DBSS project net margins are 15-18%: Hoi Hup Sunway

[mr funny]

http://www.businesstimes.com.sg/sub/news/story/0,4574,445783-1309636740,00.html?

Published July 2, 2011

DBSS project net margins are 15-18%: Hoi Hup Sunway


HOI Hup Sunway - a consortium comprising Hoi Hup Group and Sunway Group which developed two design, build and sell scheme (DBSS) public housing projects, City View @ Boon Keng and The Peak @ Toa Payoh - says its net profit margin for such projects range from 15-18 per cent.

Focusing only on gross profit margins does not paint an accurate picture of the profitability of DBSS projects, the consortium said in a press statement yesterday.

It was responding to a story in The Business Times on Thursday, which calculated developers' profits from DBSS projects.

'Gross profit margins do not take into account essential costs incurred by us,' Hoi Hup Sunway said.

'They include differential premium, financing costs, stamp duty, GST and marketing expenses. Such essential costs for DBSS projects form a very significant chunk of total costs as compared with that for private mass market condominium projects, and therefore exert a large negative impact on profitability.'

The consortium also said that, as a developer, it was exposed to a whole host of business risks over a fairly long period of about four years: 'During this period, property prices do not always go up and bank interest rates do not always stay down.'

It added that it hoped its statement would provide a more balanced view of the true costs and profitability of DBSS projects.

[mr funny]

http://www.straitstimes.com/PrimeNews/Story/STIStory_686358.html

Jul 2, 2011

DBSS profit margin: Developers clarify report

By Yasmine Yahya


THREE property firms have issued clarifications on a media report claiming that Design, Build and Sell Scheme (DBSS) projects yield 'high' gross profit margins for the developer.

The article, which appeared in the Business Times on Thursday, claimed that DBSS developers stand to reap gross profit margins of up to 76 per cent. Five out of a sample of seven DBSS projects yielded a gross profit margin of at least 28 per cent.

The Business Times had compiled these figures by analysing the revenue, land price, maximum gross floor area and estimated construction cost for each project.

However, Sim Lian had bought the land for its Centrale 8 project for $178.1 million, and not $82.2 million as reported. The maximum gross floor area was 682,384.9 sq ft instead of 721,188 sq ft. Based on these figures, the gross return would be 26.5 per cent instead of 75.8 per cent as reported, Sim Lian told the Singapore Exchange on Thursday.

A Ministry of National Development statement late last night said that even the reduced estimate was wrong as the article had failed to take into account key cost components such as financing, marketing and administrative costs.

'These are significant costs and when included, would have further lowered the profit margin for all the DBSS projects listed in the article.'

MND added: 'It is unacceptable that BT had not exercised due diligence and professional journalism, which resulted in an erroneous and highly misleading report.'

Developers Hoi Hup Group and Sunway Group yesterday said that by focusing only on gross profit margins, the report did not paint an accurate picture of the profitability of DBSS projects developed by the Hoi Hup Sunway consortium.

The two firms have collaborated on two DBSS projects, City View @ Boon Keng and The Peak @ Toa Payoh.

The BT article estimated that Hoi Hup Sunway could have earned a gross profit margin of 57.4 per cent from The Peak, and 33.3 per cent from City View.

'Gross profit margins do not take into account essential costs incurred by us. They include differential premium, financing costs, stamp duty, GST and marketing expenses,' the developers said.

'Such essential costs for DBSS projects form a very significant chunk of total costs as compared with that for private mass market condominium projects, and therefore exert a large negative impact on profitability.'

The profitability of their projects should thus be measured by their net profit margins, the firms added, which range from 15 per cent to 18 per cent.

'As a developer, we are also exposed to a whole host of business risks over a fairly long period of about four years. During this period, property prices do not always go up and bank interest rates do not always stay down.'

[iwantgizmos]

Honestly, I won't undertake DBSS projects if I am a developer...
15-18% profit isn't a great deal given the years of effort taken for development...

[kingkong1984]

Honestly, I won't undertake DBSS projects if I am a developer...
15-18% profit isn't a great deal given the years of effort taken for development...
Unless u take a cut from construction. They have straits construction right? Here 15-18% there 30-50% will make it really worthwhile.