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Saturday, November 5, 2011

Commercial development not a priority for MRT Co

Contrary to perception that Klang Valley's multi-billion My Rapid Transit (MRT) would have a big property angle to make the project viable, this is not likely to be the case.

MRT Co chief executive officer Datuk Azhar Abdul Hamid says that following the rail and property development model of Hong Kong's Mass Transit Railway (MTR) Corp Ltd is not feasible here as “our civil and legal system does not allow that luxury.”

MTR Corp, which is listed on the Hong Kong stock exchange with a market capitalisation of HK$145.48bil (RM58.5bil), is one of the largest property managers in the special administrative region.

In addition to its railway operations, MTR Corp is involved in the development of residential and commercial projects, property leasing and management, advertising, telecommunication services and international consultancy services.

“Given a choice, I would want to follow the Hong Kong model. But when we look at Hong Kong and Singapore, they have specific laws that allow for the development of a mass rail transit. We don't. I do not have a masterplan that existed 20 years ago which said Kuala Lumpur would have an MRT system. This is something that was put together a few years ago.”

Properties affected: Land owners in Jalan Bukit Bintang will be among those affected by tunneling works for the 9.5km underground section of the MRT Sungai Buloh-Kajang line.

Still, this does not mean that there will be no property development to help sustain the viability of the MRT.

Azhar says that in Sungai Buloh, where the MRT station will be an interchange station to Sungai Buloh KTM Komuter, there is an opportunity there to work with KTM Bhd on a commercial development.

“If there are opportunities for property developments, yes, we will do it.”

To date, MRT Co has not made an assessment of the potential for property development along the 51km MRT Sungai Buloh-Kajang line.

“Right now, the priority is to get the project off the ground.”

Under Azhar's helm, one priority is to reduce MRT project costs via minimising compulsory land acquisition as far as possible.

Besides a huge reduction in what might have amounted to between RM2bil and RM3bil in land acqusition costs, according to some estimates, this would also avoid creating resentment from affected property owners.

“This is a project for the people. Compulsory land acquisition undertaken via the Land Acquisition Act 1960 is a last resort for us.”

According to the Land Public Transport Commission (SPAD), 70% of the 51km MRT Sungai Buloh-Kajang alignment runs on road reserves and Government land while the rest is on private land.

In Azhar's opinion, holding discussions with affected property owners and tenants can be beneficial to all concerned parties.

“To me, this is an easier approach although it involves a lot more work. It is less painful.”

At the moment, Azhar is busy resolving disputes with property owners in Jalan Sultan (Chinatown), Jalan Inai and Jalan Bukit Bintang who would be affected by tunneling works for the 9.5km underground section of the MRT Sungai Buloh-Kajang line.

On Thursday, MRT Co said 16 out of 23 lot owners in Jalan Sultan (Chinatown), as well as 20 out of 21 lot owners in Jalan Inai, have signed the memorandum pledging to pursue a mutual agreement.

Not possible: Azhar says that following the rail and property development model of Hong Kong’s Mass Transit Railway Corp Ltd is not feasible here as ‘our civil and legal system does not allow that luxury.’

Lawyers representing the parties are due to meet next week to work out the conditions for mutual agreements.

Concerning Jalan Sultan (Chinatown), Azhar says, “The argument was they had been living there for decades, and there are heritage issues. So I asked my team Do we really want the land?'. I reasoned that we are just tunnelling 100ft underground. We are not going to demolish any building.”

He points out that the Government would compensate the affected parties for loss of business as well as legal fees.

“We can even work out terms for compensation for temporary accomodation and making good damages incurred during construction work for the MRT.”

Work on the MRT line in Jalan Sultan is expected to be in the second quarter of 2014, and tenants of the affected shop lots would need to move out for a period of up to six months for safety reasons.

“We must make sure that when we tunnel through, nothing happens on the top surface because they are old buildings.”

Azhar says among the items to be proposed to affected property owners is a mention on the property title that a tunnel exists below the building.

“One day, you may sell your property. So, if you are going to do anything, please refer to MRT Co because we need to protect the tunnel that's all.”

Regarding Jalan Inai, Azhar is quite optimistic of a positive outcome as a property developer that is buying some lots in the area has agreed to allow tunneling works, subject to a mutual agreement being signed.

“Here, the property developer wanted us to assist them with the authorities concerning their project. So, we told them we can bring Kuala Lumpur City Hall (DBKL) in during the discussions on the mutual agreement. DBKL is willing to work with us, and answer the property developer's queries. In turn, when the property developer undertakes the piling work for their project, we need to make sure that it does not impact the MRT tunnel.”

According to Azhar, the property developer has essentially agreed that some buildings on their lots would be demolished.

“The property developer is going to re-develop the land anyway.”

Regarding Jalan Bukit Bintang, Azhar says the area is “tight” and buildings would need to be demolished during the tunneling works.

About 21 lots in the area, believed to include two fast-food restaurants namely McDonald's and KFC, would be affected.

Azhar says MRT Co has offered two options to affected property owners in Jalan Bukit Bintang.

One option is for a joint venture with the owners of the demolished lots to re-develop the area to obtain enchanced values, while the other is to rebuild the structures as per their original condition.

“We kept engaging the owners and recently, many of them have indicated that they are agreeable in principle to our proposals. They will not lose their properties. Also, we do need some land for technical requirements such as air ventilation shafts so maybe one lot owner in Jalan Bukit Bintang might be willing to sell. We will work out these details with the property owners,” he says.

At this juncture, it is still uncertain whether affected property owners in Jalan Bukit Bintang will opt for a joint re-development project with MRT Co or ask for the structures to be rebuilt.

Azhar is prepared for more disputes concerning properties affected by the MRT line in the near future.

“This will not be the end of it. Each affected area will need different solutions.”

Meanwhile, areas and developments such as Sentul, Pusat Bandar Damansara and SP Setia Bhd's KL Eco City should see the strongest property upside potential, according to a HwangDBS Vickers Research report.

HwangDBS Vickers notes that property developers would be rushing to acquire landbank with the MRT factor, given the long conversion cycle (five to six years from land acquisition to construction completion) and rising land values.

A banked-backed property analyst notes that existing residential and commercial units located near an MRT transfer station would benefit from an upside in capital and rental values.

She also points out that new and future property developments would play the MRT factor in their launching prices, and such properties would be priced at a premium.

“As such, buyers of new properties that are located near MRT stations would probably take a number of years to reap significant returns on their investments.”

By The Star

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