Real estate sees rise in M&A deals
Since the Investment Law took effect in July 2015, Vietnam’s FDI inflows, and the real estate sector in particular, have significantly increased in terms of merger and acquisition (M&A) activities.
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Statistics released at the Vietnam M&A Forum in Ho Chi Minh City in August 2018 showed that in the first five months of the year, the total value of M&A transactions in the Vietnamese market had reached US$3.55 billion, equivalent to 155% of the figure recorded in the same period last year. Of the sum, property deals made up 66.75%.
Meanwhile, in 2017, M&A deals were valued at US$10.2 billion, up 175% against 2016, with real estate accounting for only 27% following consumer goods production with 57%.
Therefore, the numbers reported in the first half of the year demonstrate that the real estate sector has attracted greater attention from both domestic and foreign investors.
One of the most noteworthy deals of the 2017-2018 period was between the Government of Singapore Investment Corporation (GIC) and Vinhomes, a subsidiary of Vingroup.
US private-equity fund Warburg Pincus also teamed up with BW Industrial Development JSC (Becamex IDC) to set up a joint venture, worth over US$200 million, to develop logistics facilities and industrial property in Vietnam.
Moreover, Warburg Pincus also partnered with Vietnam’s asset management firm VinaCapital to invest US$300 million in a hotel venture.
Nguyen Ngoc Khuong, Investment Director of Savills Vietnam, said that unlike previous years when investments in property were virtual, the recent capital is real.
In addition to M&A activities, domestic and foreign businesses have also joined hands in implementing real estate projects in a variety of segments.
According to Vu Tien Loc, Chairman of the Vietnam Chamber of Commerce and Industry (VCCI), FDI firms hold advantages in capital, technology, and administration, while domestic enterprises hold a better understanding of local law and culture – a necessary partnership.
Khuong said Vietnam’s property market has attracted foreign investors thanks to the profits it promises, as well as economic growth, and the State’s policies towards foreigners who own houses in Vietnam and incentives for foreign investors.
Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, said M&A activities in real estate are significant as they have helped lure more investments in the sector, increase the market’s liquidity, reduce stockpiles, and regain confidence in the market, while creating conditions for transparency, towards a more professional playground.
