Yangon will need around 75,000 new apartments to be built each year to accommodate the city’s growing population, but contractors are struggling to come anywhere close to this target.
More than 330,000 people migrate to Yangon each year from elsewhere in the country, but formidable challenges remain to building enough accommodation to keep up with the pace of urbanisation, U Kyaw Kyaw Soe, associate secretary from The Myanmar Construction Entrepreneurs Association (MCEA) told The Myanmar Times.
Yangon city has a population of 5.14 million, which increases by 6.6 percent each year, according to MCEA estimates.
Just over 70pc of migrants to Yangon are from other towns in Myanmar and the remainder are from rural areas, said U Kyaw Kyaw Soe.
“It is really difficult to find 75,000 apartments when the real estate market is in such a bad condition.”
More people are moving to the city every year, he said. Many have to build makeshift homes because there are not enough apartments to go around.
The problem can only be solved by a decision from the Union government, he said.
“It would be appropriate to set up a system whereby people can buy apartments in installments.”
Many contractors are strapped for cash, after off-plan sales of condominium units slowed this year, following a three-year boom, leaving many with unfinished projects.
There are few incentives for developers to invest in low-cost housing projects – the return is much lower than for luxury apartments, and the cost of land remains untenably high, said U Kyaw Kyaw Soe.
According to MCEA estimates a 450 square foot affordable apartment unit costs around K10 million (US$7770) to build.
“We need land. If you look at the increasing population, low-cost housing is urgently needed. There are enough apartments in Yangon for rich people and those with a medium income,” said U Aung Myint, deputy chairman of Myanmar Engineers Association.
“If contractors have to buy the land and invest in the project, the end price for the buyer will be too high. If the government reserves land for low-cost projects, it will make a big difference.”
The Ministry of Construction has commissioned several low-cost housing projects in Yangon including Ayeyarwun and Yadanar Housing in Dagon Seikkan township.
The Yangon City Development Committee also has projects including Bo Ba Htoo and Bo Min Yaung housing, but many more are needed. Apartments at these projects are in high demand, and prices have risen well beyond K10 million.
The government wants to find a solution, said Daw Moe Thida, deputy director at the Department of Urban and Housing Development.
“Around 58pc of the population earns less than K300,000 per month and can’t afford existing housing. The system is unable to provide for these requirements,” she said, during a panel at the fourth Euromoney Myanmar Global Investment Forum in Nay Pyi Taw last month.
“We need a strategy to cooperate with private sector developers, and to invite more investment from local and foreign companies,” she said.
“The government can allocate land. We don’t just want to offer more and more support to the rich.”
Investors on the panel agreed the government has a massive role to play in affordable housing. This is particularly true for Myanmar, where urbanisation is likely to gather speed, said Lorenzo Nogales Tovey, co-founder of Golden Rock Capital.
“Something’s got to give,” he said. “The space for the government to lay down a framework for the private sector to take charge is wide open in Myanmar now.”
Cyrus Pun, head of real estate at Yoma Strategic said that investor incentives are urgently needed.
“It’s a problem we can’t wait a generation to solve – by that time the urban sprawl will be completely unacceptable,” he said. “We need to solve the problem right now.”
A coherent strategy with clear steps is essential, he said. “At the end of the day if you want the private sector to be engaged, you’ve got to create economic incentives.”
The government’s commercial mindset also needs to change. “For low-cost housing the government has to realise the profit element is out,” he said.
Access to finance is very important, he added. “These projects have to be large scale to be cost efficient; many single developers would not be able to bear the huge financial burden.”
Foreign capital may be willing to step in, but foreign banks are restricted from holding immovable property. “The new Foreign Investment Law will provide more clarity on taking land as security,” he said.
“Today this is not possible – but foreign banks can work with the local banks by providing most of the capital and asking the local bank to act as a custodian. This is gradually starting to happen.”
Source: Myanmar Times