Robust Pruksa plans to ride the storm

Real Estate February 19, 2014 00:00

By Somluck Srimalee
The Nation

Low-rise launches go ahead in Q1

Presales of new residential projects in Greater Bangkok this quarter are likely to drop by 20-30 per cent overall compared with the first quarter of 2013 amid the ongoing political turmoil, said Thongma Vijitpongpun, chief executive of leading property firm Pruksa Real Estate.
However, this will have the little impact on Pruksa, as it has a backlog worth Bt37.38 billion, of which Bt20.71 billion worth will transfer to customers and be booked as 2014 revenue.
 This will grow the company’s revenue by at least 10 per cent over last year’s figure.
In 2013, Pruksa reported presales of Bt41.28 billion and revenue of Bt39.04 billion, generating net profit Bt5.8 billion. 
Those figures were up 40, 44 and 49 per cent respectively from 2012.
The company plans to launch between 40 and 50 projects worth Bt40 billion to Bt50 billion. Up to 80 per cent of these will be low-rise homes, both detached houses and townhouse, and the rest condominium projects.
However, it will delay launching condo projects until the second half of the year as it waits to see how the political crisis ends. It will go ahead with its low-rise launches this quarter because buyers in this category suffer less impact from the political turmoil.
If the political problem drags on into the second half of the year, that will have a direct impact on the property market, which may decline by 2-5 per cent from last year, Thongma said. 
That would be the first such decline in the property market since the economic crisis in 1997.
While Pruksa’s presale target may be missed, it expects revenue to grow by at least 10 per cent compared with last year. 
This is thanks to the backlog of homes begun in 2011 and 2012, especially condominiums, that will transfer to customers this year. The transfer of condos alone should be worth up to Bt10 billion.
“We have a rejection rate of 25 per cent. These are customers who ordered homes but did not take delivery, either because they could not get a mortgage or they simply changed their minds. 
“This is a normal rate and will have no impact on our revenue target,” he said.
He added that the company also had ways to help the customers win bank approval for mortgages by changing the size of the home to match what they can afford, or may add a co-signer for the loan.