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Built to Build stays ahead of the curve

source: Bangkok Post Monday Oct 20 2008 Buyers seek quality in difficult times While many are waiting for the global financial tsunami to wash over Asia, some Thai businesses continue to thrive, among them top-tier house builders. Built to Build Company Ltd, which is part of the Seacon Group that created Siam Square and later Seacon Square, is sitting pretty because its revenues and those of its affiliate Bangkok House Builder Co have already exceeded this year's target of 550 million baht, with the year-end total expected to reach 650 million. They are aiming for 750 million baht next year after recording 500 million baht in 2007. Sutee Ketsiri, Built to Build's managing director, attributes the strong performance to the psychological effect of the financial turmoil, which has led people to ensure hat they obtain quality when they make big-ticket purchases such as housing. "Unlike 1997, there is still demand today. In 1997, demand dropped from 100% to 10-20% and although the atmosphere today has worsened, demand is still tangible because we have been hit and knocked down before and are thus more careful." House builders also have an edge over general contractors and property developers because those who commission the construction of houses on their own land generally make plans years in advance and have saved up the money they need. Mr Sutee acknowledged that construction costs have been a major headache, especially steel, for which prices doubled from the end of last year to the middle of this year. Now they are easing back in line with the global drop in commodity prices. He said he knew of one developer that stumbled in its effort to control steel costs. It used borrowed funds to book 400 to 500 million baht worth of steel at a price that seemed cheap. Its executives reasoned that paying interest on borrowed funds to lock in the price was a good strategy, but they are now in dire straits as prices have dropped. He also acknowledges that going forward, property market demand in Asia may soften even if the region's economies are in better shape than those in the West. For example, he foresees investors sending money back from Asia to the US to resolve problems there, leading to a liquidity squeeze in the Thai system. "So there will definitely be less cash in circulation and people will be spending less on luxuries." Regardless of the economic situation, there is no denying that expenditure on necessities still has to be met and housing is among the top items. With this in mind, and in order to fend off competition, Built to Build recently introduced a new collection of houses in four styles - Modern Contemporary, Modern Resort, Modern Tropical and Modern Oriental. The Oriental group recorded good bookings at the recent Home Builders Association fair. The houses start at four million baht for around 250 square metres, approximately 16,000 baht a square metre. Affiliate Bangkok House Builder caters to the lower end with smaller houses a from 1-3 million baht. Mr Sutee likened his strategy of introducing a complete design change every four to five years to that of carmakers who usually launch new models after the same duration. He also tends to tweak ongoing models until it is time to offer a new collection. But he warned that builders have a host of ways of cutting costs and delivering shoddy houses. Among these are using fewer or thinner steel rods; not getting the concrete mixture right, which leads to cracks; not waiting seven to 15 days for each section of the concrete to set before continuing, which weakens the concrete; and using cheaper grade fittings such as thinner ceiling aluminium grid. "The person who is getting a house built has to check all this himself because the government is not going to do it for him." A well-built house or condominium should last at least 50 years. However, renovations are required every now and then, initially every 10 years and as they get older every five years. "If these structures have to be knocked down after 30 years it means they haven't been built properly," says Mr Sutee. "Knocking a condo down after 30 years is not worthwhile."

 

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