Businesses shrink and operate at a loss.
The real estate industry since the end of 2022 has witnessed an extremely strict screening on a large scale.
Enterprises with unhealthy financial health, poor management capacity... are gradually exposed to the market's examination problem. Many investors who follow the "surface" and projects that do not ensure legality also encounter many difficulties, have to face losses, and even accept selling assets to maintain operations.
LDG Investment Joint Stock Company once had a plan to transfer 2 projects including Bai But - Son Tra Beach Resort, Da Nang and Apartment Complex Lot C1 in Binh An Ward, Di An City, Binh Duong Province. This move is part of the company's asset restructuring plan to pay off bank debts and bonds.
Bai But - Son Tra beach resort was once "treated like an egg" by LDG, considered one of the strategic projects with a long-term vision. Before intending to sell, the company considered finding a partner to participate with a ratio of 50-70%, but LDG's leaders also admitted that this possibility was unlikely in the current real estate market context.
Before this deal was completed, Mr. Nguyen Khanh Hung, Chairman of the Board of Directors of LDG, was arrested for Customer Fraud. Mr. Hung was involved in the illegal construction of 680 villas and townhouses by LDG Company in the Tan Thinh residential area project in Doi 61 commune, Trang Bom district, Dong Nai province.
The difficult business situation and lack of new projects also pushed LDG into losses. In the period of 2018-2019, the company earned over 600 billion VND per year. During the pandemic, profits decreased significantly. By 2022, the company earned 4 billion VND, the lowest ever. In the first 9 months of 2023, LDG lost 209 billion VND after tax, compared to more than 8 billion VND in the same period last year.
LDG Company encountered difficulties in implementing the project (Illustration photo: Khong Chiem).
Hai Phat Investment Joint Stock Company also sold all of its capital contribution to the investor of the commercial land lot TM 1, part of the Tan Lap Islet residential project, Nha Trang. According to the plan, this project includes 3 towers of 40 floors, including 3 commercial floors, 10 hotel floors, and 27 apartment floors. Along with that, Hai Phat plans to focus on wholesaling products at a number of other projects in Lao Cai, Bac Giang, and Quang Ninh.
Although it has been out of the real estate sector for a long time, Hoang Anh Gia Lai Group has also sold the Hoang Anh Gia Lai Hotel in Pleiku City, Gia Lai - the last real estate of Mr. Duc. The proceeds of about 180 billion VND, according to the announcement from the enterprise, were also used to pay off bond debt.
Several other businesses are closing down or suspending operations en masse. Housing Development and Trading Joint Stock Company (HDTC) announced that it is temporarily suspending operations due to financial difficulties and no source of income to pay salaries to its staff.
Or PVR Hanoi Investment Joint Stock Company also temporarily suspended business operations from November 15, 2023 to November 14, 2024 to rearrange personnel and find new business directions.
Brokerage companies are in an equally difficult situation. Ms. Trinh Thi Kim Lien, Sales Director of Dat Xanh Services, said at a recent event that after 3 years of the pandemic and more than 1 year of real estate market crisis, most brokerage companies have exhausted their accumulated funds.
Ms. Lien said that in 2023, the number of real estate brokers had decreased by 60-70% compared to the end of last year. Units that are still operating are facing difficulties in recruiting sales staff, high recruitment costs, and competitive pressure on salary, bonus, and commission policies. Many floors have to consider stopping to preserve their capital, waiting for the next phase of the market.
"Never in the history of business have real estate brokerage businesses had to face such severe difficulties as in recent years," said Ms. Lien.
Many businesses rise up to acquire land funds
On the contrary, many businesses do not hesitate to declare to buy more assets, increase land funds in the context of the market still facing many difficulties but are expected to turn a new page from this year.
A representative of An Gia Real Estate Company said that they still aim to continue expanding clean land funds, prioritizing projects that have been approved for investment policies, are suitable for affordable project development, and have a quick implementation time.
The company is in the process of in-depth appraisal of two potential land funds in District 8 and Thu Duc (HCMC). When the transaction is completed, it is expected to provide more than 4,000 products to the market in the context of increasingly scarce land funds in the city.
Many businesses are bold in the race to acquire land funds (Illustration: Nguyen Mau Phuoc).
An Duong Thao Dien Real Estate Investment and Trading Joint Stock Company approved the plan to receive the transfer of land use rights for 8 plots of land all located in Phuoc Long Ward, Thu Duc City, Ho Chi Minh City. The amount to be paid is more than 294 billion VND.
Or Ecopark Group is in the process of negotiating to buy the entire Song Thao Company Limited - the investor of Thanh Thuy Hot Mineral Resort project in Thanh Thuy town (Thanh Thuy district, Phu Tho province).
At the same time, Ecopark Song Thao Company is allowed to propose adjustments and re-establish the planning of the Thanh Thuy hot mineral resort project with a scale of 65 hectares, and complete procedures to register assets on the land according to the provisions of law.
However, businesses still face difficulties in the acquisition race. In the case of An Duong Thao Dien Company, the business needs to spend more than VND 294 billion for the above 8 transactions, while the amount of cash on September 30 was only over VND 53 billion, meeting about 18% of the transfer value. This transfer value is also larger than the total value of investment real estate (about VND 274 billion) at the end of the third quarter of 2023.
Or Ecopark Group, although in 2022 its profit was nearly 2,400 billion VND, up 9% compared to the previous year, its debt increased by 11% compared to the previous year, at 19,415 billion VND. The debt/equity ratio is still at 3 times, although it has decreased compared to 4.1 times the previous year.
It is easy to see that domestic enterprises are still facing many unfavorable factors such as the general difficult situation of the economy, unresolved project legal issues, many shortcomings in corporate bonds, and lack of access to capital flows.
A synthesis by DSC Securities Corporation (DSC) shows that in 2024, the group of real estate enterprises will have more than 120,000 billion VND of bonds maturing, the highest in the past 5 years. The burden of bond repayment still weighs heavily on real estate enterprises and they need a "major surgery" to restore their financial health.
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