Illustrative image (Photo: VNA)Hanoi (VNS/VNA) - Bondissuance is becoming an ideal channel for real estate firms to raise capital ascredit policies for property development are gradually being tightened, expertssaid.
Raising capital byissuing bonds is a new option for property enterprises at a moment when theyhave to look beyond banks for funds, said financial expert Bui Quang Tin at aworkshop held by online news portal Bizlive in Ho Chi Minh City earlythis week.
According to Le Hoang Chau, chairman of the HCM City Real Estate Association, property developerswere still mainly raising capital from banking loans and from customers, withpayment following construction progress.
However, bondissuance is proving an effective channel and is forecast to become a major toolfor raising capital as in 2019, several policies meant to restrict lending torisky sectors like real estate have or will come into force.
The central bank hasincreased the risk weighting of real estate loans from 200 percent to 250 percentin 2019, which is a significant disincentive for banks to provide loans to theproperty sector since their minimum capital requirement is a ratio of theirrisk-weighted assets under the Basel norms.
Meanwhile, the SBV’sregulation on reducing the maximum quantity of short-term deposits that can beused for medium- and long-term loans from 45 percent to 40 percent will reducebanks’ liquidity.
To that end, realtyenterprises need to count on other sources of funds.
However, according toeconomist Dinh The Hien, to raise capital by issuing bonds, firms need to havea good brand name, reputation and prestige.
Besides, bond issuersare required to meet more criteria than share issuers, including transparency, Hien said.
According to the HCMCity Real Estate Association, businesses operating in the fields of property,construction and infrastructure development issued bonds worth more than 16.2 trillion VND (690 million USD) during January-May, or 27 percent of thetotal value of bonds which have been already put up for sale.
Phat Dat Real EstateDevelopment Corporation (PDR) has recently announced the successful issue of 150 billion VND worth of one-year bonds at a per-annum yield rate of 14 percent.This is the fourth bond issuance so far this year for the firm. Earlier, it putup for sale 850 billion VND worth of bonds at interest rates of 14.45 percent,12 percent and 10.5 percent.
Dat Xanh Group alsosuccessfully made a sale of 234 billion VND worth of five-year bonds, offeringan annual yield rate of 7 percent.
Notable real estatestocks recorded positive growth in the first half of this year and offeredpromising opportunities for market players, said Lai Duc Duong, head of the Department of Real Estate Sector Analysis at Viet Dragon SecuritiesCompany.
Real estate giantVingroup (VIC), the largest listed company in Vietnam by marketcapitalisation, has sky-rocketed by 23 percent since early this year.
Its real estate arm,Vinhomes Joint Stock Company (VHM), the second-largest listed company by marketcapitalisation after Vingroup, has also soared 17 percent since early thisyear.
According to Duong,VIC and VHM have huge land funds, spreading over large cities and provincesthroughout the country.
"This year, VHMhas set a business target which is pretty high compared to not only its pals inthe real estate industry but also to itself. In the first six months ofthe year, it almost reached 50 percent of the yearly plan,” Duong said.
“VIC and VHM aretemporarily the most outstanding names in the real estate sectors and arehighly valued, but this does not mean all investors will choose them,” said Truong Hien Phuong, senior director of KIS Vietnam Securities Corporation.
“I would preferlooking for opportunities in some other potential names such as Novaland (NVL), Hung Thinh Land JSC (HTN), FLC Faros Construction Joint Stock Company (ROS), Dat Xanh Real Estate Service and Construction Corp (DXG), and Nam LongInvestment Corporation (NLG),” Phuong said.
They invest inhigh-end apartment projects in big cities with prime locations, large scaleresort projects in the coastal regions, Phuong said, adding that these stocksalso provided promising investment opportunities.
Foreign directinvestment (FDI) into the real estate market in the first six monthsreached more than 225.9 million USD, accounting for 43 percent of the total FDIpumped into Vietnam.
“If we don't enhancethe transparency of the real estate market, FDI flow into the sector may stop. Vietnam has signed a lot of FTAs, which means that we must adjust the law tosuit the integration process, ensuring the attraction of capital inflows intoreal estate, from both foreign investors and home buyers,” financial expert Bui Quang Tin said. — VNS/VNA
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