“The process itself is relatively straightforward with investors and developers considering counterparty risk being the first hurdle to overcome,” Gray told VIR.
If satisfied, Gray added, commercial terms tend to follow and can be negotiated to mitigate execution risk and other matters of concern. The advantage to a buyer working within this framework is that they can enter into a robust contractual arrangement with a seller, allowing them to receive land within a reasonable period of time.
Moreover, Gray stressed that this method would take away a lot of the risk associated with land transfer in Vietnam.
“In principle, this process will inject some certainty into the market. However, key to this is that the master developer, the seller, and transferor, must be able to do this. If they are trying to perform a sub project transfer whilst engaging with buyers, it will cause confusion and delays and could be detrimental to the market,” he added.
According to Michael Piro, COO of Indochina Capital, the option to buy parts of an existing real estate project to further develop or manage the asset was allowed following the passing of the 2014 Law on Real Estate Trading.
“It expanded the market creating additional demand, encouraging interest and investments in Vietnam real estate, and contributed in growing the number of merger and acquisition (M&A) deals in Vietnam’s real estate market,” said Piro.
He added that acquiring part of a project allows developers and owners to focus on an asset at a scale suitable to their financial capacity, management ability, and expertise.
“With the right investor, the overall development’s value will receive a boost with fresh ideas and an incentive to increase returns. The disadvantages of such deals lie in the timeline as additional steps are required to register and acquire legal documentations related to the land use rights and ownership of sub-investors. Nonetheless, with the right consultants and determination from both parties in the transaction, this type of deal could unleash synergies between both firms, enhancing positioning and operations management for the entire project,” Piro explained.
Exciting developments
Nguyen Hoang, an M&A real estate consultant said that both Ciputra and Starlake are offering special advantages to attract sub-investors.
The two ventures have a completed inner infrastructure and are offering single buildings which are appropriated to the tastes of various buyers.
“Sub-investors would not have to face any difficulties when receiving those land plots, especially regarding legal procedures, because those land plots were approved to its planned design already. The buyers and sellers just have to deal with price only, and then they can start their projects soon,” said Hoang.
Land plots for developing residences have dominated M&A trends in the first nine months of the year.
Hanoi People’s Committee revealed that the Tay Ho Tay Development Ltd., backed by South Korean Daewoo E&C of the Starlake project in the city, is seeking approval from the Prime Minister to transfer three land plots to sub-investors.
Licensed in 2006 and officially breaking ground in 2014, the Starlake project is designed with premium hotels, international schools, supermarkets, and 25 office and residential buildings.
As one of the largest-scale real estate projects in Hanoi, Starlake is now being developed over 206 hectares right next to West Lake. The project is the latest golden land area to be developed at the west-side of the lake, and is on the radar of many sub-developers wishing to get their hands on ventures in the area.
Transaction land plots are also being seen at Ciputra Hanoi, a 300-hectare and modern residential project located near Nhat Tan Bridge.
Invested in by a joint venture between Indonesian developer Ciputra Group and the domestic Urban Development Infrastructure Company, Ciputra Hanoi had also proposed being permitted to transfer three land plots.
Starting construction in 2003, Ciputra is now one of the most well-known urban development projects in Hanoi, with total investment capital of $2.1 billion and space for 50 high-rise buildings and 2,500 townhouses.
Ciputra’s developer had previously offered a range of land plots to other sub-investors. In 2018, Ciputra transferred a 7.3-ha land plot which was planned to be used for a mall by Lotte Group, after many years of delay.
Lotte Hanoi Mall, with total capital of up to $600 million, is being built as a trading centre complex, with serviced apartments, hotel, and leisure facilities. The project is now under construction and expected to have its first phase finished next year.
In the southern provinces, residences remain attractive for the likes of Mitsubishi Corporation and Nomura Real Estate Development Co., Ltd., which bought 80 per cent (equivalent to over $900 million) of the second phase of the Vinhomes Grand Park project, invested in by Vingroup in Ho Chi Minh City’s District 9.
Expected to be completed in 2023, this initiative is equipped with nearly 50,000 residences as well as schools, hospitals, and commercial centres.
The residential segment is also attracting a Singaporean consortium led by KKR that includes Temasek, which in June acquired a minority equity stake in Vinhomes JSC for a total of VND15.1 trillion ($650 million).
