Significant land bank and strong financial foundation are expected to help Novaland deliver sustainable growth.
The artist impression of second home development - The Tropicana at NovaWorld Ho Tram
Novaland has posted strong growth in revenue as the company is fast expanding into hospitality property and satellite township development.
The Ho Chi Minh City-based developer saw its revenue skyrocket by 88 per cent year on year to reach $346 million in the first half of the year, while its gross profit amounted to $93 million, an increase of 53 per cent against the same period last year.
Despite slow project licensing process which has been frustrating real estate developers in Ho Chi Minh City for more than a year as local authorities tighten control of granting land use rights and construction licences, Novaland has managed to finish construction and hand over a number of residential projects.
The company delivered 2,936 residential units to homebuyers during the first six months, a rapid growth of 185 per cent year on year and met 50 per cent of its yearly target.
Its revenue and profit mainly came from The Sun Avenue, Sunrise Riverside, Richstar, Saigon Royal, Newton Residence and Orchard Parkview. The company expects to earn its yearly revenue of $774 million during the rest of the year.
Novaland has set the target of selling 6,500 property units this year, an annual increase of 44 per cent.
In addition to its housing market in which the company would market around 4,200 residential units, the HOSE-listed developer plans to launch up to 2,300 vacation homes as part of its second-phase business strategy to diversify investment beyond mere residential development in Ho Chi Minh City and expand into vacation home and suburban township development.
Novaland has been well-prepared to overcome challenges that other developers are struggling to cope with.
Nguyen Tran Nam, chairman of Vietnam Real Estate Association, said although housing demand in big cities like Hanoi and Ho Chi Minh City, real estate developers are finding it hard to build due to tightened credit control and slow project licensing.
Nam said the State Bank of Vietnam is consistent with its roadmap of limiting lending real estate sector and as a result, developers are facing difficulties in seeking alternative funding.
In addition, the government is tightening control of granting land use rights and construction certificates, which has caused a sharp drop in new housing supply in Ho Chi Minh City.
According to real estate consulting company CBRE, due to slow licensing process since last year, new housing supply in the second quarter of 2019 dropped to the lowest number in the last five years, with only 4,124 units launched from 10 projects.
The municipal Department of Construction also confirmed 28 housing projects eligible for sales in the first six months, providing the market with total 8,784 units or a decrease of nearly 50 per cent compared to the same period last year.
CBRE states that demand remains strong which is witnessed through high interest of the market to pre-launch events in the last six months. Booking rates are high in these pre-launch events, especially, some projects received number of booking higher than their launching plan by 50 - 100 per cent.
New growth impetus
Novaland CEO Bui Xuan Huy claims that the company is ready capitalising on growing demand for both housing accommodation and vacation property.
The company raised around $380 million from bond issuances last year which continues to help it build existing projects and acquire new ones.
Novaland started to acquire land for future development over the last decade, with a focus in Ho Chi Minh City during the property market crisis between 2011 and 2013. This land bank has allowed the company to become one of the biggest residential developers in the city in the following years and earned up to $658 million in revenue last year.
The company has accumulated a land bank of around 4,270 hectares owned and researching to develop which will help to deliver sustainable growth in the next 10 – 20 years.
Novaland is capitalising on growth in demand for second homes to rapidly expand its hospitality property business.
In additional to operational properties such as Azerai Can Tho Resort and Anantara Mui Ne Resort, Novaland has acquired significant land bank for tourism real estate development in major tourist destinations of Phan Thiet, Cam Ranh, Vung Tau and Can Tho.
Following the successful launch of NovaHills Mui Ne Resort & Villas late last year with almost all pool villas being snapped up by buyers within a short time, Novaland has marketed the NovaWorld, a integrated tourism city model, with first two projects in Phan Thiet city, Binh Thuan province and Ho Tram, Ba Ria – Vung Tau province.
Each NovaWorld is expected to be built on 1,000 hectares and designed with second homes, granded villas, hotels, resorts and entertainment parks. In particular, the NovaWorld Phan Thiet has a cluster of world-class golf courses while NovaWorld Ho Tram in Ba Ria – Vung Tau will boast a safari.
Duong Thuy Dung, senior director of CBRE Vietnam, said improving infrastructure developments will increase connectivity for tourism property projects in Phan Thiet and Ba Ria – Vung Tau and boost real estate capital value there.
Dung said although around 66,000 vacation home units are in planning stage across the country, the figure is just half of Phuket area in Thailand.
“Compared to Southeast Asian countries, the hospitality real estate market in Vietnam is still at early stage of development and there remains large room for growth”, said Dung.
Nam from Vietnam Real Estate Association added that Vietnam’s aspirational middle-class is fast growing that would boost demand for second homes.
“Vietnam needs thousands of hotel rooms more as it is expected to welcome 20 million foreign arrivals soon. In addition, the number of domestic travellers is due to surpass 80 million sooner or later and that triggers demand for not only hotel rooms but vacation home ownership”, said Nam.
Novaland also claims that it has seen high interest for second homes in new projects, including NovaWorld Phan Thiet and NovaWorld Ho Tram.
With sustainable business growth, Novaland shares have been listed on the Vietnam Sustainability Index by Ho Chi Minh Stock Exchange. The index, which is announced every July, aims to commemorate companies doing business in the most effective and safe manner.