Vietnam real estate market: ‘Robust M&A opportunities’

Vietnam’s real estate market in 2022 has numerous M&A opportunities to attract foreign investment as reopening of international routes facilitates transactions, according to Savills.

The real estate sector ranked second in terms of disbursed FDI in the year to March 20, recording nearly $1.52 billion or 34% of the country’ total.

Le Phuong Lan, head of investment at propert service provider Savills Vietnam, said the figure reflects foreign investors’ investment demand and expectations.

The country’s real estate market in 2022, according to Lan, has opportunities to become an attractive acquisition destination for international businesses, given the following elements.

The fully reopening of international routes allows investors to directly examine projects, research markets and meet partners, speeding up M&A activities, while rapid urbanization creates opportunities to develop numerous urban area projects.

More than VND100 trillion ($4.37 billion) from the government’s socio-economic development and recovery program set to be invested in infrastructure development will drive growth of localities near Hanoi and Ho Chi Minh City. FDI companies can expand their business to those areas, instead of having presence merely in the two big cities.

The country’s good macro economic fundamentals, effective control of Covid-19 and high vaccination coverage are also solidifying investor confidence. Transport infrastructure networks are expanding rapidly, making it easier for transport of commodities and travel between localities.

Moreover, Vietnam possesses a young and abundant workforce and competitive labor costs compared to other nations in the region.

However, Lan noted that a major constraint to M&A activities is the complication and inconsistency of legal rules.

Most foreign enterprises prefer a joint venture structure, in which they hold the primary decision-making power and Vietnamese investors provide legal support for the project. But, due to the difference in business practices and legal entanglements, negotiations become time-consuming and sometimes lead to post-M&A problems, she said.

Foreign buyers and Vietnamese sellers have different valuation methods, resulting in variations in the estimated price of high-value assets. This makes it challenging for the two parties to reach agreement, Lan added.

In the first few months of 2022, outstanding M&A cases includes Phu Long Real Estate JSC’s acquisition of the 200ha SwanBay Dai Phuoc project in Nhon Trach district, Dong Nai province which neighbors Ho Chi Minh City’s Thu Duc city.

Another is Viva Land acquiring Capital Place, an A-class building which provides 100,000 square meters of office and retail space in Ba Dinh district, Hanoi, from Singapore’s CapitaLand. The acquistion is reportedly valued at $550 million.

Previously, Keppel Land signed an agreement with Phu Long Real Estate to acquire a 49% stake in three plots, about 14.2 ha in total, in Bac An Khanh Urban Area - Mailand Hanoi City, fomerly known as Splendora, for about $120 million. Accordingly, the transaction is scheduled to be done in the third quarter of 2022. Keppel Land and Phu Long will the develop 1,020 apartments and 240 houses at the total cost of $506 million.

In late February, Novaland and Tai Nguyen Trading Manufacturing Construction Co., Ltd. resumed the construction of Grand Sentosa in Nha Be district, HCMC after many years of suspension. It is planned to be a high-class, 8.3 ha trade, service and residential complex which will provide 200 apartments and shophouses by 2024.

Another case is Masterise Homes acquiring the 117.4 ha Saigon Binh An urban complex in An Phu district, Thu Duc city in January from Van Thinh Phat Group.