Pruksa banks on innovation to cap costs - The Nation

Somluck Srimalee
The Nation November 10, 2012 1:00 am

He said three factors would push up residential prices: the rising cost of construction materials, land prices, and labour costs. As a result, property firms have to find a way to control their construction costs to ensure that prices are able to match the purchasing power of buyers.

"While prices are rising, income doesn't rise in tandem, hence purchasing power is limited," he said.

To deal with this problem, Pruksa has developed its own construction process called the "Real Estate Manufacturing" (REM) system to control costs and also improve the quality of the homes it builds. Under this system, subcontractors are trained to be specialists in building a part of the home, as in car manufacturing. For instance, labourers skilled in laying roof tiles will be confined to that task. Those with the skills to build the structure will do only that.

By following this system, the construction of a detached house measuring between 160 and 200 square metres will be completed within 28 days. This is faster than the normal system, whereby a combination of prefabrication and knockdown system takes an average of two months.

In addition to speeding up the construction, this system reduces construction defects from an average of 14 early this year to only about three. It also reduces the maintenance budget after the transfer of the residence to the buyers from an average of 1 per cent of total sales a year to only 0.5 per cent a year. All of this will help the company reduce both its construction and operating costs.

Maintenance

This will enable the company to maintain its prices or have a competitive edge in the market, Thongma said.

He added that Pruksa had designed this system two years ago and now used it to build 53 per cent of its detached-house projects and 50 per cent of its townhouse projects. The company plans to use this system for 80 per cent of its detached-house and townhouse projects by the end of this year, and for 100 per cent in 2013.

This will also enable it to maintain its average net profit margin between 14 and 15 per cent this year.

Meanwhile, the company's presales recorded Bt23 billion in the first 10 months of this year, and will achieve Bt29 billion by the end of the year. Part of the revenue will come from Pruksa Avenue on Pattanakarn Road. This project will combine nine residential projects worth Bt11 billion, two of which were launched last month and two will be launched this month. Five projects will take off next year.

The two projects launched last month - The Plant and Patio - have already had sales of Bt600 million while the target for the end of the year is Bt700 million.

Pruksa Real Estate also plans to launch 18 projects worth Bt14 billion in the current quarter to help achieve its 2012 presales target, as part of its plan to launch 49 residential projects worth Bt34 billion this year.

The company reported revenue of Bt11.5 billion and net profit of Bt1.6 billion in the first half of the year.

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Source: http://www.nationmultimedia.com/business/Pruksa-banks-on-innovation-to-cap-costs-30194063.html

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