Con­struc­tion as­so­ci­a­tion acts as in­ter­me­di­ary

The Myanmar Times - - Front Page - ZAY YAR LINN za­yarlinn@mm­times.com

The Myan­mar Con­struc­tion En­trepreneurs As­so­ci­a­tion is help­ing cash-strapped con­trac­tors se­cure bank loans amid a real es­tate in­dus­try slump.

A NEW ini­tia­tive from the Myan­mar Con­struc­tion En­trepreneurs As­so­ci­a­tion (MCEA) is help­ing smaller con­struc­tion and con­tract­ing firms se­cure bank loans, amid a slow­down in the res­i­den­tial real es­tate mar­ket that has left com­pa­nies fac­ing aban­doned projects, court cases and fi­nan­cial dis­tress.

MCEA vice chair U Shein Win said that the as­so­ci­a­tion was col­lab­o­rat­ing with Con­struc­tion and Hous­ing De­vel­op­ment Bank (CHDB) and AYA Bank to help small firms get ap­proval for loans.

The ini­tia­tive has been in place since early Oc­to­ber, and so far has helped 17 firms re­ceive bank loans, U Shein Win said.

The MCEA was es­tab­lished in 1996 and has more than 1000 mem­bers, rang­ing from small and medium to large-scale con­struc­tion com­pa­nies.

Smaller firms in par­tic­u­lar are strug­gling amid a stag­nant real es­tate mar­ket. In a re­cent third-quar­ter re­port on the wider real es­tate sec­tor, Yan­gonbased Slade Prop­erty Ser­vices said, “The con­do­minium mar­ket has shown no sign of re­cov­ery over the last few months.”

“Hopes that post-elec­tion sta­bil­ity would rein­vig­o­rate the mar­ket have proven un­founded,” it said, “and the gov­ern­ment’s high-rise re­view has given po­ten­tial buy­ers even more rea­son to hes­i­tate.”

A Con­do­minium Law that would al­low for­eign­ers to pur­chase apart­ments was passed in Jan­uary, but the rules and reg­u­la­tions ac­com­pa­ny­ing the law have not been re­leased and the leg­is­la­tion is not yet in force.

Many con­struc­tion and con­trac­tors rely on pre-sell­ing apart­ments to fund con­struc­tion of res­i­den­tial projects. But with few buy­ers to be found many firms have run into fi­nan­cial dif­fi­culty. Those that have won gov­ern­ment ten­ders for projects are strug­gling to reach the 30 per­cent com­ple­tion that typ­i­cally trig­gers an ini­tial pay­ment from the gov­ern­ment.

“We’re pro­vid­ing con­struc­tion com­pa­nies with help to com­plete their sus­pended projects,” said U Shein Win, adding that the loans were typ­i­cally be­tween K10 mil­lion and K20 mil­lion.

“For un­sold apart­ments we are work­ing to­gether with banks to sell them on in­stal­ment plans, and also help­ing com­pa­nies with gov­ern­ment ten­ders [get fund­ing] to reach the 30pc [stage],” he said

Small firms find it hard to se­cure bank loans by ap­ply­ing to lenders in­di­vid­u­ally. Col­lat­eral re­quire­ments for loans are onerous and credit as­sess­ment is dif­fi­cult be­cause of a lack of avail­able in­for­ma­tion on many firms.

“MCEA is link­ing with banks to help con­struc­tion com­pa­nies that are in need of fi­nanc­ing be­cause it is not easy to ap­ply for bank loans in­di­vid­u­ally,” said CHDB direc­tor U Tin Aung Myint.

The MCEA is not guar­an­tee­ing loans to small firms or pro­vid­ing help with col­lat­eral. The as­so­ci­a­tion is sim­ply act­ing as an in­ter­me­di­ary, co­or­di­nat­ing with com­pa­nies that are in need of fi­nan­cial help and help­ing write rec­om­men­da­tion let­ters, U Shein Win said. But this is enough to help fa­cil­i­tate loans.

In or­der to qual­ify for a loan, the con­struc­tion com­pany has to be an MCEA mem­ber, and sub­mit a let­ter to the as­so­ci­a­tion de­tail­ing the lo­ca­tion of their project and the stage of com­ple­tion, and ex­plain the spe­cific dif­fi­cul­ties they are fac­ing and how much fi­nanc­ing they need.

“It is a very good that MCEA is help­ing us like this,” said U Yan Aung, gen­eral man­ager of Asia Con­struc­tion. “If you have made an agree­ment with the land­lord but not sold enough units un­der pre-sale or if con­struc­tion has stopped be­cause of fi­nan­cial is­sues or other prob­lems then [of­ten] banks won’t lend.”

In mak­ing use of the MCEA as­sis­tance pro­gram, de­vel­op­ers still have to “make their busi­nesses [sit­u­a­tion] as clear as pos­si­ble,” he added. “You may get a loan if you have ir­refutable doc­u­men­ta­tion.”

Firms with par­tially fin­ished projects will find the pro­gram use­ful, but there are also many com­pa­nies em­broiled in court cases over un­fin­ished build­ings or projects that never broke ground, he said.

In some cases landown­ers and de­vel­op­ers have mu­tu­ally agreed to tear up con­tracts for res­i­den­tial projects be­fore work be­gins. But other projects have ground to a halt with apart­ments presold, con­trac­tors hav­ing spent money and landown­ers left with an un­us­able build­ing.

“There are a lot of court cases among con­trac­tors, land own­ers and buy­ers for un­fin­ished build­ings,” said U Yan Aung. – Trans­la­tion by Zar Zar Soe

Photo: EPA

Work­ers sit on the edge of a build­ing un­der con­struc­tion in Yan­gon.

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