Vietnam's economy is on the recovery; property market is warming up and M&A transactions have increased in recent years. According to economic experts, this reflects the strength of Vietnamese enterprises, especially when the finance is still very weak.
M&A thriving
As reported by the Foreign Investment Agency (FIA), Ministry of Planning and Investment, the real estate sector is still ranked No. 2 out of 17 areas that foreign investors and domestic investors are interested in. Currently, a total of newly-registered investment in the real estate sector of the country was US$1.69 billion or 19.3 percent. FIA also added that in the first 7 months of the year, total newly-registered FDI increased by US$8.8 billion, or 92 percent over the same period last year, of which the FDI flows into the real estate sector reached US$456.5 million.
M&As occur not only between domestic and foreign investors but also among domestic investors; for example, the VND73.4 billion La Casa project of An Gia Group was transferred from Van Phat Hung Real Estate Company.
According to Nguyen Dinh Bao, Deputy General Director of Khang Dien Group (KDH), the VinaCapital Investment Group owns 21 percent shares of KDH, equivalent to the market price of US$20 million. In addition, other capital funds such as Elite Mutual Fund, Vietnam Holding, and SAM also join hands with KDH. Currently, KDH is one of the few real estate businesses that has 49 percent of foreign ownership.
Mr Le Hoang Chau, Chairman of the Ho Chi Minh Real Estate Association, explained that the infrastructure and the connectivity of the metropolitan areas and cities are improving to make property market more attractive to M&As.
According to Savills Real Estate Management Company, successful M&As in recent times come from a number of real estate investment companies who are very fierce in solving financial problems. Meanwhile, firms with strong financial resources expect to acquire good projects with high profitability after the market rebounds.
Opportunities for economic development
According to Masataka Sam Yoshida,CEO of Recof Japan, a leading M&A group, Vietnam is forming a wave of M&A that comes from a policy on equitisation of SOEs including real estate companies.
Domestic and international economic experts agree that Vietnam real estate has much room for development so M&A in this sector is expected to continue to increase in the remaining months of 2015 and 2016; especially, once Vietnam signs TPP agreement, the Vietnam economy will have more momentum to develop and attract more FDI.
Yasua Nishitohge, CEO of Aeon Vietnam, one of the corporations investing quite heavily in Vietnam's retail market in recent years, said that transparency and equality will not only help the real estate market develop sustainably but also increase the attractiveness for foreign investors.
According Dr Su Ngoc Khuong, Investment Director of Savills Vietnam, the market will have housing projects more focused on apartment segment, land and residential areas. Besides, investors are also interested in operating assets with stable margins and lower risks.
According to Savills, when foreign investors seriously participating in the domestic real estate market, there will be positive impacts on other sectors such as hospitality and tourism. That is the reason to invest in hotels in the urban areas and resort centres.
Although Vietnamese real estate market is still potential to attract foreign investors, many foreign investors are worried about complicated mechanisms and administrative procedures. According to Mr Masataka Sam Yoshida, foreign investors are still facing many difficulties accessing M&As in Vietnam, particularly legal provisions that are complicated and difficult to understand. This hinders consulting process of M&As. The improvement of transparency of information will minimise the administrative procedures to boost up M&As.
Dinh Thanh
Vietnamese
