Corporate News

By Krista A. M. MontealegreSenior Reporter

SM Prime betting big on low-cost housing

Posted on April 11, 2016

SM PRIME Holdings, Inc. expects its low-cost housing business to eventually account for half of the residential business, as the property conglomerate of tycoon Henry Sy, Sr. plans to start selling units at its maiden real estate venture in China next year.

Jose Mari H. Banzon, SM Prime business unit head for primary residential, told reporters last week the integrated property developer plans to start offering this year medium-rise buildings (MRB) and house-and-lot packages with prices ranging from P800,000 to as much as P2.5 million.

“Ultimately, the target is to be half-half: half from high rise [projects] and half from MRBs and house-and-lots, in terms of launches and contribution to revenue,” Mr. Banzon said.

These projects will be gradually launched in phases, he said. The foray into economic housing will account for a tenth of the 12,000 to 15,000 units the real estate firm intends to launch this year with an estimated sales value of P36 billion to P40 billion.

“If you look at demand, [the] affordable [segment] is good. Shortage in housing is big and the biggest backlog is in the lower level,” Mr. Banzon said.

So far, SM Prime has launched two residential projects in Pasay and Tagaytay this year, with 13 to 15 more slated for roll out in new locations for the rest of the year, depending on market conditions.

“Our sales in the first quarter is significantly higher than in the same period last year. It’s still [because of] the backlog. We haven’t really come close to serving it,” Mr. Banzon said.

In China, SM Prime has started excavation work on its first residential project in Chengdu -- a seven-storey development situated beside its shopping mall.

“You cannot start selling until you have reached the ground [level]. We will start selling in the first quarter of next year,” Mr. Banzon said.

The real estate developer is scouting for properties for possible residential projects in first- and second-tier cities in China where demand continues to be strong.

“SMDC (SM Development Corp.) is aggressively looking for land in China,” Mr. Banzon said.

SM Prime is on the third year of a five-year program that entails a capital spending budget of P400 billion to beef up its businesses that will double earnings by 2018.

Without a P7.4-billion trading gain on marketable securities, net income climbed 14% year-on-year to P20.9 billion last year, slightly faster than the 13% jump to P18.39 billion in 2014.

SM Prime is part of SM Investments Corp., which has core businesses in retail, banking and real estate. The family also has interests in gaming, geothermal energy and infrastructure.

Shares in SM Prime added 30 centavos or 1.38% to close at P22 each on Friday.