“The plot is suitable and has a PUZ for 1,700 units, it's a large scale project. This kind of project should start in steps, with a couple of hundred units. My best guest is that the project won't start in 2009,” Libby Weizman, managing director of the developer, tells Business Review. “Due to the challenging economic environment and the infrastructure issue we will review commencing the project on a quarter by quarter basis.”
Construction loans are not feasible for projects in Pipera at this moment, because banks are now looking at other projects, Weizman adds. “Pipera enjoyed demand from foreign individuals, and this demand has already been met. The next wave which will be coming to Pipera is local demand, which will come after the infrastructure is addressed,” he explains.
The developer, which is six months away from delivering the 110-unit Vivando project close to Unirii Square, has so far sold 30 percent of the apartments in this project, and none of the buyers used mortgages.
Weizman, who took the helm of the company in February this year after the former co-managers had resigned, is now focused on the sales and marketing campaign for the project. “I took the sales and marketing in house the moment I came in. I increased the project's exposure; instead of one agent with exclusivity, we now work with selected agents. I am looking at the local demand, and there is local demand. I am looking at those individuals who have most of their money in cash, and there are more than 100 people in this category,” Weizman explains.
The price per sqm of apartments in Vivando is down by 10 percent, from EUR 2,200 per sqm in the previous sales session, to EUR 2,000 per sqm with more recent sales. “The previous management's intention was to increase the sale price while the construction advanced, which is something that market conditions no longer allow. There is also substantial value that can be achieved through rents. But for me it is not an option to have a substantial reduction in price,” says Weizman.
He plans to sell the remainder of the apartments in the project, but has not ruled out renting the ones that remain unsold. A combination of renting and buying the apartment afterwards, subtracting the rent from the final price, is also a possibility.
Weizman says profit margins on residential projects have not changed much due to a fall in construction prices. “But the turnover, the liquidity of a developer and the ability to sell are more important now than profit margins. […] You can work on very small margins as long as you have sound pre-sales. And you will not survive with a huge envisaged margin if you don't have pre-sales,” Weizman explains. A small margin would be ten percent, while big margins are of around 30 percent. This is still achievable on the Romanian market, he says.