Myanmar Real Estate: How to identify bankable projects? Presented by Tan Poh Teck, Executive Director

Transcription

1 Myanmar Real Estate: How to identify bankable projects? Presented by Tan Poh Teck, Executive Director

2 Agenda Brief Overview of Myanmar Property Market Key Criteria to consider when seeking bankable projects Most Frequently Asked Questions Where are the bankable opportunities Conclusion

3 Myanmar s neighbors comprise almost 40% of the World s Population Source: World Population clock Major Industrial Zones: Dawei SEZ Thilawa SEZ MMID Myotha Industrial Park & Semeikhon River Port Kyaukpyu SEZ

4 ASIAN HIGHWAY NETWORK» 142,000km (88,235mi) 32 countries Source: UN ESCA Yangon & Mandalay are located at the crossroads of major routes of the Asian Highway Network

5 YANGON & MANDALAY : NATURAL REGIONAL HUB FOR TRADING & LOGISTIC Yangon: main sea port & point of entry Mandalay: Asian Highway Hub (AH1,2,14) Trans Asian Railway Hub Riverway Kyaukpyu, Deep Sea port +China gas pipeline + railway International Airports Kyaukpyu AH1 Tamu KaLay Monywa Myingyan Magwe Prome Myitkina Bhamo MANDALAY AH1 YANGON AH1(2) Meikila Muse AH14 Lashio NAY PYI TAW AH2 Road River way Railway Airport AH3

6 REGIONAL TRANSPORTATION ANALYSIS Service Catchments International Connect China and Kyaukpyu, Yangon, further sea way to ASEAN, EU, Middle East and Africa. Trans Asian Economic Corridors: GMS Northern Economic Corridor & Asian Highway East-West Economic Corridor : a) India Mandalay-China: Connect the new important economy markets of China and India b) Fast growing border trade Myanmar-China : $4,7 billion - ( ) Myanmar-India : $1.8 billion ( ) Domestic Yangon and cities along Ayeyarwaddy River and national highway Local Mandalay Division Surrounding areas: Sagaing, Myingyan, Monywa, etc.

7 Myanmar Real Estate: How to identify bankable projects? A project is considered bankable if lenders are willing to finance it Textbook definition: bank a ble (adj) : Guaranteed to bring a profit Profit/Financial returns projects that attract the necessary funds are bankable

8 Key Criteria to consider: Location Suitable Local (development) partner Supply & Demand - Development scheme Realistic land value Development Financing Construction procurement & project management

9 Key Criteria 1: Location analysis Myanmar is a large country be familiar with key regions and states, major urban centres, townships, major roads and traditional and new commercial areas road accessibility availability of infrastructure network Very important to study the terrain; Walk the streets - be thoroughly familiar with the locations

10 Key Criteria 2: Identifying Local Partners no shortage of potential local partners varying financial strengths assess background and credibility of local partners need time and local market intelligence no 100% meeting of the minds *Important to spend time to understand local business culture, partners motives & objectives

11 Key Criteria 3: Development Scheme: Current lack of clear planning parameters (zoning, plot ratio/density control) Over ambitious development schemes (plot ratios above 10) Existing infrastructure unable to cope Owners too keen to impress with iconic projects which may not be viable *Be realistic with development proposal

12 Key Criteria 4: Land Value Market opaque No reliable/credible market data source Hearsay evidence Unrealistic expectations by owners Lack of planning guidelines *Be prepared to walk away if land values are not realistic

13 Key Criteria 5: Development Financing small local banks, low capitalisation local banking regulations still at infancy high domestic financing cost limited financing options highly cash driven economy *Strong cash flow management vital

14 Key Criteria 6: Construction procurement & project management no lack of professional architects and engineers workers relatively unskilled insufficient local construction materials, imports necessary Beware of natural geological fault line, earthquake prone in some areas relatively high construction cost in major cities (similar to Kuala Lumpur, Bangkok) *need to keep tight control on cost and project timeline

15 Most Frequently asked questions : Why are the land and property prices in Yangon & Mandalay so expensive? What are the factors that led to prices escalating to such high levels? Will it be a real estate bubble? Will the bubble burst and prices will drop in the near future? Are foreigners allow to invest in land & property? Is there a formal Strata Title Law or Condominium law in Myanmar? Is it safe to invest using Proxy or Trust arrangements? What is the process & procedure for property transactions? Is the same as in Singapore? Where should I be looking and which sector to invest in? Where are the prime & good locations and which area is suitable for investment or for setting up office?

16 Why are the land and property prices in Yangon & Mandalay so expensive? What are the factors that led to prices escalating to such high levels. 1. Only Myanmar citizens can purchase land & property. 2. Most of the land owned by the government and only leased to the citizens. 3. Typically, the government will lease the land to Myanmar citizens on a build-operate-transfer (BOT) or a renewable lease. 4. Previously, most Myanmar citizens put their money in gold, jade, precious stones & cars. 5. With the country opening up and with an arcade banking system and the absence of a stock market, most Myanmar citizens when they have cash they will invested in land, seen as the most secure investment. 6. As almost all land have been bought with cash, no gearing or loan from banks, etc., no worries about interest rates and loan repayments, hence no pressure to sell, prices remained high.

17 Are foreigners allow to invest in land & property? Is there a formal Strata Title Law or Condominium law in Myanmar? Foreign ownership scheduled in the Condominium Law: Foreigners will be able to buy up to 40 percent of apartments on the sixth floor and above in condominium buildings. Draft law specifies that condominiums must be constructed on land which is zoned for residential use and is not smaller than one acre. Smaller plots require approval from the Ministry of Construction before commencing work. The law outlines the formation of Building Management Committees to monitor the management and maintenance of condominiums. Property market experts expect the law to help stabilize skyrocketing rental and sales prices of condominium units.

18 What is the process & procedure for property transactions? Is the same as in Singapore? Property transaction settlement are all negotiated and completion normally do not exceed 2 months. 1. When buying existing property, buyer will usually pay between 5% & 10% deposit upon agreeing the price, up to 50% of the agreed amount within 2 weeks; and remaining 50% within two months to hand over the keys and close the deal. 2. When buying new property at launch (off plan), buyer has to pay a booking fee (fixed amount or up to 5% of the value), pay another 5% within 10 days, another 10% one month later, next 60% is spread over 24 months (equal instalments), final 20% upon getting the keys. 3. Rental payment are usually one year rental in advance plus up to 2 months deposit, a total of 14 months. Lease tenure is usually one year with option to renew. Some landlord will be prepared to accept quarterly advance payment subject to negotiation.

19 Where should I be looking and which sector to invest in? Where are the prime & good locations and which area is suitable for investment or for setting up office? 1. Residential. 2. Commercial Office space. 3. Hospitality Hotels & Service Residences. 4. Retail. 5. Industrial.

20 Residential Properties: 1. Landed bungalows & villas: These are detached, semi-detached, or terraced landed properties which are stand-alone, family residences, with a perimeter fencing/wall & gate. Favoured by expatriates with family for security and the luxury of a garden. Some foreign companies and diplomatic missions are known to lease these for use as offices vs the expensive office space within CBD. Rental starts at between USD3,000 & 4,000 and can cost up to USD25,000 per month depending on location, size and quality of furnishing & amenities. 2. Apartments & Condominium: Majority of residential spaces within Yangon are Condominiums, which are residential units inside a building with at least one elevator; Apartments usually what we call walk-up without an elevator. Condo units command rental of USD2,000 to USD7,000 USD per month for spaces ranging in size from approx 400sf 2,000 sf. 3. Gated Developments: These are usually located along the periphery of the city, including Pun Hlaing Estate and FMI City to the west over the Bayint Naung Bridge, and Star City to the southeast over the Yangon-Thanylin Bridge. These are high-end & luxury residences with amenities, eg., gym, spa, pool, tennis courts, golf course, F&B outlets & 24 hours security. Average rental USD2.50 psf per month.

21 Commercial Office Space: 1. Demand for office space has risen significantly since Some hotels and residential units have been converted to office space due to lack of supply of office space. As consequence, rents have been rapidly risen in the last year. Another 50% has been added in Offices Rental ranges from USD20 - USD45 psm/month in early 2013 rose to USD50 USD75 psm/month with CBD area office rental hit USD90 psm/month and beyond in mid Service Office/Business Centres became popular even though the rental is higher due to shorter term leases being offered. 4. Good quality, sole-purposed, well located offices equivalent to Grade A commercial office space attract MNCs tenants and also command the highest rents. Currently relatively scarce, eg., Sakura Tower & Centre Point Tower. 5. Most office space available are within a mixed-use building or a sole-purposed building of smaller size containing fewer facilities, less than ideal location, lacking in amenities, parking and building maintenance.

22 Hospitality Hotels & Service Residences: 1. Serviced Residences which are well maintained and managed are highly sort after running at 100% occupancy, with waiting lists. Amenities typically include a pool, gym, sauna, a restaurant, covered parking, and staffed reception area. Currently only few of such quality are available, eg., Marina Residence, Micasa Residence, & Sakura Residence. Rental for 2BR apartment was betw USD2,500 3,500 per month in 2012 will now cost USD5,000-6,000 per month and beyond. 2. Substantial increase in both tourist & business visitors in the past 12 to 18 months have resulted in the jump in occupancy rates in Yangon s hotels from an average of below 40% to betw 90% & 100%. Room rates more than doubled from below USD90 to more than USD200 per room night. Peak period rate can be more than USD300 per room night. 3. Hotels which formerly rented rooms as offices started opting to offer those rooms for nightly rentals again as leases came due for renewal. 4. International Hotel Chains with present in Yangon includes, Shangri-la Group (Shangri-la Residences & Traders), Pan Pacific (Park Royal), Orient Express Hotel (Governor Residence), General Hotel Management (Strand Hotel), & Sedona. Accor Group s Novotel, Pan Pacific and Hilton Hotel are under construction.

23 RETAIL SECTOR There are currently more than 50 shopping centers, malls, and hypermarts in Yangon. Junction Square, along Pyay Road near Hledan Junction being the premier shopping complex in Yangon. Parksons Departmental store recently open in FMI Centre in Yangon CBD. Marketplace by City Mart, a unique stand alone mall with City Mart Supermarket as anchor and a few shops & F&B outlets is becoming the new trend. There are a few other shopping mall with at least one large scale mixuse development planned or under construction which will compete with Junction Square.

24 Industrial Zones in Yangon IINDUSTRIAL ZONES IN YANGON 1. No1: South Dagon Industrial Zone 2. No2: South Dagon Industrial Zone 3. No3: South Dagon Industrial Zone 4. Dagon Seikkan 5. Dagon Myo Thit (East) Zone 6. North Okkalapa 7. Shwepoukkan 8. South Okkalapa 9. Thaketa 10. West Yangon Industrial Zone 11. South Yangon Industrial Zone 12. Hlaing Thar Yar 13. Shwe Pyi Thar 14. Mingalardone

25 MMID PROJECT LOCATION MAP Monywa 38miles Semeikhon Port Myotha Industrial Park 11 miles 28miles Sagaing Mandalay 36miles Airport 22miles Myingyan MIP + SEMEIKHON PORT

26 MYOTHA INDUSTRIAL PARK

27 SEMEIKHON RIVER PORT INITIAL PLAN

28 Prominent Areas of Yangon: Yangon consist of more than 30 townships with two strategic lakes, Inya Lake & Kandawgyi Lake. The key township and prominent areas are: Prime locations: 1. Pyay Road; 2. Areas around Inya Lake 3. Kamaryut Township - Heldan Junction Area; 4. Bahan Township - Golden Valley; 5. Areas around Kandawgyi Lake; 6. Yangon Downtown (CBD);

29 Prime Location: Pyay Road Pyay Road is one of the longest roads, most prominent and well-maintained road in Yangon. Pyay Road runs along the west of Inya Lake and heads north to the airport. Most guests arriving by way of Yangon s airport will travel south along this road into Yangon CBD. Most oil & gas sector companies are located in this area. Traffic less congested and ease staff traveling time from work to home in outlying gated communities. International Business Centre, American Embassy Residence, Shwe Hin Thar condo are located along this road. Available spaces are limited. Asking prices are high due to prominent location. Several developments are under construction and due to be completed in 2014 & 2015.

30 Prime Location: Kabar Aye Pagoda Road Road Kabar Aye Pagoda Road runs north to south along the east of Inya Lake. Service residences & hotels are located here, eg., Marina Residence, MiCasa Residence, Sedona Hotel, Inya Lake Hotel, etc.. Second most prominent road to Pyay Road, running from the airport south to downtown Yangon CBD. Available space is limited. There are several projects currently planned for this area. Most prominent is the large scale development opposite Sedona Hotel led by the Vietnamese company Hoang Anh Gia Lai scheduled for completion in Prime location with lake views and close proximity to the areas with many hotels and F&B outlets.

31 Prime Location: Kamaryut Township Heldan Junction Area; Hledan Junction in Kamaryut Township is situated just south of Inya Lake on Pyay Road. Several new developments, eg., soon to open Novotel and Yangon s premier shopping center, Junction Square are located here. A newly constructed fly-over which opened in April 2013 has helped eased the very bad north-south traffic congestion that affected this area. Buildings in this area are mostly commercial space fronting on Pyay Road and mainly mid-to-high end residential properties situated at the rear. Hledan Junction area is mostly sort after by organizations/businesses seeking to benefit from high transient foot traffic and where proximity to Yangon CBD is not a priority.

32 Prime Location: Bahan Township Golden Valley Golden Valley, Inya Road, & University Avenue in Bahan Township form the most prominent residential areas in Yangon. Situated between Inya Lake & Kandawgyi Lake, this area is where the American Embassy, the Yangon Yachting & Sailing Club, Yangon University as well as walled residences of diplomats, expats and wealthy individuals. Many large NGOs and several MNCs have their offices in large walled houses in this area. This area is considered to be Yangon s top end residential location which commands high rental. Strong competition between converting large houses to offices and retaining its luxurious homes status together with limited supply have push up asking prices in this area.

33 Prime Location: Area around Kandawgyi Lake Kandawgyi Lake is strategic lake near downtown located just north of Yangon CBD. This area helps provide some relief from the traffic congestion and parking problems that exist in Yangon CBD. Three prominent hotels, Chatrium Hotel, K Paradise Hotel, and Kandawgyi Palace Hotel are located in this area. Kandawgyi Lake is conveniently located between Yangon CBD and the prominent residential areas of Golden Valley and Inya Road. Currently only few commercials spaces are available. Union Business Centre, a nicely renovated office complex converted from a large residence was completed in August Shangri-la Towers are expected to complete in Rose Garden Hotel, a recently completed 4 stars hotel is also located in this area.

34 Prime Location: Yangon Downtown (CBD) Prime offices like Centre Point Towers, and Sakura Tower as well as the prominent business hotels Traders and Park Royal are situated in this location. Hilton Hotel is reportedly to be opening in the near future and will be located in the south Centre Point Tower. This area boasts many heritage buildings. Several of these buildings are undergoing restoration and will be developed as residences and office space. Yangon CBD is one of the most congested area in Yangon. Journey through the CBD that used to take 20 minutes may now take more than an hour. Rental prices for commercial space in Yangon CBD are the highest in Greater Yangon. There are few less expensive alternatives to the prominent business towers in this area. Inadequate parking is an issue in this location with some buildings offer limited paid parking

35 Conclusion: Condominium Law expected to be ratified by end 2013 or early Foreign ownership of condo apartments as explained earlier will be allowed. A spike in prices for condominium and mixed-use developments is expected to follow. Rental prices for residential leases unlikely to drop in the future. However the rate of increase will likely to ease towards Both residential and office rental will start to stablise towards end of 2014 and 2015 as more new units are completed and more alternatives are available. Prices will however be propped up by more foreign companies entering Myanmar. Investors will seek alternative opportunities outside of Yangon. Lifting of sanctions by the US will allow more FDI into Myanmar as well as allow investments outside of Myanmar. Overall outlook going forward remains positive as economic and political reform continues to make progress.

36 THANK YOU For enquiries please contact: Tan Poh Teck, BSc., MRICS, Executive Director, Investments & Business Development Tel: Disclaimer: Information, views, opinion and values shared in this presentation were compiled and presented in good faith and are intended for info and comparative purposes only. Suntec Real Estate Consultants Pte Ltd cannot be held liable for the accuracy of information provided nor can it be held liable for the accuracy of the information as presented. The statements and conclusions made are the opinions of Suntec Real Estate Consultants Pte Ltd and/or its representatives, and are based upon the facts or opinions as presented. Statements and conclusions presented are not intended to cause harm to individuals or companies. All facts, figures, and conclusions should be independently confirmed and audited before their use to make strategic business decisions.