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PROPERTY
KANANA KATHARANGSIPORN
Four Pattana hopes to lift demand for owner-built housing by combining construction, decoration and gardening contracts in a single discounted package. |
The homebuilding firm Four Pattana Co expects the lowest margin in a decade _ below 7% _ this year as rising construction costs hurt demand, said managing director Pramote Theerakul.
Construction material costs rose 11.2% in the first half of this year. The company attempted to cap the impact by controlling management costs, negotiating material prices with suppliers and discussing higher costs with customers.
As a result, the increase in construction materials prices affected the company's costs by only 4.89%. However, it has to absorb costs by 1.89% as it increased housing prices by only 3% in March.
''This [the carried costs] definitely hurts our margin. We need to accept it and support customers by slashing our margin,'' he said. The company would consider increasing unit prices again in the third quarter as costs were unlikely to stop rising.
Besides higher construction, management and overhead costs, rising oil prices and living expenses the company gave to its staff resulted in its lower margin. During the past decade, its margin ranged between 8.8% and 12%, he added.
''Costs rose but house prices cannot,'' he said. ''We used to monitor the situation [of rising construction material prices] six to 12 months at a time. But now with only one month's increase, we cannot catch up with them.''
In the first half of the year, the company recorded sales revenue of 237 million baht, almost half from the home building. Four Pattana is still maintaining its original target set early this year to achieve 505 million baht in total revenue by the end of 2008.
Pramote: Raising prices difficult |
To stimulate demand in the self-built home market, where buyers remain hesitant, the company plans to use a promotional package offering home construction, decoration and gardening services at a discount of 10%.
''This promotion may again hurt our margin but it's better than nothing,'' he said. Customers who want to use all services can sign one contract instead of signing three, one with each subsidiary. The strategy will help to save about 10% in costs and 20% in construction time as work could overlap rather than waiting for completion by each subsidiary.
The full-service package will be launched at Four Pattana Golden Week from Aug 10-16, 2008 at Central Plaza Pin Klao and Aug 22-28 at Central Plaza Lat Phrao with a budget of five million baht. The company targets sales of 100 million baht from both events.
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