In a report on the real estate and housing market recently released, the Ministry of Construction said that real estate businesses are facing many difficulties. In particular, the number of real estate businesses declaring bankruptcy and dissolution in 2022 increased by 38.7% compared to 2021.
Difficulty on top of difficulty
This agency assessed that 2022 is a year when businesses operating in the real estate sector will face many challenges, with some corporations reducing their workforce by up to 50% to cope with difficulties. The main reasons are difficulties in accessing credit loans, issuing bonds and mobilizing capital from customers, leading to many businesses lacking capital, having to delay or temporarily suspend project implementation.
In addition, lending interest rates, foreign exchange rates, gasoline prices, and construction material prices have increased, leading to increased costs for businesses, affecting business operations. The fact that customers buying real estate have difficulty accessing bank loans also indirectly affects the liquidity of real estate products and projects; businesses cannot sell products to recover capital and reinvest.
In addition, from the end of 2022 until now, some enterprises are still under pressure to repay bonds early to investors for many reasons, including changes in policies to control bonds issued by enterprises.
The Vietnam Bond Market Report by the Vietnam Bond Market Association (VBMA) shows that the total volume of corporate bond issuance last year reached VND255,163 billion, down 66% compared to the previous year. The issuance value of most industry groups in 2022 decreased compared to the previous year, notably the issuance of bonds by real estate enterprises decreased by 80.8% compared to the same period in the context of many unfavorable macro factors.
Difficulties in capital sources greatly affect buying and selling activities in the real estate market. Photo: TAN THANH
Meanwhile, enterprises had to buy back bonds worth up to VND 210,830 billion in advance, an increase of 46% compared to 2021. Of which, the real estate group bought back about VND 35,400 billion in advance. That means that capital sources for real estate have not only been tightened but also significantly narrowed compared to before, causing many enterprises in the industry to fall into difficulty. A series of enterprises recently announced losses show this difficulty, such as Phat Dat Real Estate losing nearly VND 230 billion in the last quarter of 2022, Cen Land also reported a loss after tax in the fourth quarter of 2022 of up to VND 58.6 billion or Dat Xanh Group had a net loss of more than VND 400 billion..., many other large enterprises also saw a sharp decline in revenue and profit.
The Chairman of the Board of Directors of a real estate company with a bond debt of more than 200 billion VND said that his company has accepted "loss and pain" to rearrange its investment portfolio, sell projects to escape the debt and interest situation... but finding partners to sell to during this time is extremely difficult, because most real estate companies have exhausted their capital sources, and any asset is difficult to sell, not just real estate.
"The tightening of the corporate bond market too quickly and too suddenly has left us unable to react in time. What we are worried about now is not knowing how to find capital to implement projects, while many policies related to procedures have not been resolved. Therefore, what we need is for the government to soon have a way to remove policies to support businesses in implementing projects," he shared.
Many solutions
Speaking to reporters of the Lao Dong Newspaper, Dr. Nguyen Huu Huan, from the Ho Chi Minh City University of Economics, said that the real estate market is facing difficulties in both input and output, especially capital sources are being tightly controlled. Therefore, to resolve capital difficulties for this market, the State Bank's policy needs to be demonstrated through giving specific messages and supporting to some extent short-term credit capital to save liquidity for real estate enterprises.
"Because the difficulties of corporate bonds cannot be solved overnight, while real estate enterprises are in dire need of working capital to continue implementing unfinished projects. Enterprises can seek other sources of capital such as foreign loans, but will face exchange rate risks because they have to borrow in USD and not all enterprises meet the conditions for mobilizing international capital. Therefore, the short-term problem is still needing credit capital to "support", contributing to helping real estate enterprises recover" - Dr. Nguyen Huu Huan said.
According to Dr. Nguyen Huu Huan, not only credit capital for real estate enterprises is facing difficulties, but also individual customers borrowing to buy houses for living or investment are also limited in accessing capital or have high interest rates of about 15%-16%/year. Therefore, there needs to be a solution to stabilize or reduce the lending interest rate soon.
Regarding the solution to the corporate bond problem, Dr. Le Dat Chi, Deputy Head of the Faculty of Corporate Finance - Ho Chi Minh City University of Economics, said that it is necessary to recognize it as an important capital mobilization channel for enterprises in addition to bank credit, in order to have measures to organize and manage the corporate bond market in the same way that banks must comply with lending regulations to protect depositors.
Meanwhile, financial and securities expert Lam Minh Chanh said that the corporate bond market has recently caused many investors to lose confidence and have no intention of participating again. To restore the important role of corporate bonds, the following conditions must be ensured:
First and most importantly, all corporate bonds must be rated by reputable rating agencies. Then, investors will know the level of risk of each type of corporate bond. Second, regulatory agencies need to strictly control the distribution of bonds. Absolutely avoid circumventing the law and distributing privately issued bonds to the public. Third, only those with securities brokerage certificates are allowed to advise and sell bonds to investors. Avoid consulting on bond sales by non-professionals such as bank employees.
Fourth, bond consultants and sellers must follow a detailed and strict consulting process to ensure that investors clearly understand which corporate bonds they are investing in and the potential risks of those corporate bonds. "If we can do that, corporate bonds will gradually recover and develop strongly, becoming a capital supply channel for businesses, especially real estate businesses," expert Lam Minh Chanh emphasized.
From the perspective of the management agency, Mr. Hoang Hai, Director of the Department of Housing and Real Estate Market Management - Ministry of Construction, said that the Ministry of Construction has proposed the Ministry of Finance to submit to the Government to amend and supplement Decree 65/2022/ND-CP regulating the offering and trading of individual corporate bonds in the domestic market and the offering of corporate bonds to the international market; strengthen direction and guidance on the offering and trading of corporate bonds in the domestic market and the offering of corporate bonds to the international market in accordance with legal regulations; control capital mobilization activities of real estate businesses on the stock market, avoiding speculation, manipulation, and price inflation.
Regarding the State Bank, the Ministry of Construction proposed to consider and propose appropriate credit ceiling management plans to support the economy; direct and guide credit institutions to create conditions for enterprises, home buyers and investors to access credit capital. Guide and direct credit institutions to lend and disburse quickly to enterprises and real estate projects that meet the conditions in accordance with the law; prioritize lending to social housing projects, worker housing, low-cost commercial housing and other types of real estate serving production and social security purposes with high efficiency and debt repayment capacity.
For localities, it is necessary to review and make a list of housing and real estate projects in the area; specifically assess the reasons and causes for projects that have been approved for investment but have not been implemented or are slow to be implemented. On that basis, focus on removing difficulties and obstacles in legal matters and procedures for preparing investment in housing projects to increase supply for the market. Speed up administrative procedure reform, avoid shirking responsibility or delaying the settlement of procedures for implementing real estate projects in the area.
Research international experience
Dr. Can Van Luc, a member of the National Financial and Monetary Policy Advisory Council, said he had carefully studied 16 solutions to rescue China's real estate market and found that Vietnam could study and apply 10 of them.
"In fact, we have been implementing some solutions, such as tax deferral/postponement, debt deferral/postponement... We have also consulted the Ministry of Construction, the Ministry of Finance, and the Government to study other solutions and find a direction suitable to the actual situation in the country.
For example, enterprises must accept discounts to sell some assets to pay debts on time; negotiate with bondholders to extend debt in difficult circumstances, this is allowed by Decree 65. Exchanging money for goods, exchanging bonds for real estate, this solution needs to be guided by the state to avoid legal problems that may arise. Enterprises are allowed to roll over debt, that is, they are allowed to issue new issues to pay off old debts..." - Mr. Luc said.
(*) See Lao Dong Newspaper from issue dated January 30
Source: https://nld.com.vn/kinh-te/hoa-giai-kho-khan-de-phat-trien-go-kho-cho-trai-phieu-va-bat-dong-san-20230131213303926.htm
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