Real estate businesses in crisis mode

Over the last twenty-odd years, several real estate brands in Vietnam have lost their high credibility due to various unpredictable circumstances that have affected their reputation. Currently, too, many big brands are doing everything possible to fight the factors affecting their businesses and save and protect their brands in the current crisis situation.

Real estate businesses in crisis mode ảnh 1 Illustrative photo.
Bonding with consumers

According to the Tan Viet Securities Company (TVSI), their agents have announced plans to buy back bonds ahead of time of many businesses in the fourth quarter of 2022 and 2023 of total value of more than VND2 trillion. In which, the Hung Thinh Land Joint Stock Company will buy back all 4 million bonds issued on December 28, 2021, that will mature by December 28, 2023. Estimated time to complete the acquisition is 30 days. This bonds lot is worth VND400 billion and the method is to buy directly from the bond holders. The purchase price is equal to the total face value of the bond, along with interest and all other expenses incurred but not yet paid. This move is designed to create confidence in investors in the current context, as well as protect the brand of the Hung Thinh Company.

Some other businesses have also made similar moves. For instance, the Gotec Land Joint Stock Company has committed to buying back all 6 million bonds issued on October 15, 2021, that will mature by October 15, 2025, at an issuance value of VND600 billion. The expected time of acquisition is no later than June 30, 2023. The Nam Land Joint Stock Company plans to buy back all 4 million bonds issued on July 13, 2021, and due for maturity on July 13, 2024, with a total issuance value of VND900 billion. The expected time of acquisition is no later than June 30, 2023.

Similarly, the An Phat Technology Trading Joint Stock Company plans to buy back a lot of 2 million bonds issued on December 30, 2020, that will mature on December 30, 2028, with an issue value of VND200 billion. In this, the An Phat company plans to buy back at least 50 percent of the total par value of bonds in circulation, equivalent to 1 million bonds, as soon as possible, but no later than December 31, 2022. After that, the enterprise will buy back the entire remaining amount of bonds no later than March 31, 2023.

The Novaland Group, one of the enterprises that is implementing many vital projects, also has to struggle with difficulties. Mr. Bui Xuan Huy, Chairman of Novaland, shared that many projects had to be adjusted in their construction phase and many staff laid off in some departments due to the current crisis situation. Mr. Huy said that the solutions that were given are only temporary. At present, it will take a lot of effort to keep commitments to customers, keep construction sites operating, and stay in the market. With an unprecedented ongoing difficult situation in the market, it is important to stay focused on the core business and ensure the interests of customers are fully met.

Cash shortage

Many real estate businesses have had to borrow from outside at high interest rates, as they are running out of cash to continue operations. Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), said that this is a challenging and uncomfortable situation but necessary to survive and protect the business brand. Currently, many enterprises are shrinking scale of production and business investments such as stopping or suspending investment and construction activities of some projects; implementation of new projects; and issuance of shares to increase capital. This will affect the recovery and growth of the economy, and directly reduce state budget revenue. Enterprises also have to streamline their apparatus as much as possible, reduce their workforce, resolve social security issues, and greatly reduce wages.

According to Mr. Chau, due to lack of access to credit, real estate enterprises have to borrow from society at a very high interest rate; or have to sell off assets and even projects; or sell real estate and housing products at a steep discount. To remove these difficulties for the real estate enterprises, Mr. Chau has proposed to the Government ten solutions related to changes in laws, mechanisms, policies, extending of credit, removing the bonds market, and increasing supply of social housing.

HoREA has suggested that the Government and the State Bank of Vietnam consider extending the credit room by 1 percent to 2 percent to have credit capital of about VND100 trillion to VND200 trillion, to support the economy in the final peak period. At the same time, it has proposed that the Ministry of Finance and the Government consider and create conditions for individual investors who are not professional securities investors to invest and buy individual corporate bonds at a certain rate. Mr. Chau said it is necessary to have a definitive conclusion on projects using land funds originating from public land or because the equitization of SOEs has been stopped from 2017 to now, in order to increase housing supply and remove difficulties for investors.

In talks with Saigon Investment, representatives of many businesses said that besides efforts to save themselves, the business community wants the Government to quickly find effective solutions to remove difficulties. Mr. Dang Hong Anh, Chairman of the Vietnam Young Entrepreneurs Association, has proposed to the Prime Minister a series of solutions. Specifically, he has asked to open the credit room by 2 percent to increase the cash flow and arouse positive sentiment in investors; use VND300 trillion deposited at four state-owned banks to disburse money to bond issuers for short-term payment; urgently establish corporate bonds guarantee fund; allow enterprises to restructure debts in commercial banks and make debts restructuring projects and publicize them in the market.

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