policy to open the country for foreign investment.
The establishment of businesses in the capital has encouraged labour movement from the countryside into the city, meaning demand for accommodation is high.
They also said that the government policy to relax restrictions on the inflow of foreign workers to Laos has also caused higher demand for accommodation and land.
The government has passed legislation allowing foreign investors who invest more than US$500,000 in Laos to own a block of residential land up to 800 square metres in .
The establishment of mega investment projects which have required other residents to relocate has also increased demand for land.
Sansabai Property and its partners are one of the active firms which have seen success in residential land development after commencing operations a few years ago.
The companies are now developing their second land development project in the capital after witnessing the increasing demand for residential land.
They now sell a 200 square meter plot of land at a price of more than 100 million kip.
The land has access to electricity, water supplies and other services. The company is offering land buyers to pay in cash upfront or by installment plan. Project officials told Vientiane Times that the land development concept is not different from what has happened in other foreign countries. They said that land developers play an important role to help the government to expand the urban area.
Another land developer in Nongtaeng village said that she purchased a rice farm from villagers and decided to develop the land into a residential area.
She said that land development is one of the new businesses which are expected to boom over the next few years.
“Don’t think too much when investing in land. You never make a loss from purchasing land. It is different from other goods as it will never be reproduced,” she said.
She said that land sales are different from the past and that land sellers can get better prices if they develop infrastructure on the land which will add value to its price.
She said that she would make more than a 50 percent profit if all the land plots in her residential project are sold.
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The price of prime land in Vientiane has witnessed only small increases this year as it nears its peak, according to a major real estate firm.
Rent and Buy Company Managing Director, Mr Houmphan Sayalath, said his company had been monitoring land prices in Vientiane for several years and had seen only minor increases this year.
“Land prices in prime areas of Vientiane have been stable; one of the main reasons is that the price of land has reached its peak point,” he said.
According to Mr Houmphan, land in the highly-desirable Sihom area in Chanthabouly district and along the Mekong River in central Vientiane is now selling for 23.8 million kip (US$3,000) per square metre, a 3 to 5 percent increase on last year.
He said prices in central Vientiane were not experiencing the massive jumps of a few years ago. Three years ago, land prices in Vat Chan village close to the Mekong riverfront leapt up by 50 percent following the development of the Mekong embankment.
Mr Houmphan said land prices went up not just as a result of demand for the area and economic growth, but also because of development projects in the area.
“It is normal to see prices of land skyrocket once there are infrastructure development projects in the area,” he said.
Mr Houmphan said land prices on newly-built roads in the city’s outskirts were climbing faster than those in prime areas, possibly as buyers were eyeing profits in the land trade business.
Despite the rapid increase in Vientiane la nd prices in recent years, the cost of purchasing land remains low compared to neighbouring countries– making Laos more attractive to investors.
The land price in Laos is expected to increase after the Asean Economic Community comes into being in 2015, w ith the establishment of a single market and production base in the region likely to create a huge inflow of foreign investment and higher demand for residential and commercial land.
Mr Houmphan said a number of Lao businesspeople had built apartments and offices in readiness for regional economic integration in 2015.
He said real estate companies in Laos would see more competition due to the higher supply of rental apartments and offices.
Observers say the government’s decision to tighten expenditure, especially for infrastructure projects, would be a contributing factor to lower land prices. They explained that banks would be hesitant to issue offer loans for real estate development, which would negatively affect land sales.
Many foreign investors who have obtained land concessions from the government have been slow to carry out proposed development projects– an indicator that demand for land and property is slowing.