Regent Green Power lays out low-cost condo strategy
published : 23 Jun 2022 at 04:00
newspaper section: Business
writer: Kanana Katharangsiporn
The surging supply of cheap condos has been achieved through lower overheads, strict debt management and in-house construction, according to Regent Green Power, the largest developer of such inexpensive units.
Nirat Yoopakdee, Regent Green Power managing director, said the company was able to develop condo units priced at or below 1.2 million baht in locations no more than 500 metres from mass transit stations because it applied cost-saving measures using various methods.
"Our land and construction costs are not much different from others, but we save development costs from other methods," he said. "We don't have many sales staff as our sales usually go fast. We can relocate them to new sites quickly as each project is sold out in a short period due to the low prices."
With lower overheads, its sales and administrative expenses account for only 8% of total costs, while the average figure for other developers is 15%.
High sales rates soon after launch, or 50-80% sold, as well as buyers paying large deposits of 15-18% of the unit price, also helped reduce the financial burden, said Mr Nirat.
"We borrow at a minimum amount, mostly around 35% of the project value, while a general condo project borrows at least 50-60%," he said. "We cap our debt-to-equity ratio at no more than 0.5 times to reduce financial costs."
The company, which develops condo projects under the brand name Regent Home, also constructs all its projects itself.
This strategy can help save 10% of that which would be paid to contractors, which can be used for land purchases or ploughed back into the new project.
Mr Nirat said the firm plans to launch 10,000 new condo units priced 1.2 million baht and lower this year, down from an earlier plan for 15,000 units, due to the soaring prices of construction materials, particularly steel.
"Last week we cancelled a land purchase for a new condo project to save 750 million baht in cash flow in case of an unfavourable situation," he added.
The firm cut expenditure further through a corporate tax waiver after it took part in a Board of Investment (BoI) condo scheme which required units to be a minimum size of 24 square metres and costing no more than 1.2 million baht.
The criteria for BoI condos was revised up in 2020 from a minimum size of 28 sq m and a unit price no higher than one million baht.
This change led to more lower-priced condos hitting the market over the past two years.
According to the Real Estate Information Center, sales of new condos in the first quarter of 2022 outperformed the whole second half of last year, driven by 6,249 transfers of units priced 1.5 million baht and lower, out of 19,055 condo sales in total.
- Green Power