The Construction Entrepreneurs Association (MCEA) has called on developers to push ahead with projects despite sluggish sales in the hope the market will pick up. As an example, MCEA president Dr Khin Shwe said work would continue at his company’s Pyay Garden condominium tower (above) on Pyay Road in Sanchaung township, Yangon.

A BUILDING boom awaits construction companies if they can hold on through the current difficult period, the head of the Myanmar Construction Entrepreneurs Association (MCEA) said February 23.

MCEA president Dr Khin Shwe acknowledged that a general decline in spending power in recent times posed challenges for the construction industry but said that population growth in Yangon over the next decade would lead to a surge in demand for new apartments.

“In 2020, the population of Yangon will be 10 million and, for families that have a minimum of three children, we’ll need at least 50,000 new apartments a year,” he said at the MCEA’s annual general meeting in Yangon.

However, after seeing a revival through the 1990s, developers now needed to struggle through a challenging period before the fruits of a rising urban population could be enjoyed.

“The construction sector peaked in the period after 1988 because of the [market-oriented reforms] introduced by the government but there was a sharp downturn in 2002 due to the bank crisis and the current period is the most difficult,” Dr Khin Shwe said in his speech to about 100 industry leaders at the MCEA’s headquarters.

While Singapore and Thailand proceeded to race ahead with apartment projects, “we can only build 5000 apartments a year because finished apartments remain unsold”, he said.

Low purchasing power among homebuyers and financing difficulties faced by developers were key issues in the sector’s stagnation, he added.

Annual interest rates of 18 percent made borrowing from state banks unprofitable as developers could not ensure sales at prices where a good return could be made, Dr Khin Shwe said.

Lending to homebuyers that had driven growth in neighbouring countries was also missing in Myanmar.

“In China, sales of apartments are high because banks will lend buyer 80pc to 90pc (of an apartment’s market value). Students there only need to pay 5pc up front and they can pay the rest in instalments within 30 years from the time when they finish school,” the MCEA chairman said.

Without sufficient market demand, Myanmar developers currently risked losing money on their investments, Dr Khin Shwe said, pointing out that a rise in the cost of construction materials was also driving up sale prices.

“The cost of (building) one square foot in previous years was under K10,000, but today the cost for one square foot is over K20,000 no matter how economically we construct buildings.

“Eighty percent of construction materials are imported from abroad but we cannot increase final prices (of homes) because of poor sales,” he said.

Dr Khin Shwe said Zaykabar Company Ltd, of which he is chairman, was pushing ahead with its projects. He urged other developers to do likewise so that the industry did not fall behind during a period of weakness.

“For the 25-floor Pyay Garden project, we know that we’ll lose money if we sell now but we are continuing our project without stopping because we are waiting for the time when people will spend a lot more,” he said.

The MCEA was formed in 1996 and comprises 1500 members, most representing Myanmar construction companies. As well as its headquarters in Yangon, the MCEA has branches in Mandalay and Mawlamyine.