The Role of Foreign Investment in Vietnam's Real Estate Boom

 Buzzing street, flashing light, the never-ending development has sparked Vietnam's real estate boom in recent years. Ever since it opened its doors to FDIs (Foreign Direct Investment), Vietnam has transformed itself from a LIC struggling to recover from the war to one of the fastest-growing economies. The development of the economy brings with it the development of many other sectors within it and ignites a flame for the real estate boom.

FDI and Urban Development

To understand how FDI has impacted the real estate market, one must understand how it changes a place's urban landscape. FDI has forever been one of the main catalysts for urban development, not only that private sector businesses invest in urban places to locate their regional headquarters or stores, but also invest in public infrastructure such as transport networks, utilities, and logistics hubs. Here are 3 examples of when FDI has transformed the urban landscape:

1. Shenzhen, China:

One of the biggest changes FDI has had on the urban landscape was in Shenzhen, China, all thanks to its economic reform in 1978, shifting its current communist command economy to a socialist market economy. In the late 1970s, the Chinese communist government introduced an economic policy for certain areas of the country to 'experience capitalist reform' called the Special Economic Zone (SEZ), allowing for the region's liberalization of trade and investment policies that attracted a substantial amount of FDI, especially from regions like Hong Kong, Japan, Taiwan, and USA.  

FDI from global electronics companies (Foxconn, Huawei's partners,.. ) turned Shenzhen into China's major technology and manufacturing hub. This has led to many jobs being opened in Shenzhen, sparking a large influx of migrants to Shenzhen, both national and international migrants. As of the early 2020s, the Shenzhen population has reached well over 17 million people, and it is still growing today. An increase in the number of people also leads to the opening of more businesses, commercial zones, and improvement in public infrastructure to accommodate the growing population. Foreign companies leased land, partnering with Chinese contractors to build warehouses, offices, and housing complexes, leading to housing speculation, turning a once-poor farmland into a high-rise urban place. The residential real estate market also felt the impact of FDI development. Developers, fueled by foreign investment, develop high-rise apartment blocks, and an entire new district around an industrial zone is formed (Nanshan, Luohu). This development, as has happened rather rapidly, has caused urban sprawl, gentrification, and vertical living.

2. Bangalore, India

The 1990s saw India's liberalization of its economy, allowing FDI to come in. Bangalore has a well-educated and English-speaking workforce, a mild climate, and with having existing research institution, it has become a great destination for foreign investors, especially in industry related to technology. 

Tech giants such as Intel, Accenture, and Dell flooded into Bangalore, igniting the commercial real estate industry with their needs in offices, IT parks, and business campuses. Again, with more companies coming in, more jobs are created and centered in one location, and there will be more people migrating into that city, increasing demand for housing. As improvements in Bangalore were later than those of Shenzhen, and also that India allows for 100% FDI construction, they follow a much stricter international construction standard, and the design of the city was very much accustomed to the international community there, with green buildings, a smart city, and a high-rise tech park.

The introduction of Real Estate Investment Trusts (REITs) has further accelerated Bangalore’s already booming real estate market. As one of the first Indian cities to host REIT-backed office assets, Bangalore has attracted major international firms such as Blackstone, Brookfield, and Embassy Group. These REITs have opened the door for both institutional and individual investors to participate in the city’s growth, fueling further development. As a result, Bangalore now leads the country in office space absorption and stands as a major hub for real estate investment in India.

3. Warsaw, Poland

After the fall of the communist party in the Eastern bloc in 1989, Poland opened its economy, and Warsaw became one of the most attractive markets in Eastern Europe. Benefiting from its strategic location in Europe, Warsaw was considered a hotspot for multinational businesses, and especially businesses in the Business Process Outsourcing (BPO) and Shared Services Centers (SSC) industry. 

Massive development of residential zones with modern apartments, condos, and gated communities in areas like Wilanów, Ursynów, and Wola due to the rising demand from migrants residing in Warsaw. Not only that, as part of the European Union (EU), Poland and Warsaw benefit from the provision of grants, loans, and structural funds to improve their public infrastructure, raising the standard of living and improving transportation.

Just like the other two, FDI has changed Warsaw's urban landform and real estate market dynamics simply through job creation. Together with this, being part of a supranational organisation like the EU also helps Poland to flourish economically post-Cold War.

All in all, the three examples, Shenzhen, Bangalore, and Warsaw, have all shown us that FDI, along with other major factors, can have a major influence on shaping the spatial landscape of a city as well as the rise in real estate prices.

The Policy that Changes Modern Vietnam

After 1975, Vietnam regained its independence and adopted a socialist economy, in which the public sector operated as the main economic driver and wealth was intended to be distributed equally among the people. However, as the economy is mostly state-owned, the Vietnamese people have no motivation to work to increase productivity, and there is no room for innovation. Private farms were abolished, leading to great food shortages and famine, and the overprinting of money led to hyperinflation (of around 700%). Vietnam then needs something new, an economic reform to develop itself, which gives rise to the 'Đổi Mới' (Renovation) policy. 

Introduced in 1986 by the Communist Party of Vietnam (CPV) at its 6th National Congress, its aim is to save Vietnam from economic turmoil and modernize the country. The major change from the policy includes decentralising the Vietnamese economy, allowing and encouraging private sector businesses to open up, opening up Vietnam for FDI, and encouraging more exports. This has led to rapid urbanisation, rising income levels, and Vietnam's integration into global capital flows. There was also a social aspect to the policy as well such as improvement in healthcare, as well as the 2-child policy. All in all, the policy was made to spur economic growth and to solve contemporary issues that the Vietnamese society was facing, however, this essay is only going to go into the specifics of FDI in Vietnam.

FDI in Vietnam

To be able to integrate into global supply chains, the Vietnamese government introduced investor-friendly policies, including tax incentives, the establishment of export processing zones (EPZs), improved infrastructure, and later accession to international agreements like the World Trade Organisation (WTO), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the EU-Vietnam Free Trade Agreement (EVFTA). Joining these international trade and strategic organisations made Vietnam a competitive destination for FDI in manufacturing, electronics, textiles, and the technology industry. Multinational companies such as Samsung, Intel, LG, Foxconn, and Nike have invested billions into Vietnam’s economy, establishing large-scale factories and R&D hubs. In 2022 alone, Vietnam attracted over USD 27 billion in FDI, specifically in the manufacturing industries, with many industrial parks being built around.

The employment impact of FDI has been immense. Manufacturing jobs have surged, employing millions of Vietnamese workers, many of whom previously worked in subsistence agriculture. For example, Samsung employs over 100,000 workers in Vietnam. This industrial boom triggered mass rural-to-urban migration, especially among young workers seeking better wages, better jobs, and modern lifestyles. As a result, major cities like Ho Chi Minh City and Hanoi have seen their populations more than double in the past three decades. Ho Chi Minh City’s population grew from roughly 4 million in the late 1980s to over 9 million today, while Hanoi's expanded from 2 million to nearly 8 million, showing Vietnam's urban development boom.

This massive demographic and economic shift has had a great effect on many sectors, most notably the real estate market, which has evolved rapidly to accommodate the growing demand for industrial zones, office space, and housing. While the full extent of FDI’s impact on real estate deserves its own detailed exploration, it is clear that investment inflows have not only fueled economic output but also redefined the physical and urban landscape of Vietnam’s key cities and provinces, laying the groundwork for a property boom that continues today.

FDI-Driven Real Estate Hotspots in Vietnam

With the development of the Metro Line in Ho Chi Minh City (HCMC), built by a Japanese firm called Hitachi, commuting from the urban fringe to the CBD has become much faster; this has played a significant role in the development of TOD projects in Tan Binh, the HCMC fringe. Despite that being a large foreign investment from Japan with around $1.82 billion invested by Hitachi, it is still not the biggest effect Japan has on Vietnam's urban landscape. Located in Vietnam's capital city, Hanoi, lies a zone that locals often call 'little Tokyo'. Concentrated in areas like Tây Hồ and Ciputra, Japanese expatriates have driven demand for high-end housing, international schools, and lifestyle infrastructure. Japanese investment has fueled major infrastructure and real estate projects in Hanoi, such as the Smart City Hanoi project co-developed by Sumitomo Corporation and BRG Group. Industrial zones like Thang Long Industrial Zone, home to companies such as Honda and Panasonic, have further anchored Japan’s economic and urban footprint. 

Not only that, but the southern part of Vietnam, specifically District 7, was the area most impacted by FDI. From swarms to one of the most expensive urban areas in Ho Chi Minh City, FDI has not only increased the micro-economic activity in this area but also created an urban area that has become a symbol for other developers to follow. Launched in 1993, the Taiwanese CT&D Group (later changed its name to Phú Mỹ Hưng Asia Holdings), a joint venture with the city of Ho Chi Minh (through Tan Thuan IPP, a government-backed company that acts as a bridge between foreign investors and local government, helping to launch Vietnam's first big export zone and urban development). The joint venture develops a modern, well-designed urban place on the urban fringe of Ho Chi Minh City. Phú Mỹ Hưng development sought to transform underutilized peri-urban land into a master-planned, mixed-use city center. This vision contrasted sharply with the organic, congested growth of the city's inner core. With the inspiration from global urban principles, the area featured a well-segmented residential zone, commercial spaces, as well as an international school.

The development has not only transformed the urban landscape in the south of Ho Chi Minh City but also driven the real estate market in the region to soar. Early development, such as Huong Vuong or Sky Garden, draws suspicion of its success and return rate, considering it is still a swarm. However, as time progresses, the area has now become one of Ho Chi Minh's most expensive residential areas, with the amount of green space, public infrastructure, and home quality. Not only that, but lots of commercial spaces are also created, and with that, countless jobs are created. Notably, with the creation of this urban place, expatriates tend to move over. Specifically, Korean expatriates who move to Vietnam tend to settle in Phu My Hung, around the Sky Garden complex. With that, the commercial zone around the sky garden will a filled with Korean BBQ, Korean shops, and cosmetics, which all add value to properties around it. 

Despite having their positive effects, towns like Ciputra or Phu My Hung also have their negative effects that often affect locals the most. Development of 'Korean Town' or 'Japanese Town' sent land prices to the sky as foreigners often have a higher income than the Vietnamese people, which meant they could bid higher for the land there, and are displacing the locals. This creates a segregated community within the town as expatriates from these countries speak their own language and decrease social cohesion. It is also that the foreigners coming over sell goods and services at a much higher price than what the Vietnamese people are used to; to add on to that, higher property prices are also counted in the price. This has raised the cost of living within the area, putting further stress on the Vietnamese population. There have also been incidents of foreigners 'abusing' Vietnamese tenants, leading to higher rent, early cancellation of contract, and demand for higher rent charges.

However, FDI has most certainly raised the real estate price, and for Vietnamese people who are hoarding land or speculating, this development benefits them more than anyone.

Vietnam’s Integration into Global Real Estate Capital Flows

Over the past two decades, Vietnam has emerged as a significant node in global real estate capital flows, driven by robust FDI, industrialization, and legislative reforms through the 'Doi Moi' policy. For example, in 2024, total FDI reached $38.23 billion, of which real estate accounts for 16.5% of the total FDI, showing international investors believe in the Vietnam real estate market. Out of all investors, Singapore and Korea have invested around $18 billion, anchoring high-profile real estate portfolios across Vietnamese cities through equity stakes and mergers, with 92% of real estate M&A in 2023 coming from foreign buyers. Most notably, Keppel Land, a Singaporean company, has invested $3.8 billion across 25 different projects, including Riveria Point and Empire City. These investments are facilitated through institutional channels like mergers, joint ventures, and, recently, Real Estate Investment Trusts (REITs), following the launch of Vietnam’s first REIT (TCREIT) in 2021. Legal reforms, including the Real Estate Business Law 2023, further broaden foreign investor access to residential, commercial, and industrial assets. While foreign capital has modernized infrastructure and expanded housing supply, it has also contributed to soaring land prices, condominium rates in Ho Chi Minh City rose by 15% in 2024, and deepened inequalities, with affordable housing comprising less than 1% of new launches since 2021. This dynamic integration into global capital flows marks Vietnam’s ascent in the regional property market but also raises urgent questions about sustainable urban development and equitable access to land.

Conclusion

Vietnam’s experience over the past four decades shows how decisively foreign capital can re‑shape a nation’s urban landscape. From the Phu My Hung project to the surge of Singaporean and Korean joint ventures, FDI has supplied the finance, advice, and global networks that ignite Vietnam’s real‑estate sector from an informal, fragmented market into an internationally bankable asset class. That transformation has brought clear benefits with modern industrial parks, upgraded infrastructure, world‑class housing, and millions of new jobs that have helped lift the country’s living standards.

The policy challenge now is to convert these headline investment figures into broadly shared welfare gains. Strengthening the new Land, Housing, and Real‑Estate Business laws, scaling up transparent REIT structures, enforcing inclusionary‑housing quotas, and investing in mass TOD projects beyond Hồ Chí Minh City and Hà Nội can all help spread the dividends of growth. Equally crucial is a proactive land‑tax and planning regime that recaptures a fair share of windfall land‑value gains for public infrastructure and climate‑resilient projects. If Vietnam can strike that balance, in leveraging global capital while safeguarding affordability and sustainability, it will not only preserve the momentum of its real‑estate boom but also build cities that remain livable, competitive, and inclusive for decades to come.