Real estate enterprises struggle to restructure

Investors view model houses of a real estate project. (Photo: SGGP)

Narrow operations, investment

In recent months, several large and small-sized real estate enterprises have been forced to reduce wages and personnel to maintain operations. Specifically, they cut 30-40 percent of salary, depending on rank, and reduced staff by 50 percent, keeping only key positions. In the last days of 2022, the working capacity at many real estate enterprises remained at only 25 percent compared to the beginning of 2022. In many companies, business leaders have classified personnel into three groups. Group 1 includes key personnel to be retained; group 2 includes qualified personnel, but cannot be arranged jobs, so they have agreed to temporarily stop working until the end of March 2023; group 3 consists of the remaining personnel whose labor contracts will have to be terminated.

Besides narrowing operations, many enterprises have also reduced investment scope and offered promotions when customers buy apartment products. For example, the Board of Directors of Phat Dat Real Estate Development Joint Stock Company has just approved the policy of transferring 28.4 million shares, worth nearly VND285 billion. This transfer is part of the company's strategy of restructuring the investment portfolio, optimizing investment resources, ensuring cash flow, and increasing debt solvency and settlement for bonds before maturity. With Phuc Dat Connect No.2 project in Di An City (Binh Duong Province), Phuc Dat Group - the investor - and S Gold - the distributor - have just applied a sales promotion program of selling apartments with the land. Specifically, customers who buy two or more apartments in this project will be given 1,000m2 of land in Gia Lai Province. If customers buy four apartments, they will be given 2,000m2 of legal land with land-use rights certificates (red book).

At the residential project Quoc Linh - Diamond City in Long An Province, invested by Thang Loi Group, headquartered in District 6, HCMC, if customers pay up to 95 percent, they will receive an 18 percent discount. Similarly, at The 9 Stellar apartment project of Son Kim Land in Thu Duc City, HCMC, if customers pay 95 percent, they will receive a discount of 16 percent. Some other investors have extended the progress, split the amount, and stretched the payment period to five years to ease pressure on customers in 2023.

Unlock cash flow

Newly released data from the General Statistics Office of Vietnam shows that the number of dissolved real estate enterprises in 2022 was nearly 1,200, an increase of 38.7 percent compared to 2021. However, this is only the number of enterprises that have completed the dissolution procedures following the law. According to some real estate experts, if including enterprises that are temporarily suspended, the increase can be up to 60-70 percent. Mr. Ngo Quang Phuc, General Director of Phu Dong Group, said that 2023 is still a challenging year for the real estate market, so the priority is the safety of the system, ensuring cash flow to implement projects on schedule and being able to repay loans and maintain business operations.

Mr. Tran Duc Vinh, General Director of Tran Anh Group, said that enterprises that accept "early treatment" often have an easier recovery. Although the operational scale is smaller, and capital is reduced, in return, financial pressure is lessened, and this helps businesses focus on core activities to quickly overcome difficulties. For good enough brands, when the company posts growth again, the personnel will automatically return, and the operational scale will also be quickly expanded. Here, the problem lies in quick reaction to the market without having to struggle in any way. In the current difficult context of the real estate industry, it is extremely difficult for enterprises to maintain their apparatus and steady growth of business activities at the same time.

Meanwhile, leaders of the HCMC Real Estate Association said that real estate enterprises need to lower profit expectations, so they should implement solutions to reduce selling prices by 45-50 percent, offer deep discounts, and swap bonds. Another solution that needs to be taken into account is that enterprises should be ready to sell or transfer projects that they cannot continue to invest to be able to restructure and restructure investment. At the regular press conference at the end of December 2022, Deputy Minister of Construction Nguyen Van Sinh recommended that businesses should sell projects that have not been implemented, focusing on completing ongoing projects, thereby, creating cash flow to implement the next projects. In the long run, when implementing real estate projects, capital borrowed for any project must be used to implement that project, avoiding financial imbalance.