Real estate businesses in crisis mode

(SGI) - Over the last twenty odd years, several real estate brands in Vietnam have lost their high credibility due to various unpredictable circumstances that have affected their reputation. Currently too, many big brands are doing everything possible to fight the factors affecting their businesses and save and protect their brands in the current crisis situation.
Illustrative photo.
Illustrative photo.

Bonding  with consumers

According to the Tan Viet Securities Company (TVSI), their agents have announced plans to buy back bonds ahead of time of many businesses in the fourth quarter of 2022 and 2023 of total value of more than VND 2,000 bln. In which, the Hung Thinh Land Joint Stock Company will buy back all 4 million bonds issued on 28 December 2021 that will mature by 28 December 2023. Estimated time to complete the acquisition is 30 days. This bonds lot is worth VND 400 bln and the method is to buy directly from the bond holders. The purchase price is equal to the total face value of the bond, along with interest and all other expenses incurred but not yet paid. This move is designed to create confidence in investors in the current context, as well as protect the brand of the Hung Thinh Company.

Some other businesses have also made similar moves. For instance, the Gotec Land Joint Stock Company has committed to buying back all 6 million bonds issued on 15 October  2021 that will mature by 15 October 2025 at an issuance value of VND 600 bln. The expected time of acquisition is no later than 30 June 2023. The Nam Land Joint Stock Company plans to buy back all 4 million bonds issued on 13 July 2021 and due for maturity on 13 July 2024, with a total issuance value of VND 900 bln. The expected time of acquisition is no later than 30 June 2023.

Similarly, the An Phat Technology Trading Joint Stock Company plans to buy back a lot of 2 million bonds issued on 30 December 2020 that will mature on 30 December 2028, with an issue value of VND 200 bln. In this, the An Phat company plans to buy back at least 50% of the total par value of bonds in circulation, equivalent to 1 million bonds, as soon as possible, but no later than 31 December 2022. After that, the enterprise will buy back the entire remaining amount of bonds no later than 31 March 2023.

The Novaland Group, one of the enterprises that is implementing many vital projects, also has to struggle with difficulties. Mr. Bùi Xuân Huy, Chairman of Novaland, shared that many projects had to be adjusted in their construction phase and many staff laid off in some departments due to the current crisis situation. Mr. Huy said that the solutions that were given are only temporary. At present, it will take a lot of effort to keep commitments to customers, keep construction sites operating, and stay in the market. With an unprecedented ongoing difficult situation in the market, it is important to stay focused on the core business and ensure the interests of customers are fully met.

Cash shortage

Many real estate businesses have had to borrow from outside at high interest rates, as they are running out of cash to continue operations. Mr. Lê Hoàng Châu, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), said that this is a challenging and uncomfortable situation but necessary to survive and protect the business brand. Currently, many enterprises are shrinking scale of production and business investments such as stopping or suspending investment and construction activities of some projects;  implementation of new projects; and issuance of shares to increase capital. This will affect the recovery and growth of the economy, and directly reduce state budget revenue. Enterprises also have to streamline their apparatus as much as possible, reduce their workforce, resolve social security issues, and greatly reduce wages.

According to Mr. Châu, due to lack of access to credit, real estate enterprises have to borrow from society at a very high interest rate; or have to sell off assets and even projects; or sell real estate and housing products at a steep discount. To remove these difficulties for the real estate enterprises, Mr. Châu has proposed to the Government ten solutions related to changes in laws, mechanisms, policies, extending of credit, removing the bonds market, and increasing supply of social housing.

HoREA has suggested that the Government and the State Bank of Vietnam consider extending the credit room by 1% to 2% to have credit capital of about VND 100,000 bln to VND 200,000 bln, to support the economy in the final peak period. At the same time, it has proposed that the Ministry of Finance and the Government consider and create conditions for individual investors who are not professional securities investors to invest and buy individual corporate bonds at a certain rate. Mr. Châu said it is necessary to have a definitive conclusion on projects using land funds originating from public land or because the equitization of SOEs has been stopped from 2017 to now, in order to increase housing supply and remove difficulties for investors.

In talks with Saigon Investment, representatives of many businesses said that besides efforts to save themselves, the business community wants the Government to quickly find effective solutions to remove difficulties. Mr. Đặng Hồng Anh, Chairman of the Vietnam Young Entrepreneurs Association, has proposed to the Prime Minister a series of solutions. Specifically, he has asked to open the credit room by 2% to increase the cash flow and arouse positive sentiment in investors; use VND 300,000 bln deposited at four state-owned banks to disburse money to bond issuers for short-term payment; urgently establish corporate bonds guarantee fund; allow enterprises to restructure debts in commercial banks and make debts restructuring projects and publicize them in the market.

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