REAL ESTATE DEVELOPERS CONTINUE TO INCREASE FINANCIAL LEVERAGE

Borrowings Rise Sharply in Q2

According to data compiled by S&I Ratings, total outstanding debt among listed real estate companies reached approximately VND 360.24 trillion at the end of June, more than 20% higher than at the end of Q1, equivalent to an increase of nearly VND 60.9 trillion.

Notably, the sector’s debt-to-equity ratio increased from 0.61x to 0.72x, reaching its highest level in the past 15 quarters.

This ratio reflects the extent to which companies rely on financial leverage. At 0.72x, every VND 1 of shareholders’ equity was associated with approximately VND 0.72 of debt, indicating greater reliance on borrowed capital.

The maturity structure of debt also shifted during the quarter. Long-term debt accounted for approximately 67.3% of total outstanding debt, up from 63.1% in the previous quarter. This suggests that a growing portion of borrowed capital is being directed toward longer-term needs, particularly project development and implementation, rather than short-term liquidity requirements.

Borrowing Growth Tracks Project Development

The increase in debt coincides with a recovery in project development activity, prompting developers to secure additional funding for construction and new project launches.

Among the companies covered, Vinhomes (VHM) recorded an increase of more than VND 50 trillion in borrowings, primarily associated with investment in and development of new projects. Novaland (NVL) also increased its outstanding debt by more than VND 4 trillion.

At the banking-system level, SSI Research reported that several lenders accelerated real estate lending during Q2. Banks with greater room for credit expansion, including MB, VPBank, HDBank, Techcombank, TPBank and VIB, recorded approximately 22% quarter-on-quarter growth in lending to real estate developers.

The renewed flow of credit to property developers indicates that funding demand is recovering alongside the project cycle. However, access to capital is becoming increasingly differentiated across companies.

Banks Become More Selective in Lending

As financial leverage increases, access to credit is emerging as a key factor behind the widening gap between developers.

In its Q2 housing and real estate market report, the Ministry of Construction noted that credit outstanding for real estate business activities remains unevenly distributed. Factors such as a developer’s financial strength, project legal status and ability to generate cash flow are playing an increasingly important role in lending decisions.

This means developers with healthier balance sheets, legally compliant projects and clearer cash-generation potential are likely to have an advantage when seeking additional financing.

Conversely, companies carrying high leverage or projects that have yet to complete key legal procedures may face higher borrowing costs or greater difficulty securing new funding.

Corporate Bonds Remain an Important Funding Channel

Alongside bank credit, the corporate bond market has also shown a strong recovery, providing developers with an additional source of medium- and long-term capital.

According to S&I Ratings, total corporate bond issuance reached approximately VND 275.4 trillion in the first half of the year. Real estate companies accounted for around VND 128.2 trillion, or 46.5% of total issuance.

In Q2 alone, real estate companies issued approximately VND 102.4 trillion in bonds, up 228% year on year and accounting for 43.8% of the overall market. Around 84% of this issuance came from three major groups: Vingroup, Masterise and Sun Group.

The scale of issuance highlights the growing role of corporate bonds in supplementing funding for real estate projects. However, the cost of raising capital is becoming an increasingly important consideration.

Higher Funding Costs Increase Refinancing Pressure

Bond yields in the real estate sector have shown a clear upward trend this year. The average coupon rate for real estate bonds stood at around 11.4% per year in Q2 and 11.3% during the first half of the year.

The highest rates reached 12.5% in Q2 and 13.5% during the first six months of the year.

As developers increasingly rely on multiple funding channels, including bank loans and corporate bonds, their future financial obligations are also growing. This is particularly significant for highly leveraged developers or projects that require extended periods before generating sufficient cash flow.

S&I Ratings estimates that more than VND 156.5 trillion worth of real estate corporate bonds will mature in 2027, approximately 16% higher than the amount due this year.

If new bond issuance rates remain above 11% per year, refinancing costs could become a significant financial burden for companies that need to roll over existing debt or raise new capital to meet upcoming maturities.

Backlog Provides Support for Future Earnings

Despite rising financial risks, the outlook for real estate companies continues to benefit from several positive factors.

According to BIDV Securities (BSC), the recovery in property launches during 2025–2026 has enabled many developers to build up substantial backlogs of sold units that have yet to be fully recognized as revenue. These backlogs could provide a foundation for revenue and profit growth in the coming years.

BSC forecasts that after-tax profit attributable to parent-company shareholders among the real estate companies under its coverage could reach approximately VND 76.266 trillion in 2026, up 36% year on year. In 2027, the figure is projected to rise to VND 91.893 trillion, representing a further 21% increase.

The increase in borrowings, therefore, should not necessarily be viewed as a negative development in itself. When capital is allocated to projects with clear legal status, defined development timelines and strong market absorption, financial leverage can help developers expand their project pipelines and improve business performance.

However, as funding costs rise and bond maturities increase over the coming years, cash flow management, debt maturity structure and capital efficiency will become increasingly important indicators of financial resilience.

Vietnam’s real estate market is consequently entering a phase in which access to capital alone is no longer the key competitive advantage. More importantly, developers must demonstrate how effectively and how quickly they can convert borrowed capital into cash flow and sustainable earnings.