Condo buyers struggle with hire-purchase payment

Developers of residential projects in Yangon have found themselves with less cash than expected, as buyers fail to stick to the terms of hire-purchase plans and do not make regular payments.

An underdeveloped banking system means real estate developers tend to fund their projects through off-plan sales. Myanmar has no mortgage system and as some buyers cannot pay the entire value of an apartment upfront, many companies offer hire-purchase schemes that allow payment in instalments.

Yet a number of developers have struggled to convince buyers to pay up, and have instead had to strike alternative deals that suit both sides, said U Kyaw Kyaw Soe, associate secretary of the Myanmar Construction Entrepreneurs Association.

“In spite of the hire-purchase agreements, some buyers face many difficulties keeping up with their payments. They cannot afford to pay developers, though they have signed for apartments. If one industry fails, everything will come to a halt, and so we have to negotiate,” he said.

“We’re facing a severe lack of demand. If companies try to enforce the contracts, they will get a bad name, so they are trying to find appropriate and convenient ways to extend the payment period or help buyers to access bank funding.”

Despite the possibility of positive changes made by the new administration, he believes the market will continue to face problems during the Thingyan holiday and the rainy season.

“Even if nothing much changes immediately [after the new government takes power] I think the market will improve from October once the rainy season ends,” he said.

Buyers have been few and far between during the transition period to the new government, he said, despite developers’ best efforts.

Many companies have tried offering promotions and launching new hire-purchase programs, holding exhibitions and dramatically slashing prices, but nothing seems to have worked, he said.

Ko Zay Thiha, managing director of Zaykabar Company, said developers are loath to involve banks in the process.

“There are many difficulties in the banking system, and it’s dangerous to involve banks. We need to wait and see what the new government will do, but I hope the market improves,” he said.

U Pe Myint, consultant to CB Bank, said lenders have not received many requests from construction companies or developers, asking them to help buyers honour their hire-purchase plans.

 

Source: Myanmar Times

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