Artist rendering of Chewathai Hallmark Ladprao – Chokchai 4 Phase 2.
AMI-listed developer Chewathai plans to resume land purchases, downsize new projects and launch new property-related businesses as it grapples with property and building tax and China’s strict zero-Covid policy.
Chief executive Boon Choon Kiat said the planned full implementation of China’s tax and border controls has reshaped the company’s business plan and strategy for 2022-23.
The company’s outlook changed when the pandemic altered the real estate market in early 2020, Boon said.
“As the situation in 2020-21 was concerning and unpredictable, we froze new project launches from then until June 2022, when we launched a new condo project,” he said. declared.
Boon says China’s property and construction tax and border controls have reshaped the company’s business plan and strategy for 2022-23.
As a medium-sized company, the company needed to hold as much cash as possible and focus on eliminating inventory and reversing all land transactions over the past 30 months.
“Now we are ready to resume land acquisitions with an investment budget of 1 billion baht for five plots next year,” said the 48-year-old Singaporean who moved to Thailand in 1998. will have a change in strategy.”
Before the property and construction tax came into effect in 2020, when the company bought land for a low-rise condo, they generally paid the rest and received the transfer of the land after paying a deposit 3 to 6 months before, depending on the competition.
Currently, payment terms are longer. Chewathai is now paying the rest and receiving the land transfer 10 months after paying the deposit because he wants to spend that time seeking approval for an Environmental Impact Assessment (EIA) report, Mr Boon said. .
When the land is transferred, likely at the same time the EIA is approved, construction can begin immediately and is expected to take 10 to 11 months to complete an eight-story low-rise condo, he said.
“We will have less or no risk in paying the land and building tax to own such land, as we should receive the building permit once the EIA is approved,” Boon said. “The tax provides a three-year grace period for a development project from the date the building permit is granted.”
With this method, the lead time will be shorter and it can help save on property and building tax costs, as the developer’s tax burden on unsold units does not begin until three years after receiving the building permit. build, he said.
Mr. Boon said the tax was the reason for the decision to downsize new projects, both low-rise condos and low-rise homes, because big projects usually take a while to sell. longer than the three-year grace period. .
For low-rise condos, the size will be reduced from four towers to one or two. The total for a townhouse project will be less than 350 units, down from 400 to 500 units, he said.
“The highest take-up rate for townhouses in Greater Bangkok is 10 units per month. If we can sell five units per month, it will take us up to 80 months for a 400-unit project to come to fruition. sells. That makes the tax a bigger risk,” Boon said.
He said the prudent step is to reduce the size of the project from 30-40 rai to 20 rai, rather than trying to sell 10-20 units per month. However, the price of land for a small plot is 10-20% higher than for a larger one.
Next year, the company plans to launch a new detached house project on a 20-rai plot on New Ratchaphruek Road in Nonthaburi with 100 units priced at 5-8 million baht, Boon said.
He said that of the five lots Chewathai plans to buy next year, three will be for low-rise condo projects in outlying areas of the city with units priced at $1.5 million to $2 million. baht to capture local demand, which remains strong.
The company is maintaining its freeze on high-rise condo development because land costs for high-rise condos in downtown areas are high and there is a glut of unsold units.
“Once Chinese buyers disappeared from the market, other condo developers targeting Chinese people turned to local demand, which is our playground,” he said.
With steep discounts and attractive campaigns offered by new rivals, Mr Boon said Chewathai was struggling in his comfort zone.
“Although the Chinese market is not our focus, we want the market to come back so that rivals leave our playing field,” he said.
The company is also looking for new revenue streams in the post-Covid era. Last year, Chewathai promoted its vice presidents to start a new business related to its core business.
Chewa Renue, a second-hand home business, has a team that purchases non-performing or distressed assets by bidding on Department of Legal Enforcement auctions or working with an asset management company (AMC) on renovation before sale.
Since its launch in March, Chewa Revue has secured 28 single-family and townhouse units as well as two condo units for renovation with a combined value of 90 million baht.
“The advantage of this business is that we don’t need to pay AMC. We refurbish them before the sale. The units are then transferred directly from AMC to buyers. transfer of units and no need for capital.” said Mr. Boon.
Another venture is a small vacation home project with 10-15 units in locations such as Khao Yai, Pattaya and Hua Hin. A pilot project worth 40 to 50 million baht will be launched next year, he said.
“We want to help our loyal middle managers start a new business. If it works, we’ll separate it to start a new business,” Boon said.