Foreign investors case real estate market, but hold on to money

At a seminar on April 7 analysts said that while the M&A market is heating up, there are still many barriers that make the negotiation process tortuous and delay deals.

Dung Duong, managing director of real estate services and investment company CBRE Vietnam, said there has been an increase in new foreign investors interested in the Vietnamese market in recent years. This year 50% of interested parties have been new names in the market.

Previously most investors were from Hong Kong and Singapore, now there are new players from economies such as South Africa and Saudi Arabia.

But despite the rising interest, the number of successful M&A deals is few and far between since Vietnamese businesses are indifferent or unable to meet foreign investors’ conditions, he said.

He said most foreign investors offer loan interest rates of 18-20%, while Vietnamese investors can only afford 13-15%.

The latter have mostly mortgaged their projects to banks to raise working capital, which is unacceptable to the foreign investors, he said. There is also tension between the parties since Vietnamese firms are not transparent about their cash flows, he added.

Nguyen Cong Ai, deputy general director of KPMG Vietnam, said potential foreign buyers are just looking around and in no hurry to close deals.

Vietnamese businesses have spent a lot on their projects, and so are reluctant to sell cheap, but foreign investors, since they have cash in their pockets, bargain hard, he commented.

It seems that only in the fourth quarter this year or 2024 would there be new M&A deals, he added.

Vo Tri Thanh, director of the Institute for Brand and Competitiveness Strategy, said Vietnam needs to be flexible with its legal framework to attract big players to the M&A market.

Some conditions foreign investors set fall foul of Vietnam’s regulatory framework, which is also a reason for the deadlock, he explained.

Nguyen Anh Tuan, deputy director of the Foreign Investment Agency, said FDI in real estate has not been commensurate with the potential of the market despite growing strongly in the last two decades.

While it slumped somewhat during the Covid pandemic, it has gradually recovered, increasing by 26% last year, he said.

But he acknowledged there are many hurdles that prevent a breakthrough in real estate M&A, including the inconsistent, unclear and complicated legal system, which is not nimble either.

The complicated administrative procedures delay the implementation of projects, while planning lacks synchrony, especially in new urban areas, he noted.

He spoke about the things that need to be done to attract foreign capital into real estate like streamlining legal provisions, creating a competitive and open investment environment, and proactively addressing difficulties and problems related to policies.