Vietnam's real estate market is a potential channel to attract FDI.

Many advantages to attract capital

Accordingly, up to now, 48 countries/territories have invested in the real estate business sector in the Vietnamese market. Of which, Singapore is leading the list, followed by Korea, British Virgin Islands and Japan. Ho Chi Minh City is also recognized as the leading city in the country with a total registered investment capital of over 16 billion USD, accounting for 24.7% of the total investment capital, followed by Hanoi, Binh Duong and Ba Ria Vung Tau.

Over the years, registered FDI capital in real estate has increased. Specifically, in 2020 it reached 987 million USD, accounting for 13.6%, in 2021 it reached 1.390 billion USD, accounting for 9.1% and in 2022 it reached 1.816 billion USD, accounting for 14.6% of total registered FDI capital. Real estate projects are also always in the top 10 projects attracting the largest FDI capital. For example, in 2021, there was a smart city development project in Binh Duong with capital from Singapore up to 500 million USD. The remaining project is a high-rise residential area in Ho Chi Minh City with capital from Japan, up to 291 million USD.

By 2022, two real estate projects in Hue and Can Tho will also be in the top 10 projects with the most FDI capital of the year. The investment capital in these two projects is more than 169 million USD from Japan and more than 159 million USD from Singapore, respectively.

Aeon mall project in Hue is in the top 10 projects with the most FDI capital in 2022.

Commenting on this issue, Mr. Nguyen Anh Tuan, Deputy Director of the Foreign Investment Department - Ministry of Planning and Investment, said that Vietnam has many advantages in attracting foreign investment capital such as: stable and safe politics, high economic growth, competitive production costs, favorable location, abundant human resources, easy connection with major economies...

To take advantage of these advantages, the Government is currently vigorously implementing the public investment plan for the period 2021 - 2025 and the investment plan to serve the recovery of socio-economic development. In particular, the Government will focus on investing in the development of many important infrastructure projects such as: highways, coastal axes, airports, seaports, creating favorable conditions for the development of the real estate market as well as other industries.

Attracting many FDI projects into real estate also helps diversify real estate types in Vietnam. This is reflected in the fact that many types of real estate are developing more strongly than before, including industrial real estate, resorts, and healthcare. However, there are still some obstacles that hinder capital attraction such as legal issues, mechanisms for foreign investors, monetary policies, etc.

Take advantage of M&A deals

In the short term, while existing weaknesses have not been improved, capital attraction from foreign capital flows is still coming from mergers and acquisitions. This is a capital attraction channel when foreign investors can easily overcome legal difficulties to participate in existing projects, while also rescuing domestic enterprises that are in a period of capital shortage.

From 2022 to early 2023, a series of large project acquisitions and sales have attracted public attention. The famous name in the M&A market associated with a series of urban real estate projects in Vietnam is Keppel Group. Its most recent deal is Keppel Corporation (Keppel Corp), a leading Singaporean enterprise. Through its subsidiary, Keppel Land spent VND 1,230 billion to acquire a real estate project under development in Hanoi.

FDI inflows into the real estate market will continue to increase due to available potential.

According to many sources, this project is part of a multi-functional real estate complex under construction, expected to be completed in 2025. Keppel Land will pay in two installments with a total value of about VND 1,230 billion to own shares of this project.

Previously, the group also announced that it and the Keppel Vietnam Investment Fund would spend about VND3,180 billion to buy shares in two projects in Thu Duc City (HCMC). This project will develop a total of more than 200 townhouses and 600 apartments on a total area of ​​about 11.8 hectares with a total estimated development cost of about VND10,200 billion. In addition, this Singaporean giant is also holding shares in many large projects in Vietnam.

Many other names can be mentioned with recent M&A deals such as CapitaLand (Singapore), Sumitomo Forestry (Japan) with many deals that have been and are being implemented. Besides, many foreign-invested enterprises are still waiting or negotiating to be able to acquire good and suitable projects in the current period.

In addition to large enterprises, many groups of foreign investors with strong cash flows are also looking for opportunities in potential projects. Specifically, projects with complete legal procedures and low risks but investors are having to manage cash flow due to financial pressure. According to forecasts, in the period of 2024 - 2026, FDI capital will continue to flow into the real estate market when the recovery phase of this market begins. In the last 6 months of 2023, only deals in the negotiation stage are likely to attract cash flow. Most M&A deals are still revolving around traditional types such as housing, hotels, offices and are showing signs of shifting to industrial real estate due to the growing demand for this type. Source