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Vietnam Real Estate Sector Is Attracting Foreign Investment

  • Tuesday, 16:05 Day 21/06/2022
  • The decision to open all air routes on March 15th, as well as the visa policy, will both speed up M&A negotiations and increase real estate investment operations.

    Opportunities

    The real estate industry has received more than US$31 billion in registered foreign investment capital, according to the Ministry of Construction. The distributed capital in 2021 was $2.6 billion, down $1.6 billion from 2020.

    In terms of macroeconomic considerations, compared to other nations in the area, Vietnam's economy is growing steadily and sustainably. Vietnam will lead in economic growth in 2022 and 2023, according to FocusEconomics.

    According to the Ministry of Planning and Investment, the Government will officially adopt the greatest socioeconomic recovery and development program ever, valued over VND350 trillion, in early 2022. More than VND100 trillion has been invested in infrastructure development.

    As a "spill-over" driving factor, this will creating various prospects for expansion in outlying locations. From there, FDI businesses can broaden their investment scope rather than focusing just on major cities like Hanoi and Ho Chi Minh City.

    Furthermore, as compared to other nations in the region, Vietnam has a young and abundant labor force as well as competitive labor costs. The rapid rate of urbanization also offers favorable conditions for socioeconomic development, allowing for the construction of numerous new urban projects.

    Aside from favorable macroeconomic variables, timely State support is essential in helping to enhance the trust of FDI firms in Vietnam.

    Along with economic policies, the universal immunization campaign was soon implemented. Vietnam has become one of the six countries with the highest vaccine coverage rate in the world, thanks to increased immunization speed and size. This is the foundation for foreign enterprises to have faith in the Vietnamese market's resurgence.

    Limitations

    In exchange for the chances and potential afforded by Vietnam, merger and acquisition activity in the nation remains constrained. This makes FDI businesses more cautious, slowing the growth of the M&A market.

    According to experts, Vietnam's M&A market offers numerous benefits over other nations in the area, but there are also potential hurdles for international investors. M&A deals are a complicated commodity. As a result, the parties concerned must do extensive research and develop precise strategies in order to achieve long-term value in the future.

    In the context of enterprises with investment requirements being free to travel, this is a perfect opportunity for the market to maintain commerce flowing into Vietnam.

    To make itself more appealing to international investors, the market must maximize its potential and eliminate current obstacles. The land law system is still quite complex. This results in bottlenecks and waste that have yet to be resolved. Despite the government's institutional reforms throughout the years, these flaws will impede the development of M&A transactions.
     

    In terms of transaction structure, the majority of foreign-invested firms prefer a joint venture form. They have the majority of the decision-making authority in this arrangement, while Vietnamese investors give legal support for the initiative. However, because to differences in business practices as well as the legal system, the discussion between the two parties becomes time consuming and occasionally results in post-M&A problems.

    Because the M&A industry is still relatively young, many Vietnamese firms, particularly small and medium-sized organizations, have not adequately prepared for this process. Enterprises with significant projects have not yet particularly prepared for a reasonable divergence right from the project planning stage, resulting in several issues in mobilizing investment capital or transferring capital.

    Buyers and sellers use diverse pricing strategies, resulting in disparities in the project's estimated price. This makes it harder for the two sides to negotiate a reasonable price.

    Source: Vietnamnet