Small firms may not complete

LPN Development managing director Opas Sripayak

LPN Development managing director Opas Sripayak

The chiefs of nine of Thailand’s leading property companies have been asked to share their views with The Nation’s readers on how they plan to survive the global economic crisis. The series continues today with the fifth of the nine, LPN Development’s managing director Opas Sripayak.

Some of Thailand’s leading property firms are voicing concern about small and medium-sized property developers who may no longer be financially capable of delivering new homes to their customers from projects begun last year.

These concerns came to light when LPN Development managing director Opas Sripayak was revealing his company’s strategies for surviving the effects of the global economic crisis.

Do you think Thailand’s property market will be affected by the global economic crisis?

Thailand’s property market began to feel the effects of the global economic crisis in the final quarter of last year, when home-buyers began to delay their decisions to buy from residential projects.

Although this crisis began in the United States, which is a long way from Thailand, I believe this country’s economy and the property market will be affected. This is because Thailand’s economy - especially its exports - will

fall when demand for our export products in the US and Europe drops. This will have an indirect effect on Thai people because their earnings should drop.

However, this crisis will have a lesser impact on Thailand’s economy than the financial crisis in 1997, because most of the country’s commercial banks began to restrict the provision of mortgages early last year. So Thailand’s commercial banks are financially strong when compared with their condition in 1997.

However, the commercial banks’ restrictions on providing mortgages for home-buyers will have a negative impact on the property sector this year.

What is your business strategy for surviving this crisis and maintaining your business growth?

“The company will go ahead with plans to launch six to eight condominium projects with a combined market value of up to Bt10 billion this year”We have begun to restrict our new investment in undeveloped land and we are exercising care in the launching of new residential projects by downsizing the projects. This will speed up sales and generate income faster than property projects of a larger size.

Meanwhile, the company is also managing both its operational and construction costs by changing its business structure and freezing plans to recruit new staff.

Now, our management costs are about 31.7 per cent of revenue and our net profit margin averages 16 to 17 per cent. If we succeed in further reducing our costs and generating more returns that will help us to remain financially healthy throughout this crisis.

So our business strategy is finding ways to generate income and reduce our costs while keeping the company ready to grab business opportunities, by launching new condominium projects at new locations.

The company will go ahead with plans to launch six to eight condominium projects with a combined market value of up to Bt10 billion this year, but the projects will be reduced to small or medium size, with between 200 and 300 units each.

We have also set aside Bt1.5 billion to Bt2 billion to buy land on which to develop new residential projects in 2010.

We continue to aim for sales growth of nearly 10 per cent this year.

The company is also trying to find ways to help our customers get mortgages from banks by suggesting that they make their down payments through a bank deposit book and make monthly savings deposits at the bank. This will create a savings record that will help them get a mortgage.

What are you main concerns about the business risks in the property market this year?

We are concerned about both political turmoil and the economic crisis and how these will affect small and medium-sized property developers, who won’t have enough cash to develop residential projects that they launched last year and have promised to deliver to their customers this year.

We have to advise home-buyers to investigate these projects, to see whether construction has been suspended. Who is going to buy these projects now? Buyers should study the condition of the companies that own these projects and find out which bank supported them.

We’re afraid that most small and medium-sized property companies will leave their projects when they face the financial crunch. That will affect home-buyers just like it did in the 1997 financial crisis.

I strongly advise home-buyers to select from residential projects belonging to property firms with a good, long record in the industry.

About the author

Somluck Srimalee Somluck Srimalee
Somluck Srimalee is a journalist with The Nation, Bangkok's independent English language newspaper and specialises in the property and real estate sectors.
Other posts by Somluck Srimalee ( 49 )

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