(Construction) - In recent years, successful M&A deals in terms of quantity are among domestic investors, followed by foreign investors already present and operating in Vietnam market.

Foreign investors dominate the value of real estate M&A deals

According to Ms. Le Phuong Lan, M&A in the real estate sector in Vietnam has developed strongly in recent years. In the past, domestic real estate developers tended to apply for permits and implement projects themselves. M&A deals mainly belong to foreign investors acquired from domestic project developers.

However, when the market size is larger, the potential of domestic real estate businesses is stronger, they have accumulated enough financial resources, apparatus, and implementation process, then M&A is a quick way to expand land bank and business activities. It can be seen that the wave of project M&A among domestic real estate businesses has had remarkable developments during the pandemic.

Notable M&A deals in the second quarter of 2021 can be mentioned as Phat Dat Real Estate Development and Joint Stock Company acquired a 99.5% stake in Real Estate Investment and Development Joint Stock Company. Binh Duong Building to own the Binh Duong Tower project, the acquisition of the E-Mart Vietnam retail chain by Truong Hai Automobile Group, the cooperation deal between Becamex IDC and Central Retail Vietnam to develop the GO! Trade Center in Binh Duong.

In general, M&A activities over the past year have tended to slow down. The main reason from the seller's perspective is that in the second half of 2020 and the first half of 2021, the price of residential real estate in Vietnam has not decreased, along with the loosened monetary policy, which makes many real estate owners expect the pandemic to change. Hopefully the pandemic will soon end and the market will recover strongly, so they continue to hold onto their properties or price them at a very high level.

Meanwhile, the assessment and expectations of buyers are not as optimistic as those of sellers. They are more cautious when investing money at this time with the general mentality of "waiting and then acting". At the same time, for various reasons, the legal completion progress of the projects was also slower than expected, Ms. Lan said.

Positive outlook

In the past, the need for project M&A took place a lot in central districts or in the centers of big cities like Hanoi and Ho Chi Minh City. However, land fund in these areas is increasingly scarce, transaction prices have become too high, making financial models no longer effective. Therefore, demand and cash flow tend to shift to neighboring localities. There are two main factors driving demand today. They are good transport connectivity to the inner city and the presence of real estate developers leading the market.

Head of the investment consulting department, Savills Hanoi, said that urban housing is the segment that receives the most orders from investors. With a large population, high urbanization rate and rapid growth of the middle class, this is still the most profitable and potential segment for real estate investors in Vietnam.

Besides, the demand for industrial parks and logistics has also increased rapidly in the past 1.5 years. Thanks to the fact that Vietnam has joined the Free Trade Agreements, many giant enterprises in many fields have chosen Vietnam as a destination.

In addition, the types of real estate that have been operated include office buildings, apartments for rent with good location, good operating and maintenance condition, long land use period, are always the first assets. Preferred investment for foreign investors who tend to look for long-term and stable cash flow. This market also records transactions of investors doing business in other fields who want to expand and diversify risks by investing and holding real estate.

Another trend is an increase in demand for residential and resort real estate projects that combine health care and sports services. The pandemic has changed the thinking and living habits of real estate buyers. This will cause the number of M&A transactions of these projects to increase not only in tourist coastal cities but also in the vicinity of big cities, where there is favorable nature and large land bank.

In the long-term, investors, especially new foreign investors who have not yet operated in Vietnam, still pay great attention to the real estate market. For many reasons, including travel difficulties, they have not been able to successfully execute the deal. Once the pandemic is over, this investment wave will enter the market. In the coming time, successful deals will be in clean land projects, clear legality, completed properties in operation.

(Construction) - The Decree detailing the implementation of a number of articles of the Law on Real Estate Business 2014 began to appear difficulties and obstacles that were no longer suitable for reality. It is time for a new Decree to replace it to catch up with the development of the real estate market.

Decree No. 76/2015/ND-CP appeared some problems that need to be amended and
replaced to ensure the uniformity of the current legal system (Source: Internet).

After nearly six years of implementation, the Law on Real Estate Business No. 66/2014/QH13 and Decree No. 76/2015/ND-CP dated September 10, 2015 of the Government (abbreviated as Decree No. 76/2015/ ND-CP) has created an important legal corridor, helping localities strengthen state management of real estate business; at the same time creating favorable conditions for organizations and individuals to participate in real estate business, contributing to promoting the development of Vietnam's real estate market.

Problems arise

During the implementation process, Decree No. 76/2015/ND-CP gradually appeared difficulties and obstacles that required research, amendment, supplement or replacement to suit the actual situation.

According to real estate experts, the shortcomings and difficulties are identified and divided into two groups of problems. The first group is some problems need to be modified and replaced to ensure synchronization and consistency with relevant legislation. The second one is some shortcomings and problems need to be amended, supplemented and replaced to match the actual situation.

Recently, the Ministry of Construction has reviewed regulations, summarized and evaluated the implementation of Decree No. 76/2015/ND-CP to identify the above difficulties.

Regarding some problems that need to be amended, supplemented and replaced to ensure consistency and synchronization with the current legal system. In June 2020, the National Assembly passed a number of related laws. to construction investment such as Law on Investment (amended) 2020, Law on Investment under the mode of public-private partnership (PPP) 2020, Law on Construction (amended) 2020 (these laws come into force from 1^st January 2021. In particular, the Law on Investment (amended) 2020 has directly amended and supplemented a number of articles of the Law on Real Estate Business 2014 (Clause 1, Article 10 on conditions for organizations and individuals doing real estate business; Article 50 on the authority to permit the transfer of all or part of a real estate project; Article 51 on procedures for transferring all or part of a real estate project).

Regarding some problems that are no longer suitable with reality, it can be pointed out that some contents of Decree No. 76/2015/ND-CP are still unclear for practical application and management such as in case of small-scale and irregular real estate transactions, it is not necessary to establish an enterprise with real estate business lines. There is no mandatory regulation on application of model contracts in real estate transactions; on conditions and procedures for transferring contracts of purchase and sale, lease-purchase of houses to be formed in the future, lease-purchase contracts of houses and construction works.

Thus, through reviewing, researching and summarizing the implementation of Decree No. 76/2015/ND-CP, the Ministry of Construction found it necessary to develop a draft Decree detailing the implementation of a number of articles of the Decree No. of the Law on Real Estate Business replacing Decree No. 76/2015/ND-CP to submit to the Government for promulgation in order to ensure the consistency and synchronism in the legal system, to remove obstacles and to be appropriate with the actual situation.

Problems need to be solved

Mr. Ha Quang Hung, Deputy Director of the Housing and Real Estate Market Management Department, Ministry of Construction said: “ For some shortcomings and problems that are not consistent with the new regulations, it is necessary to review them in order to avoid problems. annul or amend, supplement or replace a number of articles of Decree No. 76/2015/ND-CP to ensure uniformity and consistency in the current legal system”.

Mr. Hung analyzed that it is necessary to remove the regulations "must have legal capital not less than 20 billion VND" and "base for determining the legal capital level of real estate enterprises" in the conditions of organizations, individuals real estate traders to ensure consistency and synchronization between the law on real estate business and the law on investment.

In addition, it is necessary to amend and supplement regulations on procedures for transferring all or part of real estate projects to be consistent with the Investment Law 2020 and Decree No. 31/2021/ND-CP dated March 26 2021 by the Government detailing and guiding the implementation of a number of articles of the Investment Law; and at the same time supplement regulations on the transfer of all or part of real estate projects in accordance with the provisions of the law on real estate business.

For some regulations that are no longer suitable with reality, according to the Department of Housing and Real Estate Market Management, it is also time to review to amend, supplement or replace a number of provisions of Decree No. 76. /2015/ND-CP to remove difficulties and obstacles in a more realistic direction.

The new Decree guides the need to clarify regulations on "small-scale" and "irregular" real estate transactions for ease of application. It is necessary to amend and supplement the content of the sample contract and regulations in the direction of compulsory application of the model contract in the real estate business.

On the other hand, it is necessary to amend, supplement and combine regulations on conditions for transferring contracts of purchase and sale, lease-purchase of houses to be formed in the future and conditions for transfer of lease-purchase contracts of existing houses and construction works in one regulation on contract transfer conditions.

At the same time, supplement and combine regulations on procedures for transferring contracts of purchase and sale, lease-purchase of houses to be formed in the future and procedures for transfer of lease-purchase contracts of existing houses and construction works in 01 regulation on contract transfer procedures.

Deputy Minister of Construction Nguyen Van Sinh said: "With the functions and tasks of State management assigned by the Government, the Ministry of Construction with the view of clearly directing the scope of regulations amending Decree No. 76/2015/ The ND-CP must follow closely and strictly follow the articles and issues that the Law on Real Estate Business 2014 assigns the Government to prescribe in detail, under the Government's authority.

“ Do not amend, supplement or replace regulations and issues under the provisions of the Law on Real Estate Business 2014, within the competence of the National Assembly. The content of amendments, supplements and replacements must ensure consistency and synchronization with current legal provisions, especially laws that have just been passed by the National Assembly such as Investment Law (amended) 2020. Law on Construction (amended) 2020, Law on Investment in the form of public-private partnership (PPP) 2020 etc. and at the same time ensure compliance with the contents specified in documents detailing and guiding these laws”, Deputy Minister Sinh emphasized.

The new Decree replacing Decree No. 76/2015/ND-CP will create more favorable and
open conditions in real estate business (Source: Internet).

Leaders of the Ministry of Construction also thoroughly understood the amendment, supplement and replacement of current regulations in the spirit of removing limitations and shortcomings; raise the role, effectiveness and efficiency of State management; better information capture to promptly regulate the real estate market when necessary; simplify administrative procedures, create more favorable and open conditions in real estate business activities of the subjects and in accordance with the actual situation.

The development of a new Decree detailing the implementation of a number of articles of the Law on Real Estate Business 2014 to replace Decree No. 76/2015/ND-CP will ensure consistency and synchronization in the legal system, towards improving the investment and business environment and promoting the sustainable development of the real estate market.

Kinhtedothi – In an interview with the Economic & Urban newspaper, real estate expert Phuc Le said that the real estate market is being deeply hurt because of the fierce developments of the 4th wave of Covid-19. When the pandemic situation stabilizes, the trend of mountain real estate promises to have many opportunities to become a safe haven from economic fluctuations.

The 4th wave of Covid-19 broke out, has been causing negative impacts on the real estate market. So, in your opinion, when the Covid-19 pandemic is under control, will this market have a chance to break through and make up for the losses?

- Vaccination is the "golden key" to controlling the disease, thereby moving towards the goal of ending the Covid-19 pandemic. However, to create herd immunity, it is estimated that about 70% - 80% of the country's population needs to be fully vaccinated with two doses of vaccine. Therefore, in my opinion, it will be the end of November 2021 at the earliest, when people's lives turn to a new normal, the real estate market will have a chance to recover.

At the end of the year, even though the Covid-19 pandemic is under control, it is still difficult for the real estate market to have a chance to break through because people's psychology after a long time of separation will tend to relieve stress, go shopping and travel more. Businesses will focus capital to boost production to complete the target of the last months of the year. In particular, it should be noted that right after the pandemic, the volume of transactions on the secondary market may increase dramatically, the reason is that the prolonged distance makes notarization difficult, this is the amount of real estate transactions accumulated from before the implementation of Directive 16.

The real estate market "suffocated" because of the impact of the Covid-19 pandemic, while many investors fled, there was a part that took advantage of the collection to wait for a new "wave". In your opinion, is this the right time for investors to "bottom-fishing"?

- In fact, the "bottom-fishing" mentality appeared right at the time when the real estate market stalled before the Covid-19 wave from February, but the market movement recorded the opposite direction, that is, the price is not decrease but also increase. Therefore, to detect the bottom of the market at this time is a difficult problem. It is best for investors to wait until the end of the crisis cycle, then have a full basis to determine the bottom price. However, depending on the segment, depending on the product, investors need to consult, research and calculate in accordance with finance and opportunities.

In your opinion, which segment will lead the market after the Covid-19 pandemic?

- Despite being heavily affected by the Covid-19 pandemic, the real estate market still has certain "bright spots".

Specifically, for the apartment segment, the market is weak with few transactions because of the prolonged Covid-19 pandemic. Therefore, investors limited the offer to explore the market, and the price did not have an adjustment phenomenon.

With the industrial real estate segment, in 2020 and early 2021 this segment has had positive signals. However, the Covid-19 wave is prolonged, if Vietnam does not control the situation soon so that businesses can return to production, it is possible that FDI enterprises will withdraw capital from the market. Industrial parks and land or houses next to industrial zones will have a period of stagnation after a period of strong price increases.

In particular, the upcoming resort real estate segment will have two opposing directions. The first direction is that the beach resort real estate will face difficulties because of the huge supply in recent years, while the number of major foreign tourists will decline seriously in nearly 2 years, 2020 and 2021. The number of domestic tourists is not enough to fill this market gap even though room rates have dropped dramatically. Moreover, many hotels have closed during the past time, so the quality of the facilities has also deteriorated significantly, the bank interest still has to be paid, so it takes a long time to recover. Especially with the Condotel product line, it almost completely lost its liquidity due to unsecured legal characteristics.

The second direction is completely opposite that is the trend of mountain resort. Previously, this market attracted a larger proportion of domestic tourists than foreign tourists, so in the last 2 years, when the Covid-19 pandemic appeared, it was not affected as much as vacation real estate. marine care. As the recent peak holidays of April 30 and May 1, it can be seen that beach resorts only reach room capacity of about 50-70% depending on the area with room rates discounted dramatically, but room capacity is in the segment. Mountain real estate such as in Sapa, Lao Cai or Da Lat (Lam Dong) is always in a state of "out of room" for rent.

The outbreak and prolonged Covid-19 pandemic made people all over the country pay attention and focus on health, the tendency to look for mountain real estate, with fresh nature, promises to be the choice of many investors after the pandemic.

In addition, the Covid-19 pandemic has triggered a huge potential demand of people, which is the need for Second Home that serves both a family vacation, medium and long-term investment and storing assets. The trend of Work From Home resonates with the trend of finding green living space in a fresh, cool climate to enhance the experience of family life, which is becoming a prominent trend in the overall real estate market picture in the near future!

What is the most important factor for investors in the current context, sir?

- It is not necessary during or after the Covid-19 pandemic, for successful real estate investment, at any time, any period, investors must put safety first.

Clear legality is a prerequisite to help investors minimize risks in real estate transactions. Therefore, the lesson learned is that with any type of real estate, it is necessary to choose and consider ownership papers, clear red books, and transparent legality to avoid risks and damages. In particular, choosing a reputable developer will help ensure the safety and liquidity of real estate products.

Investors should note that not all real estate creates money, especially in the short term. The use of financial leverage (bank loans) to diversify investment portfolios and buy more real estate also avoids loss of space, decreases in value, improves capital etc.

Thank you for this conversation!