The merger and acquisition (M&A) market in the first few months of the year saw increased interest from foreign investors in Vietnam’s real estate market.
However, successful deals were few, and negotiations faced several barriers. Experts noted that while the market was heating up, the number of successful transactions did not meet expectations, local media reported.
Over the past few months, many new groups of investors have shown interest in the Vietnamese market. While investors from Hong Kong and Singapore have traditionally been active, new investors, such as those from South Africa and Saudi Arabia, have also emerged.
However, the number of successful deals remains low due to several obstacles. Vietnamese investors are unable to accept the high interest rates of 18-20% a year that most foreign investors currently offer. Meanwhile, domestic enterprises are facing difficulties raising capital as their projects are already mortgaged, which foreign investors are unwilling to accept. In addition, domestic enterprises are not transparent enough in their cash flow, causing tension.
Sophie Dao, a senior partner at Global Business Services LLC (GBS), a leading M&A consulting company in Vietnam, noted that foreign investors approach the Vietnamese market with the mentality of “looking over” before making a decision.
Vietnamese businesses have invested heavily in land funds, building projects, and running legalities, and therefore selling cheap is not an easy decision to make. Nonetheless, foreign investors have the upper hand in terms of cash flow, and as a result, they often bargain for low prices.
Ms. Thu Tran, managing lawyer from Viclaw, an investment law firm, suggested that Vietnam should be flexible and go beyond the legal framework to attract big players in the real estate M&A market.
Hanoi by night
The real estate FDI has been increasing and decreasing over the years, and though it has not been commensurate with the potential of the market, it has shown a clear growth trend. However, there are several barriers that prevent real estate M&A from breaking through quickly. These include an unsynchronized legal system, complicated administrative procedures, and inadequate planning.
Besides, foreign capital flows into real estate need a total solution, which includes reviewing and completing legal regulations on the real estate market, creating an attractive, competitive, and open business investment environment, and promptly removing difficulties and problems related to policies.
Ms. Sophie Dao suggested that Vietnam should flexibly and synchronously operate monetary policy tools to meet the needs of credit capital flows for the development of the real estate market.
Additionally, creating conditions for businesses, home buyers, and investors to access credit capital quickly, reducing lending interest rates, and supporting the real estate market is essential. Improving the quality of planning to ensure a reasonable distribution corresponding to the development of infrastructure is also critical.
Finally, Vietnam should take advantage of diplomatic channels to attract foreign investors, but actively select and target investors with good financial capacity and a sense of responsibility towards the environment and society during the investment process in Vietnam.