Posted by ks55 > 2018-10-11 22:34 | Report Abuse

Can someone enlighten us how does a housing developer determine selling price of :
1. Condo
2. Terrace house
3. Low cost flat/ PR1MA

I am no expert in housing, but try to figure out composition of each component:

1. Terrace house (say 100k)
1.1 Cost of house sold (60k)
1.2 Contribution to School reserve, Field and playgroud, Police Station, Bomba, Road reserve etc (6k) -- Assuming conversion rate 65%
1.3 Contribution to Bumi Quota with 7% discount, Low cost housing and PR1MA (6k)
1.4 Road, drainage, street light and other infra (3k)
1.5 Sales and marketing (3k)

Gross Profit is 100k - 60k -6k -6k -3k -3k = 22k
So, if you sell a million dollar house, gross profit is 220k

Of course, you will have to give more discount under present weak market sentiment.
Some developers give up to 15% or more (Understood MK Land gives up to 20% discount).
Then you will just have 7% gross profit.
What about interest expenses during construction period?
What about interest expenses after houses already completed but not yet sold?
What about HQ expenses?

Surely looking at the numbers, most developers will be losing money, unless the land cost is low.

How to make sure houses selling cheap, and developers still make decent profit?
Only way is to removed items stated in para 1.3, that will save up to 6%.


For Condo and high-rise apartment, land cost component normally take up around 15%.
Only problem is the developers tend to overpay for the land.
So they will have to build 30 or 40 storey high-rise.
That will take them 4 years to build before they can deliver VP to buyers.
In between, if sales not good, they will receive less progress payment, and paying 4 years bank interest is enough to kill fly-by-night developers like Jaks Resources.
Many such developers will prefer to abandon the project like Plaza Rakyat, for they could not afford to pay LAD.

As how to reduce selling price for the high-rise, better leave it to the authority to work it out.
If the authority concerned is so dumb, learn the trick from S'pore HDB......