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26 Apr 2012

Real Estate and Construction

Construction Business, 2012: Supported by Post-Flood Stimuli and Upcountry Work amid Rising Costs (Current Issue No. 2283 Full Ed. )

KResearch remains positive toward construction business in 2012, due largely to increased state investment projects to restore infrastructure after the devastating floods late last year. Although the number of construction projects undertaken by the private sector this year may not be as high as that seen during 2010-2011, continued growth is foreseen through to the end of 2012, as the private sector has diversified risk via building more commercial and residential projects upcountry this year. It is expected that the private sector will be able to maintain income streams from condominium projects in Bangkok, especially those clustered along mass-transit rail lines, as a result of growing demand for a second residence from mid-to-high income buyers, post-flood crisis. Given this, KResearch expects that construction business turnover in 2012 should reach THB923-934 billion, increasing 12.2-13.5 percent over 2011.

However, a number of challenges will continue to confront construction business this year, especially higher construction costs driven by wage hikes, plus other factors. As a result, developers will need to make strategic adjustments and adopt prudent liquidity management to enhance their business efficiency. Close attention should be paid to the government's post-flood procurements vis-à-vis rebuilding programs, as they will often involve numerous and time-consuming processes, which, if delayed, could alter construction business prospects in 2H12. If post-flood infrastructure rebuilding projects are excluded, it is expected that the construction business this year would decline by 0.5-3.1 percent from 2011, reaching perhaps only THB787-819 billion.

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