It’s time to promote the development of REITs: association

VIETNAM, May 28 –

There was a need to improve the legal framework for REITs so that investors could invest safely. — Photo VNA/VNS

HÀ NỘI — Việt Nam needs to improve the legal framework to promote the development of real estate investment trusts (REITs) to add capital to the real estate market as bank credit and corporate bond issuance were in full swing to be tightened.

According to the Association of Realtors of Việt Nam, real estate developers have mainly raised capital from stakeholders, bank credit and the issuance of corporate bonds.

Tighter bank credit and corporate bond issuance would force them to look for alternatives, and REITs are expected to become more popular as a capital-raising channel for developers, the association said.

The REIT was a form of capital contribution for one or a portfolio of real estate projects, real estate businesses by individuals and organizations through the purchase of shares or fund certificates and to obtain returns based on the performance of real estate projects or companies.

The association said the REIT would naturally help promote healthy development of the real estate market, adding that high-potential projects would attract cash flow from REITs. For individual investors, REIT certificates were a safe investment.

The US REIT market has reached $1.3 trillion, up almost 30%, after five years. Nareit, one of the leading REITs in the United States, grew by 29% in 2021.

In the United States, REITs started from the 1960s when this type of investment was not popular in Việt Nam due to a lack of detailed regulation, the association said.

In Việt Nam, the first and only listed REIT was TCREIT created by Techcom Capital Joint Stock Company, which saw its net asset value increase by 27% in 2021.

Other REITs were mainly foreign companies such as Indochina Capital, Vinacapital, Saigon Asset Management and Dragon Capital.

The association said investing in REITs was not popular because the regulatory framework was not completed and investors were still hesitant to pour money into this new channel.

However, REITs have provided a safe investment channel for investors, the association said.

According to Nguyễn Tấn Đạt, director of NTD Law Việt Nam, regulations on REITs in Việt Nam have remained vague.

REITs were new to investors in Việt Nam and the legal framework for REITs to operate remained incomplete, causing investors to face high risks in the event of problems, such as litigation, Đạt said.

When investing in REITs, investors should carefully consider profitability, risk and legality, he said.

There was a need to improve the legal framework for REITs so that investors could feel safe to invest, Đạt pointed out.

Đoàn Văn Bình, vice president of the Việt Nam Real Estate Associatoin, said developing a medium- and long-term capital market for the real estate market, including REITs, was important to reduce dependence on bank credit. and help the financial system develop in a more balanced direction.

According to the Việt Nam Association of Realtors, REITs in the United States have attracted 145 million people to invest, created nearly $98 million in return revenue, generated 2.9 million jobs and revenue worth total of $197 billion.

Việt Nam was one of about forty countries with active FPIs. —VNS

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