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Thursday, March 17, 2011

Hilton hotel to 'crown' RM1.5b Puchong project

The fast-growing district of Puchong in Selangor will welcome a Hilton hotel in 2013, which is part of a RM1.5 billion mixed-development project named Millenia City.

The project, located on a 40.5-hectare site, is being developed by privately-held Millenium Land Sdn Bhd, which shares similar directors as Tanco Bhd.

The group yesterday signed an agreement with international hotel chain, Hilton Worldwide, to manage Hilton Garden Inn Hotel that will target the mid-market business and leisure travellers.

Millennia City, which is set to be the commercial heartbeat of Puchong, will comprise M Square, a 380,000 sq ft self-enclosed six-storey shopping mall that is linked to the 255-room Hilton Garden Inn and a 2.1 million sq ft Street Mall comprising 13 blocks of six-storey retail and office units.

The development will start by the third quarter this year and is targeted for completion by 2013. The company also plans to build high-rise apartment, targeting the high income group.

"From our research, we found that Puchong is currently one of the fastest growing districts in Malaysia in terms of growth especially in three key area - population, monthly household income and commercialisation," said executive director Benjamin Tan in Kuala Lumpur.

Also present at the signing ceremony were tourism minister Datuk Seri Ng Yen Yen and Hilton Worldwide senior vice president Middle East and Asia Pacific Andrew Clough.

The primary catchment in Puchong reaches an estimated 420,000 people while its secondary catchment area, some 10 minutes away, reaches some 1.2 million people.

"As such, we believe that the development of Millennia City will be a highly significant project as we foresee it to be a major cornerstone of a modern, trendy and touristy Puchong," said Tan.

By Business Times

Supply of affordable homes in the Klang Valley is scarce

The one area that is often neglected when it comes to affordable housing is supply. Yes, loans are plentiful and there is now a scheme called My First Home Scheme launched where eligible Malaysians would be able to get a full loan for homes costing between RM100,000 and RM220,000.

The problem is that fresh supply of affordable homes in the Klang Valley is scarce and with the median age of Malaysians now just over 24 years of age, it's the time when they will start to wonder about where and how to buy their new house.

The problem is that it might no longer be profitable for property companies to develop huge tracts of land into a township of affordable housing.

The issue is that for property projects in excess of 10 acres in size, developers have to provide low- to medium-cost housing at a ratio of 1:1, meaning that for every expensive house they build they must provide one unit of affordable or low-cost housing up to a maximum price of RM100,000.

As building and land costs rise, developers will be hard pressed to make a profit, if they can, on such affordable homes. Often it's done at a loss and to compensate for that, prices of houses they would sell to the market need to be bumped up or developers build a smaller number of homes in new projects to maximise profits.

Developers building on land less than 10 acres don't have to provide low-cost homes, a loophole that has been thoroughly exploited for maximum profits among developers seeking to build high-rise super expensive apartments and condominiums.

One suggestion that has been raised is that the 1:1 rule be exempt for developers who aim to build affordable homes. In this I mean not only low-cost homes but those in the RM250,000 to RM300,000 price range. That way a developer will be enticed to build homes for the middle-income family and be able to get a decent return.

The Government, or through appointed contractors, needs to get directly involved in providing the supply of such homes. One way is to utilise idle government land to build affordable homes for the middle class and lower income group.

For optimum effect, one way is to align the upcoming mass rapid transit (MRT) lines to areas where such new townships of affordable homes could be built, somewhat replicating the HDB model in Singapore.

By building mass housing schemes serviced by a MRT station nearby, it will solve a number of issues. For one, the availability of a MRT line and a feeder bus service near a purpose-built mass housing scheme would reduce the dependence on private transportation needs in the Klang Valley, whereby giving such new homeowners the luxury of keeping their vehicles at home when they go to work.

The supply of affordable home for the lower income and middle class families need to be addressed and soon, as a prolonged ambivalence towards the issue would make that group of people feel more disenfranchised over house ownership in the country.

Failing which, the situation, if left to market forces, may not be resolved.

Deputy news editor Jagdev Singh Sidhu is saddened by the events taking place in Japan and is amazed by the attitude and behaviour of the people there in times of adversity.

By The Star

A boon for smaller developers

PETALING JAYA: The recently announced “My First Home Scheme” is set to mostly benefit smaller property developers outside the Klang Valley that offer affordable houses priced between RM100,000 and RM250,000, said property analysts.

Among the listed property developers that offer or have plans to build such properties are YNH Property Bhd and Hua Yang Bhd.

On March 8, Prime Minister Datuk Seri Najib Razak launched the scheme under which Malaysians earning RM3,000 or less can acquire houses costing from RM100,000 to RM220,000 with 100% financing from 25 financial institutions and a loan repayment period of up to 30 years.

Ho Wen Yan, Hua Yang’s CEO, is optimistic the scheme will benefit his company as its business is focused on lower- to mid-range properties.

“We are focused on building properties in the price range of RM90,000 to RM400,000, which are mainly in Johor and Perak,” Ho tells The Edge Financial Daily.

He notes that it is very hard to offer a decent property within that price range in the Klang Valley, as land prices are high.

His view is supported by Tan Kam Meng, a property analyst with TA Securities.

“You cannot get those kind of properties (at affordable prices) in the Klang Valley. Thus, it will benefit property developers which have projects in places outside the Klang Valley, such as in Perak and Melaka,” he explains.

According to Tan, Hua Yang will benefit from the scheme as the contribution of affordable properties to the company’s bottom line is generally more than 50%.

Meanwhile, Daniel Chan, YNH’s general manager of corporate affairs, said the scheme would provide more incentives to the prospective buyers of YNH’s Manjung Point Township development in Seri Manjung, Perak. “It will appeal to those serving at the naval base,” he tells The Edge Financial Daily.

“Most of YNH’s single-storey link house developments in Manjung Township cost an average of RM150,000, and the double-storey link houses cost an average of RM200,000, which fall within the price range of the My First Home Scheme,” he said.

Chan said that, with the introduction of the scheme, its Manjung Township would see an increase in interest among prospective buyers. He added that the Manjung area’s appeal had also been boosted by a RM15 billion investment from mining giant Vale (SA) International Ltd for its iron-ore pelletising plant in Teluk Rubiah and Tenaga Nasional Bhd’s RM6 billion investment in the TNB Janamanjung expansion.

“The affordable properties in Manjung Township contribute almost RM30 million out of a gross development value of RM75 million, to the company’s revenue,” said Chan, elaborating on the contribution of the development to the company’s income stream.

“For this year and next, the contribution of Manjung Township to the company’s revenue will increase as we managed to get Jusco to set up a regional mall and the Pantai Healthcare group to set up its hospital there,” he said.

YNH is one of the largest land owners in the Manjung area, with some 1,000 acres.

Another property company that has some properties within the RM100,000 to RM220,000 price range is LBS Bina Bhd, which offers attractively priced homes at its flagship Bandar Saujana Putra township located between Subang Jaya and the Kuala Lumpur International Airport.

The 820-acre project was launched in 2003 and featured attractive prices for landed homes. The prices of subsequent launches have risen due to the housing boom, a scarcity of land in the Klang Valley and improved accessibility after the opening of an interchange to the Elite highway.

However, the company, one of the Klang Valley’s largest builders of affordable homes, is moving up-market.

According to the company’s representative, although LBS is moving towards developing more medium-high-end to high-end properties, it will continue to develop medium-cost houses. He said this is in line with the government’s “Home For Everyone” objective, and is also one of the ways for LBS to fulfil its social responsibilities.

Even though the demand for affordable homes is expected to increase with the announcement of the new scheme, the impact on LBS’ financials may not be significant. The company estimates medium-cost houses will comprise only about 14% of LBS’ total GDV for planned launches this year.

While the “My First Home Scheme” will be welcomed by lower-income earners, banks — wary of a property bubble — have started to reduce their margin of financing for homes or are using more stringent internal valuation guidelines.

There are also other points to ponder.

“While it seems to be a successful campaign, the impact won’t be as much as desired,” an analyst told The Edge Financial Daily, He said that this is because there are still some things that have to be sorted out, especially with the banks which are the financiers.

“Theoretically, it will benefit property companies, as demand for affordable houses will increase. But, practically, it will not be so successful as banks have their own threshold for assessing risks,” he said.

The analyst added that there might not be an increase in the take-up rate among potential buyers earning less than RM3,000 a month.

As a guideline, banks generally allow monthly loan payments to come up to one-third of an applicant’s monthly salary.

If the applicant has other hire purchase or credit card loans to service, he or she still may not be able to afford a house, making the scheme less relevant.

“The government should raise the income threshold to include those earning below RM5,000 per month, especially for those working and living in the Klang Valley”, he said.

According to the Real Estate and Housing Developers Association (Rehda), between RM100,000 and RM220,000, one could own a terraced house in Rawang, Selangor; Kulai and Segamat in Johor; Seremban, Negri Sembilan; Bukit Katil, Melaka and Pengkalan, Perak. For between RM201,000 and RM350,000, buyers could get a terraced housein Klang, Sungai Buloh, Semenyih and Rawang in Selangor; Skudai and Johor Baru in Johor; Cheng, Melaka ; Ipoh, Perak, and Kuantan, Pahang.

The analyst’s view was echoed by Datuk Fateh Iskandar Mohamed Mansor, managing director and CEO of Glomac Bhd.

He told The Edge Financial Daily that the “My First Home Scheme” is a good one. “However, for it to be across the board is unfavourable. This is because it is really hard to find properties below RM220,000 in the big cities, especially for landed properties,” he said.

“The government should raise the threshold to include properties in the range of RM300,000 to RM350,000, and also increase the minimum income requirement to RM5,000 a month as, nowadays, a lot of young couples earn take-home income in that range [RM4,000 to RM5,000]. Thus, it will benefit more people and also more developers,” said Fateh Iskandar,

He said that, even for Glomac’s projects in Sungai Buloh and Rawang, which are considered as cheaper areas in the Klang Valley, prices start from RM300,000.

“It is very hard to find a house for below RM220,000 in the Greater KL area, especially in Kuala Lumpur, Petaling Jaya, Subang Jaya and Damansara,” said Fateh Iskandar. He also said that affordable prices varied in different areas, and the scheme would only be reasonable for properties outside the city centres.

“What is considered affordable in Petaling Jaya may not be affordable to people in Ipoh or Seremban,” he said.

When asked whether bigger property developers will change their strategy (from middle- and high-end projects to lower-end projects), he said that it is very unlikely, as once a fixed cost is incurred, the developer cannot change its game mid-way.

“When you have already incurred a fixed cost such as the purchase of land, you cannot backtrack and change the plan as the cost to acquire land, especially in the Greater KL area, is very high,” he says.

In his capacity as the deputy president of Rehda, Fateh Iskandar suggested that the government should remove the requirement for private developers to allocate 30% of houses as low-cost units (for property projects exceeding five acres).

This is because of concerns that developers are losing their profit margins by building low-cost houses and are cross-subsidising the low-cost units with higher prices for the medium- and high-end houses.

Rehda believes that the country has moved on substantially socially and economically, and that the responsibility of building low-cost homes can be fully taken up by the government.

“Even in China, the government is building almost 10 million low-cost homes to cater to the low-income group,” Fateh Iskandar explained, saying that the Malaysian government should also do the same through the Projek Perumahan Rakyat (PPR) housing scheme.

“By taking away the responsibility of building low-cost houses from private developers, we could work towards building more affordable houses which are priced lower than RM220,000,” he said.

This article appeared in The Edge Financial Daily, March 17, 2011.

By The EDGE Malaysia (by Kamarul Azhar)

S P Setia 1Q net profit up 62% to RM62m

KUALA LUMPUR: S P Setia Bhd's net profit for the first quarter ended Jan 31, 2011 jumped 62% to 62.04 million from RM38.19 million a year ago, on the back of a 43% increase in revenue to RM518.88 million, due mainly from its property development activities in the Klang Valley, Johor Bahru and Penang.

It said on Thursday, March 17 earnings per share were 6.10 sen while net assets per share was RM2.22. The net profit for the period was arrived at after expensing about RM6 million for employee share options launched in May 2009.

S P Setia said the ongoing projects which contributed to the results included Setia Alam and Setia Eco-Park at Shah Alam, Setia Walk at Pusat Bandar Puchong, Setia Sky Residences at Jalan Tun Razak, Bukit Indah, Setia Indah, Setia Tropika and Setia Eco Gardens in Johor Bahru, Setia Pearl Island and Setia Vista in Penang.

Apart from property development, the group’s construction and wood-based manufacturing activities also contributed to the earnings achieved, it said.

S P Setia said its sales for the first quarter of FY2011 totalled RM737 million and were its highest ever sales recorded in a single quarter.

“As at Feb 28, 2011, the group’s sales for the first four months of the financial year totalled RM953 million – another new record and a 25% increase from the corresponding period last year. The group is therefore well on-target to achieve and deliver its FY2011 sales target of RM3 billion,” it said.

On its prospects, the company said the KL EcoCity project (KLEC), with an estimated gross development value of RM6 billion, when launched later this year was expected to further contribute to its strong sales.

“Management is confident that the meticulous planning and preparatory steps taken so far will enable KLEC to fulfil its potential as a showcase development and act as a key catalyst that will transform and enable the group to sustain sales at a high level,” it said.

The company said it would also focus on finalising terms with the government for the land-swap deal involving the exchange of 40.22 acres of land in Bangsar for a modern new integrated health and research complex to be located on 55.33 acres of land in the Group’s flagship Setia Alam development.

S P Setia said that barring unforeseen external shocks, it was optimistic that its prospects remained positive in FY2011.

By The EDGE Malaysia