Raising capital for real estate

According to the State Bank of Vietnam (SBV), at the end of June, total outstanding loans across the economy had reached about VND 14.4 quadrillion, a 6% rise from the end of last year. Notably, credit capital increased dramatically in the last few days of June, and the economy received almost VND 487 trillion in June alone, which exceeded the entire credit growth recorded in the first five months of the year. Specifically, in the final two weeks of June, the economy's total outstanding credit surged by approximately VND 300 trillion.

It is worth mentioning that credit for the real estate sector in the first half of the year also reached over VND 3.083 quadrillion by the end of June 2024, accounting for 21.4% of total outstanding credit in the economy, an increase of 6.8% compared to the end of 2023. It can be said that in the real estate sector, credit capital has not declined.

However, Mr. Hien highlighted that, despite a brief period of significant acceleration in credit capital, several bond market businesses have resumed issuance while proactively reforming their financial balance sheets by selling assets, decreasing debt, and attracting foreign direct investment. However, the status of capital flows into real estate has not been fully sustainable.

For starters, the majority of new bond issuance in the real estate industry is geared toward restructuring existing debt to avoid maturity pressure rather than producing meaningful cash flow into the market.

Second, newly registered FDI into real estate has increased significantly, reaching nearly USD 2 billion, 3.4 times higher than the same period last year. However, the disbursement structure of FDI is primarily focused on M&A activities rather than direct purchases of homes or real estate products.

Third, regarding credit capital, the actual outstanding credit for real estate business activities has only increased by over VND 20.7 trillion compared to the end of 2023 (equivalent to an increase of 1.86%), showing that the "cumulative" credit capital tied up in projects is larger than the new capital flowing into business activities. This also reflects the cautious consumer sentiment in the real estate market, despite banks beginning to lend more aggressively to individuals.

Given the "preliminary" setting of the first half of the year and major laws taking effect in the second half, the market will require time to absorb policies, filter them, and generate quality initiatives.

This lays the groundwork for improved and more sustainable capital flows into the real estate market, as well as the release of idle cash from trust funds.

In the medium and short term, real estate businesses must continue to reorganize their finances, sell properties, decrease their debt burden, and manage hazardous capital in order to survive.

In terms of credit capital, limit ing inflation to ensure positive real deposit interest rates, as well as properly managing credit disbursement for the correct reasons, would assist banks in maintaining liquidity and boosting loan growth, particularly in the real estate industry.

Bond capital mobilization requires market difference and transparency from bondholders, which will only generate chances for enterprises with quality projects, not to mention the possibility for banks and securities companies in the ecosystem to fund and distribute bonds. However, this is not a capital route that removes all risks connected with asset distribution.