Developers say rules will cut profits

Green law will offset power use with trees

Proposed changes to environmental impact assessments (EIAs) relating to green space and air conditioning have raised concerns among condominium developers who fear lower profit margins. Teerachon Manomaiphibul, chief operating officer of the listed developer Property Perfect Plc, said the new proposed EIA measures require projects with more than 79 units to have one tree per tonne of British Thermal Unit (BTU) capacity of air-conditioning systems. He said the measure would increase costs by 10-20% due to limited space for unit development.

"Every new project faces this problem," he said. "Many need to revise plans by reducing units to have enough space to plant trees. This will increase prices per square metre or developers will need to have lower margins."

Since the new EIA measures were proposed last year, Property Perfect had to delay by three months the launch of a condominium on Ratchadaphisek Road. The company had to reduce the number of units from 1,750 to 900.

Meanwhile, to maintain a gross profit margin of 35%, the average price per square metre would have to be increased to 65,000 baht from 55,000 baht, said Mr Teerachon. The project would be launched by the second quarter of 2008.

"It's a trade-off for condominium buyers. If they buy a project that received EIA approval before new measures, they will pay lower prices.," he added.

Among other condominiums that faced delays were Noble Development's Noble Nano, with about 500 units on Pattanakarn Road.

Although the project opened for bookings in August of last year, the company needed to refund deposits to its customers and would re-launch the project during the second half of 2008.

Noble president Thongchai Busrapan said the EIA board suggested that any project with more than 100 units should receive EIA approval before selling units to customers to prevent a possible problem such as an adjustment in the plan.

New condominiums today have more limited space as some are located in prime areas with high land prices.

"The board should consider applying international standards that allow developers to plant the trees elsewhere like in the park or allow them to contribute money to environment-related organisations," Mr Thongchai said.

Mayta Chanchamcharat, chief executive officer of Plus Property Co, a subsidiary of Sansiri Plc, said condo developers this year might face lower margins due to expensive EIA measures.


Mr Mayta said the project's sellable area would fall but that developers might not be able to increase prices due to stiff competition. Thus, developers might absorb the cost by reducing gross margins.

Kittipol Pramoj Na Ayudhya, vice-president and secretary-general of the Thai Real Estate Association, said the new EIA measures would delay construction and unit transfers. This could cause buyers to delay their purchases.

Phatra Securities said the impact of the measures is already being felt since condominiums launched after last July do not yet have EIA approval.

Condominium developers need to buy additional land to meet the requirements. This has allegedly increased by 4-5% for high-rise projects in prime areas and 1%-3% for mid-rise projects in the suburbs or C+ areas.

There should not be any impact on property companies' earnings in 2008 given that projects scheduled for 2008 are approved and under construction. Developers may face losses of 2-6% in 2009 if they need to buy additional land.

Source: Bangkokpost by KANANA KATHARANGSIPORN