Home-builders turn innovative to beat slump

The Home Builder Show is part of the Home Builder Association’s efforts to boost the sector to meet its revenue target of Bt8.5 billion this year. Many companies are also planning promotions to lift sales at a time of rising costs and decreasing disposabl

Offering ready-to-move-in homes, new housing designs, improving construction processes and using replacement raw materials will be the way for home-builders to survive in times of soaring costs and sliding consumer purchasing power.

A Four Pattana survey about construction raw-material prices from January to last month showed, the cost of building materials had risen by an average 11.2 per cent. Steel prices  soared 58.6 per cent followed by wood prices, up 10.4 per cent. The cost of sand rose 7 per cent.

This has had a negative impact on property developers and home-builders as home-buyers and landowners have delayed their decision to buy or build houses.

To survive despite the reduced purchasing power of buyers, many home-builders have changed their business strategy.

Four Pattana, which is the market leader in the home-building business, is offering a one-stop-service housing concept by launching four new housing designs at prices starting at Bt5 million. The new model will offer a house complete with interior and garden design at one price.

With this, the company hopes to easily manage its raw-material costs because it will be able to get a special discounted price from suppliers due to bulk orders of raw materials, managing director Pramote Theerakul said.

"Our net profit has dropped from around 10 per cent to 7 per cent due to a rise in construction costs. As a result, we have had to change our strategy to cut costs by introducing the Four Pattana Golden Weeks sales campaign, which offers fully furnished houses," he said.

Four Pattana Golden Weeks started last week at the Central Plaza Pinklao and more promotions will be held at Central Plaza Lat Phrao on Wednesday and again on July 28.

The company expects sales of about Bt100 million from the events, which it is holding to help offset high costs in the sector.

The campaign is part of the company's drive to reach its revenue target of Bt505 million for this year.

The Emperor managing director Suratchai Kunghakij said the company had had to adjust its housing design to match customer demand.

The company has to manage its processes to reduce construction costs. Despite that, however, the company has had to raise housing prices between 10 per cent and 15 per cent due to a rise in raw-material costs, he said.

SCG Distribution director Thananit Ratananont said that to help home-builders and property developers manage their costs, the substitution of raw materials would be one alternative.

A number of construction-material producers have tried to develop innovative products that are priced inexpensively and replace natural raw materials to help contractors, builders and property developers in reducing costs.

The Engineering Institute of Thailand's Prasong Tarachai said managing construction processes was another way of reducing construction costs. Developers and home-builders must plan and consider which raw materials they use. Then, they have to manage their construction processes carefully, he said.

Home Builder Association president Panthip Thanchitikul said the association is trying to help its members by holding seminars on how to manage their costs and by helping them share their innovations.

 To drive home-builder market growth in the second half of the year, the association has set aside a budget of Bt17 million to organise "Home Builder 2008" between August 20 and 24 at the Queen Sirikit National Convention Centre. The event is part of a drive to help sector meet its

target of Bt8.5 billion.

At a glance

-- Home-buyers and landowners have delayed their decision to buy or build houses as construction-material costs rise.

-- Many construction-material producers have tried to develop innovative products that are priced inexpensively.