Wednesday, January 09, 2008

Builder thriving even in slow economy

Branches will help Royal House grow

Builder thriving even in slow economy


As more branches helped increase sales last year, the home builder Royal House Co plans to add new outlets and aims to achieve 10% growth in 2008, according to managing director Sakda Kowisuth. He said the company would open a new branch in the Suvarnabhumi-King Kaew area in March and if the overall situation is stable, it will have one more in Bangkok. Each will require an investment of about 20 million baht.

Last year the company opened a new branch in the Ratchapreuk area, helping it generate total sales of 800 million baht, 15% above its target despite an unfavourable market situation in 2007.

''Home builders have experienced less negative impact from the market slowdown than individual contractors as customers are confident in home builders rather than individual contractor,'' said Mr Sakda. ''They were afraid that individual contractors might not be responsible or might abandon the job because of rises in construction material costs.''

Other strategies to increase sales will include the launch of 12 new home designs in the next two months. The modern designs will reflect the fact that many new customers tend to own homes in housing estates and want to rebuild them with a more contemporary look and new materials.

Royal House also intends to take part in more home-related exhibitions besides the Home Builder Fair that is held twice each year. It expects to have total sales of 900 million baht by the end of 2008.

Sakda: Self-building customers prepared

Mr Sakda said the property development business last year slowed down, in line with the overall economy, but the home building business was stable. One reason is that self-built home customers tend to be people who already own land and have been saving up for some time to build a residence.

Underscoring the trend is the fact that 60% of the company's customers paid cash and only 40% sought bank loans. In contrast, most people buying from developers need financing and some change their minds about purchases when concern about the health of the economy mounts.

''We have frozen the project development business since 2006 as the situation was not stable,'' Mr Sakda said. ''From our experience, if there's a coup, we will not invest in property development as the post-coup situation is not good. Or if we do it, we may obtain lower margins.''

However, the company last year bought a 20-rai site in the Rattanathibet area where the new Purple mass-transit line will pass, as land prices were attractive. It will wait for completion of the Purple Line and may develop a housing estate or sell the whole plot.

Mr Sakda, who is also the president of the Home Builder Association, said the association had encouraged its 30 members to use uniform construction contracts and quality standards starting this year. They will be benchmark criteria in homebuilding and will create more fairness for customers.

''The home building market in 2008 will grow due to good signs in the political and economic situation,'' said Pramote Teerakul, managing director of the home builder Four Pattana Co. Late last year, many economic indices including exports and consumer spending showed a positive direction, he said.

However, possible rises in construction material costs will be a negative factor that will cause unit prices to increase, he added.

Last year the total home-building market was valued at 8.5 billion baht, an increase from eight billion in 2006.

Mr Pramote said his company generated sales of 458 million baht, 8.4% lower than its target, as some customers delayed decisions. Sales of about 200 million baht were postponed from 2007 to 2008. The company expects sales growth of 20% this year.

No comments: