Yangon’s middle range developers halve projects on demand fears
August 30 - September 5, 2010
BUSINESS might be brisk at the high end of the condominium and apartment development spectrum but middle- and low-end firms said they are cutting back the number of projects they take on.
U Lazarus, the managing director of Yadanar Shwe Htun Construction, said his company and others that cater to middle income earners, are focussing their efforts on sites in good locations – such as Bahan, Kamaryut and Mayangone – that are the most likely to be profitable.
“Middle-class developers like us are being selective and choosing to focus on sites at specific locations, rather than develop a lot of blocks at once.
“If we build blocks away from commercial areas it’s hard to generate sales and we’re left with surplus apartments,” he said.
U Lazarus said that developers sometimes get caught up in competition to buy plots or – as happened when the Yangon City Development Committee identified up to 250 “dangerous” buildings earlier this year – and buy sites that might not be profitable.
“Projects require an investment of between K100 million and K1 billion, which is why we must carefully the sites we want to develop.
“This year we’re only working on 25 projects, while at this time last year we had 50,” he added.
U Ko Ko Lay, director of Three Friends Construction, said his company had also halved the number of projects it was developing this year.
“Even though the construction industry has recovered from the impact of the global economic crisis, it’s still a tough environment for mid-level developers because overhead costs such as advertising and labour are about 15 percent higher than last year,” he said.
“We’re facing thin profit margins this year and have shelved nearly 10 projects in Thingangyun and South Okkalapa townships by August,” he said.
U Ko Ko Gyi, the director of MMB Construction, said in his opinion the global financial crisis was still hurting business and curtailing demand in the middle-level marketplace.
“Middle-level developers have to be careful and choose sites that will make money,” he said, adding that his firm has mothballed 90pc of its projects.
However, the same is not proving the same for high-end firms like Shine Construction and Naing Group.
Shine Construction’s assistant general manager, U Soe Min Naing, said the company is enjoying strong sales and is actively expanding, with 10 more sites on the drawing board than last year.
He said the company offers a wide range of apartments selling from as low as K10 million up to K800 million.
U Yan Aung, the marketing manager of Sai Khung Noung agency, said: “Eighty percent of buyers want locations in developing and commercial areas such as Bahan, Mayangone, Kamaryut, South Okkalapa and Thingangyun townships.
“Developers usually expect returns about 15pc higher in those townships than other locations.”
