Real estate investors hitting capital wall
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- 27 Oct 2022
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Nguyen Hung, a director from a private real estate developer, said that over the last five months, his sales revenue had been almost zero. This caused construction-related activities to stop and he cannot pay salaries. The bank will not give loans, and products remain unsold, all adding to the company’s misery.
“Currently, I have to pay more than VND30 billion ($1.3 million) for office leasing and salaries per month, but we do not have money left in our pocket,” Hung told VIR.
To get capital, the only way now for businesses is to raise capital from foreign investment funds such as in Japan, Thailand, or Singapore. However, it is not easy because it often takes up to two years to complete a deal.
“Foreign investment funds also only pour money into specific projects and take share benefit but not invest in just any companies. They only participate in projects with good revenue and have the potential for price increases,” Hung said.
“From now until the end of October, we hope the company will complete the contract with a foreign investment fund that we have worked with for nearly a year. If not, we have to wait a few more weeks to hope for the government to extend more room for credit for survival.”
A leader of another large real estate group in the Mekong Delta province of Long An said that in the past, the company bought distressed projects to develop. To have money to buy projects, this company has to borrow capital from banks. However, now it is a tough time for any loans from banks, and his current solution is to suspend all projects and wait for new monetary policy signals.
“Currently, not only is credit tightening, but administrative, policy and legal procedures are also frozen due to reviews from competent bodies for all projects. Businesses are struggling to survive,” he said.
Multiple difficulties
Independent real estate expert Ho Huu Khanh said that the real estate market has never been as difficult as it is today.
“A decade ago when the market was frozen there was no liquidity, but the bank still gave loans and customers still had money to pay for the contracts signed previously. Now, the market has frozen again, the bank has tightened its capital, and the administrative procedures are lengthy, making the difficulties of enterprises much worse,” Khanh said.
A solution to have a loan from an international financial institution and partners is feasible, but it takes time, and there are many conditions, Khanh added. Read More…
