Risk Management is Becoming a Key Strategy in Real Estate Market in Thailand
Michael Duffy, Head of Project and Development Services at Jones Lang LaSalle suggests a industrious and balanced advancement in all segments of the development industry in Thailand, with a particular attention on risk management.
A broad understanding of risk and liability is necessary to the success of any big apartment or office development. Developers and their related investors have to permit suitable possibilities applicable to the present economic situation in their viability and valuation models, designers have to apply technology suitable to Developer’s budgets, and Contractors should apply attentiveness in their rates and contract conditions to guarantee enough cash flow to finance productive delivery of construction.
Attentiveness and risk management is particularly important for projects that are financed by off-plan sales, based on sales valuations determined by guesses of construction prices. It is necessary to allow practical eventuality for the inflationary period between sales launch and eventual construction.
Recently declared consumer-protection rules highlight the significance of price conscientiousness. The rules will check the flexibility for Developers to reduce stipulation of materials during construction in an effort to cut the costs – the stipulation presented in original sales copy must be admired, in spite of price increases. The quick hike in material costs, determined by the soaring oil commodity prices, is a universal fact, and this tendency is unlikely to be overturned in the short to medium term.
In the present situation of tighter credit controls, increasing interest rates and common inflationary pressure, the tendency to higher material costs is an expected truth. Developers are suggested to invest in specialized project and risk management with the intention of efficiently alleviating their exposure to the current inflationary forces.
A broad understanding of risk and liability is necessary to the success of any big apartment or office development. Developers and their related investors have to permit suitable possibilities applicable to the present economic situation in their viability and valuation models, designers have to apply technology suitable to Developer’s budgets, and Contractors should apply attentiveness in their rates and contract conditions to guarantee enough cash flow to finance productive delivery of construction.
Attentiveness and risk management is particularly important for projects that are financed by off-plan sales, based on sales valuations determined by guesses of construction prices. It is necessary to allow practical eventuality for the inflationary period between sales launch and eventual construction.
Recently declared consumer-protection rules highlight the significance of price conscientiousness. The rules will check the flexibility for Developers to reduce stipulation of materials during construction in an effort to cut the costs – the stipulation presented in original sales copy must be admired, in spite of price increases. The quick hike in material costs, determined by the soaring oil commodity prices, is a universal fact, and this tendency is unlikely to be overturned in the short to medium term.
In the present situation of tighter credit controls, increasing interest rates and common inflationary pressure, the tendency to higher material costs is an expected truth. Developers are suggested to invest in specialized project and risk management with the intention of efficiently alleviating their exposure to the current inflationary forces.
Labels: apartment, office, risk management
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