Overcoming backlog to promote M&A in the real estate market

VCN - Considered a field with many opportunities to attract foreign investment, real estate mergers and acquisitions (M&A) activities in Vietnam are expected to continue to grow in quality and quantity in 2022. However, the remaining limitations will hinder transactions if not resolved soon.
Preventing brokers from pushing up land prices in the real estate market Preventing brokers from pushing up land prices in the real estate market
Taking advantage of planning information to push the Taking advantage of planning information to push the "wave" of the real estate market
Many positive signals for the real estate market Many positive signals for the real estate market
The real estate market has many incentives to attract foreign investment.
The real estate market has many incentives to attract foreign investment.

Real estate M&A faces many opportunities

The merger and acquisition (M&A) market in Vietnam in 2021 has witnessed impressive numbers. According to the Ministry of Construction, the real estate sector received more than US$31 billion of registered foreign investment capital. In which, the disbursed capital in 2021 is US$2.6 billion, down US$1.6 billion compared to 2020.

This shows that there are still many projects in the market that have not yet met the legal conditions for disbursement, partly due to communication restrictions during the pandemic.

However, the decision to open all routes from March 15 and the visa-free entry policy will accelerate the negotiation process of M&A deals and strengthen real estate investment activities.

This will lead to the disbursement of foreign direct investment (FDI) capital becoming more convenient when tourism barriers are removed, investors can directly move to projects to research the market, find out the business model or assess the potential of the industry. This contributes to an increase in the success rate of M&A transactions.

Thus, Vietnam's real estate industry is facing the opportunity to create momentum for M&A activities and become an attractive destination for international businesses in 2022.

Experts estimate that Vietnam possesses many macro factors, helping to create an attractive environment for foreign individuals and organizations to participate in investment activities.

In addition, the Government's plans to support businesses and control the pandemic have stabilized the economic situation and ensured social security. These are said to be two factors that build the confidence of FDI enterprises to pour investment capital into Vietnam.

For example, according to the Ministry of Planning and Investment, in early 2022, the Government officially approved the largest socio-economic recovery and development program ever, worth nearly VND350 trillion, in which, more than VND100 trillion is to develop infrastructure.

This acts as a “spillover” driving force, providing many opportunities for development in satellite areas. From there, FDI enterprises can expand their investment scale, instead of just concentrating in big centers like Hanoi and Ho Chi Minh City.

In addition, the timely support from the State plays a role in helping to strengthen the confidence of FDI enterprises when investing in Vietnam.

According to Le Thi Phuong Lan, Head of Investment Advisory Department, Savills Hanoi, entering the first months of 2022, Vietnam continues to record positive M&A activities. In particular, the real estate business ranked second in the whole industry when it received total registered investment capital of nearly US$1.52 billion, accounting for 30.4% of the market share.

"These figures have partly confirmed the needs and expectations of foreign enterprises in developing real estate projects in Vietnam," said Le Thi Phuong Lan.

Hidden barriers

However, along with opportunities and potential, M&A activities in Vietnam still have certain limitations. This makes FDI enterprises more cautious, somewhat inhibiting the development of the M&A market.

First of all, the legal system on land in Vietnam is still relatively complicated, causing bottlenecks and waste that have not yet been resolved. Many provisions in the laws, such as the Law on Housing, the Law on Land and the Law on Real Estate Business, still have inconsistencies. Despite the government's institutional reform over the years, these shortcomings will be a factor hindering the development of M&A deals.

In terms of transaction structure, most FDI enterprises want to implement a joint venture structure. Under this model, they hold the main decision-making power and Vietnamese investors provide legal support for the project. However, due to the difference in business practices as well as the legal system, the negotiation between the two parties becomes time-consuming, and sometimes leads to conflicts in the post-M&A stage.

Because the M&A market is a relatively new concept in Vietnam, many businesses, especially SMEs, have not been prepared for this process. For enterprises that own large projects, they have not yet planned specifically for a reasonable divergence right from the project planning stage, leading to many difficulties in mobilizing investment capital or transfer.

Finally, buyers and sellers are taking different pricing approaches, creating differences in the expected price of the project. This leads to difficulties in negotiating to find a suitable price between the two parties.

“Having many advantages compared to other countries in the region, the M&A market in Vietnam still has many potential challenges for foreign investors. M&A transactions are a complex commodity, so the parties involved need to carefully study as well as make detailed plans to aim for long-term value in the future,” a representative of Savills said.

According to the assessment, although the real estate market possesses many incentives to attract foreign investment capital, remaining limitations in the legal system, as well as the way businesses approach M&A, will limit the ability to convert transactions.

This should be noted especially in the context that businesses with investment needs are allowed to move freely, this is a golden time for the market to keep the wave of trade moving into Vietnam.

By Hoai Anh/ Huu Tuc

Related News

Financial policy helps strengthen state management of land

Financial policy helps strengthen state management of land

VCN - The Ministry of Finance has actively researched, urgently developed and submitted to competent authorities for promulgation according to its authority legal policies within the functions and tasks of the Ministry of Finance or actively participated with other relevant ministries, industries to develop projects and policies on real estate and housing market management, thereby contributing to the development of the real estate and social housing market.
Corporate profits enter recovery cycle

Corporate profits enter recovery cycle

VCN - The recently released Q1 2024 business results update by SSI Securities Corporation shows that corporate profits may have overcome the most challenging period and entered a phase of recovery and more stable growth.
Improve processes and enhance experience to rebuild trust in life insurance

Improve processes and enhance experience to rebuild trust in life insurance

VCN - In Vietnam, the space and potential of the life insurance industry is still very large, so it is necessary to focus on implementing new solutions, improving product quality, and helping the market develop sustainably.
Ensuring quality for sustainable growth of durian exports

Ensuring quality for sustainable growth of durian exports

VCN - Quality is a prerequisite to ensure sustainability for durian exports. Accordingly, the Ministry of Agriculture and Rural Development issued many synchronous solutions from technical processes to sanctions to ensure productivity and quality of exported durian fruit, as well as meet the requirements of the importing country.

Latest News

Traceability helps improve product value

Traceability helps improve product value

VCN - Traceability of origin has been and is a mandatory requirement for Vietnamese goods when exporting to several markets. The application of information technology and the use of QR codes is an effective solution in traceability, increasing value and promoting product consumption, especially agricultural products.
Vietnamese pepper prices see strong upward trend

Vietnamese pepper prices see strong upward trend

The Vietnam Pepper and Spice Association has expected pepper prices to continue rising every week.
E-commerce boosts exports of Vietnamese products

E-commerce boosts exports of Vietnamese products

Digital platforms have played a key role in helping Vietnamese firms take their high-quality products to the world, insiders have said.
Increasing the value of rice grains from the project of 1 million hectares of high quality rice

Increasing the value of rice grains from the project of 1 million hectares of high quality rice

VCN - The implementation of the project of 1 million hectares of high-quality rice will contribute to promoting the transition from traditional farming methods to synchronous mechanization, developing large-scale, stable and long-term concentrated raw material areas, ensuring sustainable and effective farming quality and minimizing environmental pollution. Vietnam is also the first country in the world to build a large-scale project on sustainable rice production and reduced emissions.

More News

Hai Phong Port strengthen solutions to improve cargo handling capacity

Hai Phong Port strengthen solutions to improve cargo handling capacity

VCN - The flow of goods passing through Hai Phong port area has tended to improve recently.
Five trends in exporting through e-commerce

Five trends in exporting through e-commerce

VCN - On May 22, 2024, Amazon Global Selling announced the prominent cross-border e-commerce (CBEC) trends shaping Vietnam's online export economy. Concurrently, it launched phase two of the program "CBEC: The breakthrough era" in collaboration with the Vietnam e-Commerce and Digital Economy Agency (iDEA) under the Ministry of Industry and Trade.
Vietnamese firms urged to watch global trade policies

Vietnamese firms urged to watch global trade policies

Experts say Vietnamese firms should keep an eye on global trade moves by major economies to figure out how best to promote the consumption and export of products made in Việt Nam, in the context of a glut of cheap Chinese goods flooding the world market.
Vietnam’s tra fish export tipped to bounce back

Vietnam’s tra fish export tipped to bounce back

Vietnamese tra fish export has roared back to growth after a significant drop recorded earlier this year as countries have scaled up their imports, according to insiders.
FDI attraction in five months tops 11 billion USD

FDI attraction in five months tops 11 billion USD

More than 11.07 billion USD in foreign direct investment (FDI) was funneled into Vietnam during January-May, up 2% against the same time last year, according to the Ministry of Industry and Trade (MoIT)’s Foreign Investment Agency.
What to do to develop Vietnam

What to do to develop Vietnam's automobile industry when implementing FTAs?

VCN - On May 24, Customs Magazine organized a discussion on the topic "Vietnam's automobile industry implements the Free Trade Agreement: In which direction to develop?"
The processing and manufacturing industry increased by 6.3% in four months

The processing and manufacturing industry increased by 6.3% in four months

VCN - Continuing the recovery momentum from the end of 2023, industrial production in April and the first four months of 2024 continues to show a positive trend. Of which, the processing and manufacturing industry increased by 6.3%.
Capital city to become an agriculture hub

Capital city to become an agriculture hub

The city’s cash crops were said to not require a large cultivating area but a high standard of production and processing, which have been identified as a solid foundation to penetrate foreign markets.
Renewables – key to green development in Mekong Delta

Renewables – key to green development in Mekong Delta

Renewable energy is seen as a sustainable choice for the Mekong Delta region to respond to environmental challenges, given that the country’s rice and fisheries granary has lost up to 300 million USD to prolonged drought and extreme salt intrusion.
Read More

Your care

Latest Most read
Traceability helps improve product value

Traceability helps improve product value

VCN - According to Dang Phuc Nguyen, General Secretary of Vietnam Fruit and Vegetable Association, currently, linking production with consumption of agricultural products plays a very important role in agricultural development, helping to enhance the bene
Vietnamese pepper prices see strong upward trend

Vietnamese pepper prices see strong upward trend

The Vietnam Pepper and Spice Association has expected pepper prices to continue rising every week.
E-commerce boosts exports of Vietnamese products

E-commerce boosts exports of Vietnamese products

Digital platforms have played a key role in helping Vietnamese firms take their high-quality products to the world, insiders have said.
Increasing the value of rice grains from the project of 1 million hectares of high quality rice

Increasing the value of rice grains from the project of 1 million hectares of high quality rice

VCN - The implementation of the project of 1 million hectares of high-quality rice will contribute to promoting the transition from traditional farming methods to synchronous mechanization, developing large-scale, stable and long-term concentrated raw mat
Hai Phong Port strengthen solutions to improve cargo handling capacity

Hai Phong Port strengthen solutions to improve cargo handling capacity

The flow of goods passing through Hai Phong port area has tended to improve recently.
Mobile Version