It could be a tough sell, as a London-listed property fund run by VinaCapital has seen its unit price plummet by two thirds since June to $0.50, a third of its official net asset value.

But company deputy managing director David Blackhall said some institutional investors were keen to invest in Vietnamese property, and wanted an unlisted fund that was not hostage to short-term market sentiment.

"This is a very testing time," Blackhall told Reuters in an interview in Hong Kong. "We’re gauging the market, and waiting for the right time to do it. We’re proposing the end of January."

Vietnam became a popular emerging market for investors when the country joined the World Trade Organisation in late 2006, and local fund managers such as VinaCapital and rival IndoChina Capital thrived.

But sentiment soured this year as inflation soared to 27.9 percent in September, partly because of a gaping trade deficit that threatens to turn into a balance of payments crisis if inward investment slows.

The government let the dong currency weaken to try to cut imports and improve competitiveness, tried to tighten lending, and raised interest rates, although they are still negative in real terms because of the high inflation.

Housing prices have fallen by up to 40 percent in Hanoi and Ho Chi Minh City in the last year. And developers, starved of funds, are keen to offload unfinished projects.

"In the last two years everyone in Vietnam became a property developer -- my uncle’s got some land, let’s do an office building," Blackhall said.

"But now they have land and projects that they need to look at divesting. The wind has gone out of their sails."

The new fund, run by the company’s property arm VinaLand, would invest in mixed-use developments in Vietnam’s main cities, business hotels, and apartment projects, Blackhall said.

"Things are available now that you just couldn’t get 12 months ago -- parcels of land in inner city Hanoi and Ho Chi Minh City," he added.

The property investment arm of British insurer Prudential is also looking to pick up distressed assets, telling Reuters in June that it was raising a second portion of a fund for Vietnam.

After rampant speculation doubled prices in a couple of years to the end of 2007, a typical top-end 120 sq m apartment in Ho Chi Minh city has fallen in price by about a third in the last year to about $300,000.

Prices would probably fall another 10 percent, stabilise for some time, and then steadily appreciate, Blackhall said.

"The macro economy is looking a lot better than three months ago," he said. "I think the (property) market has got a bit more to come down, and then it’ll normalise."

Thanks to falling rice and oil prices, Vietnam’s inflation slowed a tad to 26.7 percent in October. The government is targeting 15 percent inflation, or less, next year, and expects the economy to grow 7 percent, compared to a forecast of 6.7 percent for 2008.