Distressed Vietnamese construction firms to gain from real estate recovery, public investment boost

By Tuong Nhu, Hai Yen
Fri, December 6, 2024 | 2:34 pm GMT+7

Construction companies in Vietnam are expected to benefit from opportunities arising from the anticipated recovery of the real estate market and increased public investment initiatives after a long period of challenges, say industry insiders.

According to the Vietnam Association of Construction Contractors (VACC), some 70% of construction contractors have either scaled back operations or laid off workers since 2019.

This decline is attributed to the combined impacts of the Covid-19 pandemic, rising material costs, economic difficulties, and a prolonged freeze in the real estate sector.

In particular, the struggling property market and developers’ liquidity shortages have significantly strained contractors’ cash flow.

A property project built by Hoa Binh Construction Group. Photo courtesy of Thanh Nien (Young People) newspaper.

A property project built by Hoa Binh Construction Group. Photo courtesy of Thanh Nien (Young People) newspaper.

This financial strain has affected not only small contractors but also big players. For instance, leading contractor Hoa Binh Construction Group, which achieved record revenue of over VND18.6 trillion ($732 million) in 2019, saw its revenue plunge to VND7.5 trillion ($296 million) in 2023.

Similarly, another industry giant, Coteccons, endured three consecutive years of profits falling below VND100 billion ($4 million) due to significant provisioning costs.

Drivers for recovery

The prolonged stagnation in the real estate market over recent years has posed significant challenges for civil construction enterprises. However, three new real estate laws, which took effect on August 1, are expected to address legal bottlenecks and facilitate the resumption of stalled projects.

In addition, with an economic growth target of 6.5-7% in 2025, the government is committed to resolving obstacles hindering the recovery and development of various markets, including gold, bonds, and real estate. As a result, construction companies are likely to see an increase in project activity in the near future.

Public investment, in particular, will continue to serve as a key driver of economic growth next year, said Tran Hoang Son, director of VPBank Securities’s market strategy division.

If public investment is heavily directed toward infrastructure development aimed at attracting foreign investment into industrial parks and economic zones, construction firms and industrial developers such as CII, Deo Ca, and Vinaconex will have significant opportunities to secure new projects, Son remarked.

Furthermore, the introduction of the national power development plan VIII (PDP VIII) and the gradual completion of guiding documents are expected to offer firms opportunities to resume projects in wind power, waste-to-energy, nuclear energy, and others, the analyst noted.

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