Promoting credit rating for real estate firms is important to ensure a healthy corporate bond market. (File Photo) Nguyen Trong Dieu, President of the Vietnam Private BusinessAssociation, said that the real estate market was falling into stagnation withthe slow implementation of property projects and high pressure from interestrates on enterprises.
He added that most capital channels for real estate enterprises,including banking credit, and bond issuance, had been almost blocked since thesecond quarter of this year, putting significant pressure on constructionenterprises and real estate developers.
Le Xuan Nghia, a member of the National Advisory Council onFinance and Monetary Policy, said that about 112 trillion VND worth of bondswould mature by the end of this year. Of 1.4 quadrillion VND outstanding bonds,more than half were of real estate enterprises, around 700-800 trillion VND.
The sluggish corporate bond market had made many enterprisesunable to repay bonds that were about to mature, Nghia said, adding that, inother words, a large part of real estate enterprises faced the risk ofcorporate bond default.
According to a recent corporate bond insight report of FiinRatings/FiinGroup, the issuance of the real estate and construction industry declinedsignificantly in the first half of this year.
“Especially in the second quarter, there were no enterprises inthe construction industry to issue corporate bonds,” it said.
FiinGroup observed that new issuances in recent months were solelyfrom large and listed developers, while most companies had difficultiesmobilising capital from this channel.
In addition, corporate bond redemption increased significantly inthe first half of this year to 72.29 trillion VND, up 22% over the same periodin 2021, the report wrote, adding that concerns over the Tan Hoang Minh eventin April also forced some real estate businesses to redeem bonds ahead of timeat the request of bondholders.
According to the report, the redemption activities made itdifficult for many businesses to continue implementing projects.
The report pointed out that the maturity value of real estatebonds at the end of 2022 would reach about 37 trillion VND, of which unlistedcompanies accounted for the majority, with 84% of the total value comparedto 16% of listed companies.
“Moreover, repayment pressure continues to increase significantlyfrom 2023 to 2024, making it an urgent issue to secure capital for debtrefinancing.”
FiinGroup said that real estate developers should diversifyfinancing sources from customers and clients and enhance the transparency ofcredit profiles in the capital market.
Real estate developers could take advantage of customer capitalchannels by completing legal procedures and project implementation progress toopen for sale and receive down payments.
“Building and improving credit profile in the capital market isthe fundamental solution towards an optimal capital strategy, besidesconsidering using credit rating and enhancing information and risk transparencyto both domestic and foreign markets,” the report wrote.
“The promotion of credit rating will help individual investors andcommercial banks in selecting, evaluating, and lending credit in line with riskappetite and the State Bank’s directive: strictly control real estate creditrisks.”
According to Nghia, it was necessary to speed up the appraisalprocess of Decree 153/2020/ND-CP about corporate bond issuance, an essentialtool to recover the sluggish corporate bond market undermined by thecomplicated procedures and investor confidence decline.
Real estate developers should also register for credit rating toenhance transparency as a premise for issuing a corporate bond, Nghia said.
According to Can Van Luc, a member of the National AdvisoryCouncil for Financial and Monetary Policies, Vietnam still had room to developthe capital market for the real estate sector, including credit for segmentswhich were in a supply shortage, stock market and corporate bond market.
Luc estimated that Vietnam needed around 700 billion VND to 1quadrillion VND of capital in the medium and long term, besides banking credit.
“It is important to develop a more balanced and harmoniousfinancial market together with risk control, directing the capital flow, notblocking with the focus on regulating the supply and demand of the real estatemarket,” he said.
He stressed that the regulation of credit rating for real estatecompanies was also needed.
“It’s time Vietnam seriously thought about developing a separatefinancial institution for housing development such as a housing developmentfund,” Luc said.
Diversifying capital raising channels was a solution for realestate developers, Luc said, adding that besides banking credit, enterprisesshould flexibly raise capital for other media such as bond issuance, stakeoffering and investment funds.
FiinGroup expects that the corporate bonds market willrebound at the beginning of the fourth quarter of this year when the amendmentto Decree 153 is issued and officially comes into effect./.
VNA
