Thirsty for capital, many real estate tycoons' debts increased by several times in 2022

In real estate business, capital is an important factor that directly affects business results. Regarding capital for the real estate market in 2022, according to the Ministry of Construction , in 2022, outstanding credit for real estate will continue to increase steadily over the quarters. As of December 31, 2022, outstanding real estate credit is about 800,000 billion VND.

Calculating the total outstanding real estate debt in recent years, the State Bank's report said that the total outstanding real estate loans of the banking system have reached 2.58 million billion VND, accounting for 21.2% of the total outstanding debt of the entire economy . The bad debt ratio of real estate is about 1.81%.

In the period 2017-2019, real estate credit increased by more than 20%/year, until the period 2020-2021, when the epidemic occurred, real estate outstanding debt still increased by 12.06% and 15.37%. By 2022, real estate outstanding debt increased by about 24% compared to 2021.

In addition to loans from banks, real estate businesses also issue corporate bonds to borrow about 400,000 billion VND.

According to data compiled by the Vietnam Bond Market Association (VBMA), in 2023, there will be approximately VND289,819 billion worth of bonds maturing. Of which, the number of real estate bonds maturing will be approximately VND119,000 billion. In January 2023 alone, the total value of corporate bonds maturing was nearly VND17,458 billion, mainly concentrated in the real estate and construction groups.

In the context of a “frozen” market, many real estate businesses have to deal with the problem of cash flow. This has led to a decline in business results and a rapid increase in debts payable by the end of the year.

Real estate businesses "burdened" with debt

Recently, VnDirect Securities Corporation has announced a bond market report. Accordingly, real estate enterprises with the highest maturity value in 2023 include: No Va Real Estate Investment Group Corporation ( Novaland , HoSE: NVL) VND 14,476 billion, Saigon Glory Corporation VND 7,000 billion, and An Khang Real Estate Development Company Limited VND 4,960 billion.

The name Novaland on this list is probably not too strange, because Novaland has always been considered a "big guy" in the real estate market. This means that the company will have to use large financial leverage.

Specifically, Novaland's liabilities at the end of 2022 recorded more than VND 212,435 billion, an increase of VND 51,775 billion compared to the beginning of the year and accounting for 82.5% of total assets.

Loans and financial leasing debt are at VND 64,576 billion, the debt structure is mainly long-term debt. Of which, bank loans are recorded at VND 11,019 billion, loans from bond issuance are VND 44,169 billion and other loans. By 2023, Novaland recorded about VND 13,746.32 billion of bonds due.

Meanwhile, the company's equity only recorded more than VND 44,929 billion, equivalent to Novaland's liabilities being 3.3 times higher than its equity.

According to financial reports, Novaland has paid more than 6,100 billion VND in interest as of December 31, 2022. This means that every day, Mr. Bui Thanh Nhon's company has to spend nearly 17 billion VND to pay interest.

Although the scale of liabilities is not as large as the two real estate companies above, Khang Dien House Investment and Trading Joint Stock Company (HoSE: KDH) has VND 9,838 billion in liabilities at the end of 2022, 2.3 times higher than at the beginning of the year.

Of which, the outstanding financial loans were VND6,771 billion, an increase of VND4,218 billion compared to the beginning of the year, accounting for 31.3% of total capital. The outstanding bond debt recorded an additional VND800 billion compared to the beginning of the year, the company explained that this capital mobilization was to increase the scale of operating capital.

Despite having a debt of nearly 10,000 billion, along with a continuously negative cash flow over the years, KDH has continuously guaranteed thousands of billions of dong for its subsidiaries to borrow from banks.

Specifically, within just 6 months, Nha Khang Dien has repeatedly guaranteed for its subsidiary Nha Khang Phuc LLC to borrow 6,808 billion VND from the bank.

Ministry of Construction offers advice to save real estate businesses

At the beginning of 2023, many businesses had to "defer" their bonds due for payment. FiinRatings experts believe that liquidity difficulties will continue this year. Estimated maturity points for individual corporate bonds will fall in 2023 and 2024, at VND157,970 billion and VND341,270 billion, respectively.

“The market may see more insolvent issuers, especially those that have continuously increased leverage for at least three years and have weak cash flow,” said FiinGroup experts.

To remove difficulties for the real estate market, recently at the Conference "Removing and promoting the safe, healthy and sustainable development of the real estate market" chaired by Prime Minister Pham Minh Chinh, the Ministry of Construction proposed that the Government flexibly and synchronously manage monetary policy tools, unblocking credit capital flows to serve socio-economic development.

Besides, it is necessary to actively improve policies to mobilize maximum domestic and foreign financial resources for housing and market development.

Notably, the Ministry of Construction proposed that the Government direct the State Bank to consider loosening the credit room ceiling appropriately to support the economy in 2023 and the following years, creating conditions for businesses, home buyers, and investors to access credit capital; and extending principal and interest payments for real estate businesses facing difficulties.

At the same time, focus capital on projects, feasible loan options, customers with the ability to repay debt fully and on time, prioritize consideration of loans for social housing projects. Have solutions to reduce loan interest rates, support the recovery of the real estate market.

The Ministry of Construction assessed that the pressure of bond maturity is putting great pressure on many real estate businesses. And the handling of a number of organizations and individuals related to violations in the issuance of corporate bonds has affected the psychology of investors , they are afraid, stop investing and many investors have withdrawn money before maturity.

Regarding the bond market, the Ministry of Construction recommends that the Government direct the Ministry of Finance to control capital mobilization activities in the stock market, avoid speculation, manipulation, and price inflation, and at the same time create conditions for businesses to mobilize capital .

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