Pressure on real estate bond maturity in 2025

Although the real estate market is showing positive changes, some experts are still concerned about the risk of late bond repayment by real estate businesses next year.

According to Dr. Can Van Luc, Chief Economist of BIDV, during the most difficult period of the real estate market (from June to August 2023), Decree 08/2023/ND-CP was issued by the Government, allowing businesses and investors to negotiate and postpone bond debt. With this "lifeline", 60% of businesses have been granted a 2-year extension, thereby bringing the debt repayment date to June 2025.

Statistics from a credit rating agency show that the balance of corporate bonds (both principal and interest) due in 2025 is estimated at VND334,000 billion. For the real estate industry alone, the balance due is expected to be about VND135,000 billion.

Commenting on the above figures, the expert from BIDV said that the pressure on bonds in 2025 is not worrying. Default is less likely to happen, as the real estate market is gradually becoming more positive. Many businesses only need to set a product discount of about 10% to sell their products, instead of 40 - 50% as in the previous period.

Not only that, Mr. Luc confidently said that the real estate market is benefiting from macroeconomic factors. Accordingly, inflation is increasing under control; interest rates in Vietnam remain low; exchange rates are gradually softening; budget deficit, public debt, foreign debt, and government debt repayment obligations are within the threshold allowed by the National Assembly. In addition, institutions and legal systems are gradually being improved thanks to the presence of three new real estate laws.

The market recovery has been clearly reflected in the Ministry of Construction's Q3/2024 report. Specifically, the total number of successful transactions for the apartment and individual housing segment reached 38,398 transactions. This figure increased by 48.3% compared to Q2/2024 and increased by 29% compared to the same period in 2023. With the market sentiment improving, the premise for the return of real estate businesses is becoming clearer.

Sharing the same view, Mr. Nguyen Quang Thuan, General Director of FiinRatings, said that the largest source of capital for real estate businesses does not come from bank loans or bonds, but from customer payments. As long as the Government resolves legal issues in projects and creates conditions for investors to launch products soon, handling bond debt will no longer be a difficult "problem".

In fact, the progress of legal settlement is accelerating. Since the third quarter of 2024, many projects that had been "shelved" for many years have been reopened for sale. In Hanoi, these are Hanoi Melody Residences (Hoang Mai District) and QMS Top Tower (Nam Tu Liem District). In Ho Chi Minh City, the "revived" projects are Dat Xanh Homes Riverside (Thu Duc City), Metro Star (Thu Duc City), D-Homme (District 6), Lavida Plus (District 7)...

However, from the perspective of Dr. Vu Dinh Anh, an economic expert, the number of bonds maturing in 2025 is still a great pressure for businesses. In particular, bonds of real estate businesses have a higher risk of overdue and potential bad debt than the average level in the market.

The expert’s conclusion is well-founded, especially when compared with a recent report. Accordingly, in the past 10 months, the group of residential real estate enterprises accounted for 60% of the total amount of overdue bonds. Even 56% of the weak credit issuers belonged to the residential real estate and construction industry.

“In the next 12 months, about VND109 trillion of bonds will mature in the residential real estate sector, accounting for nearly half of the total value of maturing bonds. Of this, we estimate that about VND30 trillion of bonds are at risk of late principal repayment,” the report said.

According to Mr. Duong Duc Hieu, Director of Credit Analysis and Rating, Non-Financial Enterprise Sector of VIS Rating, the debt repayment capacity of real estate enterprises remains weak and the level of differentiation in debt repayment capacity is increasingly widening.

The expert from VIS Rating assessed that, for businesses with projects focusing on the real estate segment, concentrated in big cities such as Hanoi and Ho Chi Minh City, sales activities are quite good and will recover in 2024. These businesses will have better resources and high debt repayment capacity.

“On the contrary, some businesses will remain in difficult situations, as they previously focused on highly speculative projects. Demand for this segment remains low, so their ability to repay debt is weak,” Mr. Hieu commented.

VIS Rating emphasized that up to 2/3 of investors listed on the stock exchange have cash flow to repay debt from weak to extremely weak levels, specifically operating cash flow below 5% of total debt. This is especially serious for investors affected by project legal issues.

With the above situation, it is forecasted that 50% of the bonds maturing at the end of 2024 and into 2025 may be at risk of late payment of principal and interest, most of which are businesses that are regularly late in payment.

Source: https://baodautu.vn/ap-luc-dao-han-trai-phieu-bat-dong-san-trong-nam-2025-d231455.html