Developer Raimon Land has frozen all new projects that it planned to initiate this year, due mainly to the global economic crisis.
Marketing director Henri Young said last week that Raimon Land had delayed its plans to build three projects - Amalfi, at Phuket, 185 Rajdamri in Bangkok's central business district, and The Edge at Pattaya - until the economy recovers.
The company has to be cautious with new investment over the next 12 months, he said. It may begin construction of the three delayed projects over the next two years, depending on the economic situation.
Young was unable to give a total value for the projects because this depends on construction costs calculated at the time construction begins.
Amalfi is to be located on 37 rai of land in Phuket, where Raimon Land plans to create a villa-style resort. The project called 185 Rajdamri will be a high-rise condominium in the heart of Bangkok's central business district, while The Edge will be a condominium project at Pattaya.
Raimon Land's decision to back away from new projects this year contrasts sharply with plans by many other developers to go ahead with new projects because they believe Bangkok's property market has improved since the final quarter of 2008. The "top 10" property developers have announced launch plans for projects with a collective market value of Bt30 billion.
"Starting new projects this year is very tough," Young said. "We have to borrow money from banks because each project needs investment of at least Bt2 billion to Bt3 billion, and we absolutely don't have enough cash. And as everyone knows, banks nowadays are very cautious when lending to customers. They require presales of at least 40 to 50 per cent of total project value. It is very difficult for us to achieve that figure amid the economic situation. So, we don't think that we will start our new projects this year."
Young said an alternative means of starting the new projects as planned was to seek partners. Raimon Land is talking with a number of foreign investors who remain interested in investing in Thailand and are looking for a price reduction. These investors have to wait for the proper time to invest, as well, he said.
Consumers are currently avoiding spending because of a lack of confidence in the economic situation. While there may still be demand for condominium units in the Bt1 million to Bt2 million price range, projects with prices ranging from Bt5 million to Bt8 million are very tough, he said.
Raimon Land has yet to see severe liquidity problems among its clients. Those in the company's existing residential projects still have the ability to meet instalments. However, it has seen slow sales in on-going new projects, and is currently unable to predict its revenue this year, Cornick said.
Raimon Land's projects which still have units for sale include The Lofts Yennakart, The River, Northpoint, The Loft Southshore and The Heights Phuket.
Young said the company was looking for new strategies to accelerate sales this year. It will consider customers' needs and select its real target group before deciding how it will speed up sales.
Raimon Land launched a sales promotion campaign at the Chinese New Year by offering price discounts of up to 15 per cent for units at The Loft Yennakart and 5 per cent for units on the north side of The River.
"We want to accelerate sales, but we can't," Young said. "It is not easy to offer sales promotions and get a good response immediately because of fierce competition in the market. However, we have plenty of time for the existing projects, so we're not concerned too much."
Young said accelerating sales also depended on construction completion and the ability to transfer ownership to customers. The Heights will begin transferring this year, while Northpoint is expected to be complete by the end of this year. The company expects to receive revenue equaling about 70 per cent of Northpoint's total project value, while it expects to be selling The River until 2011.
He said that earlier, about half of Raimon Land's clients had been foreigners, but they, too, had been affected by the global economic downturn. Now the number of foreign clients has changed for each project. The company expects the proportion of local buyers to increase this year.