Locations cause of rejections

Business News - Tuesday December 18, 2007

PROPERTY / FINANCE AND RESIDENTIAL DEVELOPMENT

Locations cause of rejections

KBank : Developers must be selective

KANANA KATHARANGSIPORN

More than half of the applications for property project finance this year have been rejected, up from 30-40% last year, due to either unattractive locations or unmarketable products, according to Kasikornbank.

Sammit Sakulwira, the bank's first vice-president, said the bank had received more than 100 applications for project finance this year. Fewer than 50 were approved, with new developers accounting for most of the rejected applications.

The major reason for the rejections was that the bank believed the products being planned did not match real market demand, said Mr Sammit.

He said the rejection rate was the highest since KBank resumed project finance lending three years ago, after having suspended the business following the 1997 crisis.

"We will consider location first and then the project's viability and the developer," he said. "The location should be good and interesting while the project and product should meet demand in the market."Mr Sammit said any developers that wanted to obtain financing needed to have at least 30% of the construction cost in hand, as the bank would lend no more than 70% of the project's value.

KBank yesterday approved a credit line of 2.18 billion baht for Woraluk Property Co to support its development of Le Luk Condominium.

"Condominiums in the city that are located near convenient transport have potential to grow," Mr Sammit said.

"In particular, projects close to the current mass-transit routes have high potential as they match the lifestyle of the new generation."

Woraluk Property president Wichai Poolworaluk said Le Luk, located on a 10-rai site, would have a total value of 4.5 billion baht, comprising two residential buildings worth three billion baht. With a total of 838 units, it currently has presales of 1.25 billion baht.

Also planned at the site are hotel and commercial spaces, with Siam Future Development to join the company in creating a community mall. A construction permit is now being sought and work is scheduled to start in January.

Next year, it plans to develop one or two commercial projects. It owns land in Bangkok and provincial areas including Kanchanaburi, Suphan Buri, Chon Buri, Hua Hin and Cha-am.

Bangkok Post