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Crisis prompts developers to sell projects

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The residential property market in the Czech Republic is feeling the impact of the financial crisis and the resulting decrease in demand. Some developers are trying to sell entire residential projects while others are looking for strategic business partners.

“Right now we are getting offers from smaller developers that want to sell their residential projects,” said Petr Fanta, CEO at Skanska Reality.

It is not only smaller companies that are trying to get rid of their projects. Sekyra Group, one of the biggest developers in the country, is trying to sell some projects too.

“We have re-evaluated the cost-efficiency of small residential projects and have decided to sell some of them,” said Sekyra spokesman Radek Polák.

He refused to specify which projects are being sold, saying only that the projects in question belonged to Sekyra Group’s subsidiary České nemovitosti.

Orco looking for a strong partner

Orco Property Group, another real estate giant, is looking for partners for its project in Praha-Bubny. The company originally planned to invest in the development of the former railway properties alone, but the situation has changed.

“We are looking for a strategic partner to build in the north-eastern section of Bubny,” spokeswoman Petra Šedinová told Aktuálně.cz.

The reason behind the sudden change on the real estate market is a sharp decline in the demand for housing. The most recent statistics from real estate analysts show an approximately 30% drop against last year. Since the onset of the financial crisis, moreover, banks are more cautious about providing building loans.

For small companies that needed to take out loans to finance their projects the situation is critical. In order to avoid bankruptcy, they must sell their projects – often without profit – in order to pay back their loans.

Small investors getting nervous
“The declining demand, as well as the decline in building construction help explain why small investors are now so nervous,” said Václav Matyáš, president of the Association of Building Entrepreneurs.

He added, however, he does not anticipate any dramatic turns in the building sector. “It’s clear that construction output will not grow as quickly as it has up until now, but we are still counting on a 1% growth,” said Matyáš.

Transport infrastructure projects should boost construction in the Czech Republic, he said. Sekyra Group is also banking on this.

“We would like to focus our activities on transport infrastructure, and we have set up a new subsidiary, SG Infrastructure, for this purpose,” said Polák.

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