Japanese investors are now aiming to pour US$9-10 billion into Vietnam over the next few years, mostly into infrastructure development and real estate.

The State Bank of Vietnam (SBV)’s tightened credit policy will push more domestic real estate developers to join hands with foreign investors to have alternative funding, experts said. 

Banking credit growth for the real estate industry will ease off next year in the wake of new regulations from the SBV, the country's central bank. Among the policies, a regulation on increasing the risk weighting of real estate loans from the current 200 percent to 250 percent from next year will have significant impacts.

Another new SBV regulation on reducing the maximum quantum of short-term deposits that can be used for medium- and long-term loans from the current 45 percent to 40 percent next year will also reduce banks’ liquidity, causing a lending reduction to real estate industry.

According to Trang Bui, head of real estate services firm Jones Lang LaSalle (JLL) Vietnam’s Markets, there has been a remarkable trend in the wake of the bank credit crunch: more firms have come to foreign investors for capital.

“This is an opportunity for foreign partners and in this context, merger and acquisition (M&A) deals will increase rapidly,” Trang forecast.

Shareing the same view, Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association, said that to offset for the credit crunch, real estate developers will select foreign investors and funds with good reputation and financial capacity to cooperate in doing business, investing and developing projects.

Chau believed the cooperation not only helps domestic firms strengthen financial resource, but also learn experiences in developing projects and improving corporate governance.

M&A in real estate to boom

In fact, Vietnam has seen a sharp increase in foreign investment inflow to the real estate market, mainly through M&A deals, over the past year. According to statistics published by the Foreign Investment Agency under the Ministry of Planning and Investment, foreign investors poured more than US$6.5 billion into the country’s real estate market in the first 11 months of this year, surging sharply against US$3 billion in the whole 2017.

Real estate remains among the three sectors attracting the most FDI capital to Vietnam. South Korea, Japan, Singapore, China, and Hong Kong are the five largest real estate investors in the country.

According to Recof Corporation’s Managing Director Masataka Sam Yoshida, real estate was one of the sectors receiving the most M&A capital from Japan.

Japanese investors Hankyu Realty and Nishi-Nippon Railroad have been co-operating with Nam Long Group to carry out a series of housing development projects in Vietnam. So far, these investors have acquired and developed five large-scale housing projects and offered thousands of units to southern Vietnam.

“Japanese investors are now aiming to pour US$9-10 billion into Vietnam over the next few years, mostly into infrastructure development and real estate. I am sure that the size of M&A transactions will increase in the near future, especially when it comes to mid-range projects,” Yoshida told local media.

Experts said investors often decide to pursue M&A rather than develop its own land reserves for new project construction to save time in completing legal procedures and dealing with issues related to site clearance and compensation.

However, they said the legality of the project is the first thing which domestic and foreign investors take into consideration when they are called for investment. In addition, prolonged project investment procedures also concern investors.

Therefore, Nguyen Huong, general director of Dai Phuc Land Real Estate JSC, said relevant ministries and departments should facilitate the project procedures to enterprises and investors in order to further promote the real estate M&A market.

Hanoitimes