MahaNakhon Bangkok super luxury condominium developer Pace Development plans to inject another THB1.5 billion (US$48.1 million) into its MahaNakhon project on Sathorn Road after financial institutions changed their requirements in providing loans. According to Chief Executive Officer Sorapoj Techakraisri, the company will be able to receive only THB5.5-6 billion (US$176.5 million-US$192.6 million) in project loans.
Bangkok super luxury condominium developer Pace Development plans to inject another THB1.5 billion (US$48.1 million) into its MahaNakhon project on Sathorn Road after financial institutions changed their requirements in providing loans.
According to Chief Executive Officer Sorapoj Techakraisri, the company will be able to receive only THB5.5-6 billion (US$176.5 million-US$192.6 million) in project loans. The original figure was THB7 billion (US$224.6 million). The banks normally need 30 per cent pre-sales of a project before approving a loan, but the sales requirement goes up to 50 per cent in situations such as the recent political turmoil.
“The political unrest had a direct impact on us. Our foreign customers decided to cancel over 10 units of pre-sale bookings, worth over THB400 million (US$12.8 million), during the past few months,” he said.
However, the company managed to negotiate with the banks to maintain the requirement at 30 per cent by pointing out to them that customers are not in the mood to buy property during such times.
“And they agreed to approve the loan after we committed to put more money into the project” Sorapoj added.
Pace had earlier made an injection of over THB3 billion (US$96.3 million) into the project, which has already passed the Environmental Impact Assessment.
MahaNakhon is the company’s second super-luxury condo project after Saladaeng Residences. Fifty of 200 units of this THB12-billion (US$385.1 million) development have been sold so far, with the majority of current customers being Thai and local investors. The company expects 25-30 per cent sales by the end of the year.
The construction, which has been postponed from the second half of this year, will start in early 2010 and is expected to be completed by mid-2014.
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Thailand’s property market was able to rebound from past crises and there is every reason to believe it will be able to absorb the blow of recent political tensions. The taxation situation has actually improved the conditions for purchasing property in Thailand, and if property prices do dip slightly as a result of the current situation it may actually be a good time to buy as there is a very real possibility Thailand property will regain its golden outlook soon. As a result, the financial condition of most major housing developers in Thailand is much more robust than in the past. The development of the local bond markets and increasing domestic savings has the made the industry much less dependent on foreign funds, a significant difference from 1997.
Any fall in domestic savings will impact Thai Real Estate Market corporate funding and investment. Mortgage loans will be more difficult to obtain : The slowing economy will force Thailand’s banks to be more restrictive in their lending practices. Mortgage loans will be more difficult to acquire with rejection rates rising. Lower supply : Responding to slowing market conditions, developers will lower their risks by building fewer homes and reducing supply. New housing supply will also be reduced because developers will have more difficulty obtaining equity, bond and credit market financing because of the global financial crisis.
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