Vietnam's real estate market to perform much better in 2025: Hoa Binh Construction chairman

How do you assess the prospects for Vietnam's real estate sector in the near future, and how will this affect the construction sector?

I believe that the real estate market will perform much better in 2025. There have been some very positive changes, particularly from the government and state management agencies. Party General Secretary To Lam is very determined in removing bottlenecks in administrative procedures to resolve challenges in the sector. The results are already visible, most notably in the legal resolution for Novaland, one of Vietnam’s leading property developers. The efforts of the government and state leaders have been key in improving the situation.

Moreover, Vietnam continues to attract substantial foreign investments. A prime example is Nvidia, the U.S. tech giant, which recently announced a partnership with the Vietnamese government to establish an R&D center and AI data center in Vietnam. This investment will not only affect the IT sector but will also have a ripple effect on other industries, including real estate and construction.

Another positive sign is the recovery of the tourism industry. I anticipate that tourism will return to pre-pandemic levels next year, driven by the expected return of Donald Trump to the U.S. presidency in 2025. This could bring an end to the ongoing conflicts, boosting global tourism, particularly from key markets like Russia and Ukraine.

Finally, the government is also focusing on completing several large public investment projects, which will create significant demand for construction services. Given all these factors, the construction sector is expected to grow significantly in 2025, with a projected increase of 15% from the 7.5% in 2024, according to VinaCapital.

In recent years, Hoa Binh Construction has diversified its business areas. Is this strategy aimed at mitigating risks?

Our company operates across several business segments, including residential real estate, resorts, industry, and infrastructure. We are also focusing on exploring investment opportunities abroad.

About 5 or 6 years ago, Hoa Binh concentrated heavily on building resort and hotel projects [as contractor]. This was also the period when many real estate companies shifted their focus to the tourism and resort sector.

From 2016 to 2017, the government made a strategic push to promote tourism, with a Party resolution positioning tourism as a national economic pillar. For real estate companies focusing on residential and urban development, obtaining permits was increasingly difficult, while obtaining permits for tourism-related real estate projects was much easier. As a result, many developers jumped into the sector.

Residential real estate has faced challenges not only due to the Covid-19 pandemic but also because of stricter regulatory controls. Many projects have struggled to obtain permits, leading to less opportunities for contractors.

These two segments - residential and resort real estate - have accounted for the majority of Hoa Binh’s revenue. Meanwhile, the industrial and infrastructure sectors, by comparison, contribute only a small share, around 5%.

We also recognize the importance of overseas expansion. We are focusing our resources on domestic growth, but also on positioning ourselves to seize international opportunities. Hoa Binh is currently in the phase of deep market research, engaging with potential partners, building relationships, and being ready to act when promising projects arise.

What do you think about the prospects for these segments in 2025?

Regarding the resort real estate sector, I believe that under the leadership of Party leader To Lam, new resort projects may not be launched, but the completion of ongoing projects will continue. As a result, contractors like Hoa Binh will have plenty of work.

In his article "Against Wastefulness", Lam emphasized that projects should not be left idle for years, and there should be efforts to complete and put them into use. This approach will create jobs, produce goods for the community, and stimulate economic development.

The value of land in such areas is very high, and leaving them underutilized year after year is a waste. There is a need for essential infrastructure, such as hospitals, housing, hotels, resorts, and factories. This is a huge waste, as investors have already spent money on land clearance and compensation. Agricultural and forest lands have been cleared, yet no construction is taking place, leaving the land vacant. Therefore, there must be a way to ensure these plots of land and the investments made are used effectively.

The Party chief has pointed out that officials who fear being accused of corruption and thus avoid making decisions, letting projects sit idle, are committing an even greater crime. This perspective is, in my view, crucial for changing the mindset of regulators. They must follow proper procedures and drive the relevant departments to facilitate the development of businesses and serve the public.

On the other hand, as I mentioned earlier, when Donald Trump was elected U.S. President, it seemed likely that the war would end. This, in turn, could lead to the recovery of the tourism sector. Urban real estate and housing markets should also gradually improve.

Looking back, what do you think has caused Hoa Binh to face such difficulties in recent times?

I believe there are two key factors that distinguish Hoa Binh from many other construction companies, and these have contributed to the difficulties the company has faced.

First, it heavily focused on the tourism and resort segment over the past 5-6 years, prior to the pandemic. When the pandemic hit, the company struggled to find work, and many of its clients also encountered difficulties.

Second, during this challenging period, the company continued to carry out projects. If it had paused operations, the situation might have been less severe, with lower construction costs and fewer delays in payments.

In addition to market-related issues, a significant challenge that Hoa Binh, like many construction companies, faces is large outstanding debts. What lessons have you learned about risk management after these difficulties?

In fact, throughout Hoa Binh’s operations, we have always taken steps to select reputable developers, assess the feasibility of projects, and evaluate the financial capacity of our partners. Most of our clients have been leading real estate developers such as Sun Group, Vingroup, and Novaland.

I believe the only unpredictable event was the Covid-19 pandemic. The tourism sector had been growing by several tens of percent annually. However, when the pandemic hit Vietnam in early 2020, tourism plummeted by over 90%, and in 2021, only 1% of foreign tourists came to Vietnam. No one could have predicted this.

After the pandemic, political conflicts - like the war between Russia and Ukraine, as well as tensions in the Middle East - created further challenges for the tourism industry.

However, Hoa Binh has learned valuable lessons and gained experience in handling such unexpected risks. I’ve realized that it is very dangerous for a company to continue pushing forward with a project if it is not clear whether it can bear the load, especially when facing tough circumstances.

Do you think Hoa Binh has overcome its difficulties?

I believe Hoa Binh will only fully overcome its difficulties by next year. In the first half of this year, our financial reports were so bad that we were immediately excluded from tendering for projects. We could still take on smaller projects, but larger ones were out of reach. For a company like Hoa Binh, large projects are essential to sustain the workforce and operations.

By mid-year, we saw an improvement in our financial position. Our equity rose from VND93 billion to over VND1.6 trillion ($62.94 million), which allowed us to bid for large-scale projects worth billions of VND (VND1 billion = $39,340). As a result, in the final months of the year, we were awarded major projects like Eaton Park and Newtown, and we have won several other large contracts, which we will announce at an appropriate time.

In 2024, Hoa Binh has already secured contracts worth VND9 trillion ($354 million), mainly in housing develpment. This will significantly improve job prospects for the company.

Looking ahead, there are positive signs from the real estate market and a recovery in the tourism sector. I believe Hoa Binh’s core business areas will see growth next year.

That being said, cash flow remains a significant challenge for us. The company still needs additional capital, especially its equity. To address the cash flow issue, we will be selling some real estate projects in the near future.

Looking back, I believe that surviving this crisis is already a success. The key achievement is that, during difficult times, we found strategic partners who shared the burden with us, and we have built long-lasting, valuable partnerships. These partners include our clients, subcontractors, suppliers, shareholders, and even our employees.

While our approach wasn’t solely focused on economic efficiency, I don’t regret it. Hoa Binh has always maintained a humanistic approach, especially towards our employees. In a time when new projects were scarce, the company didn’t lay off workers en masse simply because we couldn’t guarantee employment.

During the downtime, if employees found jobs elsewhere, they were free to leave, but they didn’t have to worry about not being able to return when more projects became available. For those who couldn’t find other jobs, we offered internal training and basic salary.

Hoa Binh, listed on the Unlisted Public Companies Market (UPCoM) as HBC, closed Wednesday at VND7,000 ($0.28) per share.

The corporation is one of the leading construction contractors in Vietnam, with a 37-year business history.