Cost decline makes new projects cheaper
Raimon Land Plc is considering reducing prices of new housing projects scheduled to be launched this year due to falling construction costs, according to chief operating officer Kitti Tungsriwong.
"We are reviewing construction costs to adjust selling prices of new projects," he said. The new projects include 185 Rajdamri, a super-luxury freehold condominium on Ratchadamri Road. Raimon paid 1.4 billion baht for the plot early last year.
The developer would lower its starting prices for 185 Rajdamri below 200,000 baht per square metre, down from the 240,000 to 300,000 baht publicised last year, Mr Kitti said.
Samma Kitsin, the director of the Real Estate Information Center, said the steel price index had dropped by 47% to 164.1 points in March, from its July 2008 peak of 309.9. At the same time, the price of gasohol 95 had fallen by 33% to 26 baht per litre.
Raimon is also adjusting its plan for The Amalfi, a 15-villa project located on a 43-rai plot worth 500-600 million baht between Surin and Bang Tao beaches in Phuket. New selling prices for villas at Amalfi would be lower than 250 million baht each, he added.
Also likely to be revised are prices at The Edge, a high-rise condominium on a five-rai beachfront plot on Wong Amat Beach in Pattaya, where Raimon spent 300-400 million baht on land. Based on its earlier plan, the condominium would have a total saleable area of 30,450 sq m, comprising 274 units with selling prices of 156,000 baht per sq m on average.
"We admit that the global crisis has had a great impact on foreign buyers. We keep monitoring the situation," Mr Kitti said at an annual shareholders' meeting last week. "Some foreign buyers have cancelled bookings but we think the Thailand property market has seen less impact than other markets such as Dubai where there are zero sales."
Though sales rates at some existing Raimon projects such as The River have slowed, it expects a pickup by the end of the year when the seventh and eighth floors are built, which would increase buyers' confidence. Sub-structure construction is now 90% complete.
However, the company needs more loans to complete construction of existing projects and expand new ones.
Shareholders last week approved the company's plan to enter into two transactions including a short-term loan from its major shareholder, Dubai-based IFA Hotels & Resorts 3 Limited, for up to US$10 million or 359 million baht with a maximum annual interest rate of 10%.
Also approved was the amendment of an existing loan of 356.61 million baht from IFA Hotels & Resorts 3 Ltd, which included a reduction of the annual interest rate to a maximum of 10% from 15%.
Chairman Sompoch Intranukul said the first loan was not sufficient and funding from other financial sources now was very limited so the company needed more funds from IFA. At the same time, short-term financial support would help expand current projects and future business.
"Seeking loans from IFA, our major shareholder, is faster than getting them from other financial sources," he said. "This channel is also more flexible and the contract easier to revise. It needs no pledge. If we ask for loans from financial institutions, we need to pay front-end fees, repay them monthly and face penalties if we repay [early]."
Source: Bangkok Post 6 May 2009
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