Presales market: contractor develops property with buyer’s money

Due to weakness in a systematic housing financial mechanism, Myanmar’s real estate market relies on the presales market in which buyers have to place a down payment for a unit before constructing or developing a property, say experts at a seminar for challenges and opportunities in housing and construction.

“In Myanmar, presales system means 'A fish is fried with its own fat' – buyers have to pay advance for purchasing units to contractor to build. In some cases, buyers want to make more down payments but are not allowed. For some with cash, that wouldn’t be a good deal. So there are some challenges in presales system,” Myint Mo, a retire deputy director for the Department of Human Settlement and Housing, said.

“The government has to focus on developing of low-cost housing. And it needs to invest in those projects. Meanwhile, commercial housing should be developed as well. Construction business for developing commercial buildings seems quite strong at the moment. Currently, the Yangon City Development Committee has allowed at least twenty 20-plus storey building projects and three 30-plus storey tower projects to be implemented in Yangon. But there are very few of low cost housing projects. So there are more squatters. It would be better if more low cost housing and affordable housing are implemented. Now, buildings are being built for money because financial mechanism is weak,” Myint Mo, added.

Writer Than Soe said 80 percent of construction businesses are running with bank loans and the term for the loan is four year. Speculators are playing the real estate market. And the country’s real estate market is always based on upcoming general election.

Experts also discussed about not only challenges in town expansion by horizontally and vertically but also construction quality. The property price in Myanmar is skyrocketing and construction materials are imported as well.

“Experienced technicians are needed for tall tower constructions. Quality should be maintained. Therefore, both contractor and inspector are important for tower construction to meet with standard quality,” Than Myint Oo, the CEO of Soil Energy, said.

“Housing sector is important in the way to develop the country’s economy. It also affects political consequences. For example, if a job is being created in housing sector, there will be two more opportunities in other sectors according to the World Bank. What Myanmar needs is a comprehensive housing policy. We are solving the problems with short term solution.

“In implementing of comprehensive housing policy, private sectors are needed as well as the government’s support,’’ said Myint Mo.

Due to lack of implementation in low cost housing, there are more squatters in the country lately. Relying on presales system is not good for long term. So a good financial mechanism for housing is needed as well, he continued.

In 2013, a total of 6,000 buildings were built and a total of 4,200 buildings were built last year. Although, more than 10,000 buildings were built in Yangon, the demand is still high.