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Friday, January 4, 2008

Competition with new entrants

Besides rising costs, the challenge for local developers is to compete with new entrants who are likely to have considerable resources and experience, says Bandar Raya Developments CEO Datuk Jagan Sabapathy.

Bandar Raya Developments Bhd

Your outlook for the property market next year?

The outlook for the property market, specifically at the high-end, is bullish, and this can be attributed to the recent easing of rules by the Government on foreigners owning residential properties.

The abolishment of real property gains tax, active promotion of Malaysia My Second Home (MM2H) programme, attractive valuations and rental yields viz-a-viz our regional peers have led to strong interest from foreign buyers.

The prospect of a stronger ringgit that may lead to an asset reflation benefits prime residential and commercial properties. The multiplier effect from the implementation of Ninth Malaysia Plan projects, especially for the Johor and Penang property markets, also bodes well for industry players next year.

Strong gross domestic product growth, coupled with an expected increase in liquidity due to lower interest rates and stock market wealth, will positively impact purchasing power of domestic consumers.

What are some of the opportunities and challenges for industry players going forward?

Some of the key opportunities and challenges will surface from the relentless pace of globalisation. Private FDI is now predicted to expand by 10.5% next year. These factors are driving investor confidence.

International developer interest in the city is intensifying with many desirable and attractive residential and commercial projects coming up. The challenge would be for local developers who will now have to compete with these new entrants who are likely to have considerable financial, technical and marketing resources, expertise and experience.

Conversely, globalisation and the robust regional property markets also offer great opportunities for innovative developers to compete in the international arena.

Expanding their presence in the global market will spur greater earnings growth for developers and give them an opportunity to break out of their comfort zone and in the process, shore up their credibility as international property players.

BRDB has already embarked on a highly successful integrated development project in Lahore, Pakistan and is currently evaluating opportunities in the emerging economies of the Indian sub-continent, the Middle East and South-East Asia.

Which property sector and development types offer the best potential for your company?

As a market leader and one of the top developers in Malaysia, we continue not only to strive for quality to meet the increasing expectations of our purchasers, but also to invent iconic and innovative development concepts. At BRDB, we strive to create developments that are the first of their kind in the market, which differentiates us increasingly ahead of our competitors.

Again, with globalisation and the introduction of the MM2H programme, we are taking advantage of opportunities to market BRDB to foreign buyers (with about half the purchasers of our signature project, The Troika, being foreigners).

We now have a very strong footing in the high-end local residential sector, but we are also diversifying our developments into other sectors, ranging from premium offices to retail malls, as well as growing our recurring income business via leasing and asset management.

What are the challenges and prevailing issues being faced by the industry and what is the possible impact on your company?

The rising cost of oil, steel and labour will impact costs. Additionally, with so much choice available in the market, buyers are increasingly demanding the very best in product offering, quality and service standards. These will lead to rising cost of delivery, which will inevitably be passed on to the consumer.

The possible impact on BRDB:

·We have built a strong brand over the past 43 years. In that time, BRDB has demonstrated resilience and creativity in delivering quality living to our customers. We will continue to translate these innovative ideas into quality homes to stay ahead of the competition.

·This is where we need to be aware of the increasingly sophisticated demands of our purchasers. BRDB has always been committed to enhancing the quality of life of our homeowners. Careful thought and planning goes into ensuring all needs and comforts are readily available for the discerning purchaser.

What are some of the interesting property launches that can be expected from your company in coming months?

We will be launching three new developments in the Klang Valley in 2008:

CapSquare Residences II – An integrated commercial, retail and residential enclave, the second 32-storey tower features 176 units of Manhattan inspired condominiums and is expected to be launched in the second quarter of 2008.

Bangsar – This luxurious condominium development in Bukit Bandaraya is divided into eight blocks of low- and high-rise residences featuring open private lobbies with outstanding views of KL and Damansara.

Taman Duta – These condominium residences embrace a natural valley in the middle of a tropical forest. Surrounded by breathtaking views of the Kuala Lumpur City Centre and the lush greenery of Kenny Hills, this low-density development marries the beauty of the natural landscape with the luxuries of modern living.

We will also be rejuvenating our presence in Permas Jaya, Johor with a series of launches aimed at introducing an exclusive lifestyle living concept to this integrated township.

What is your expectation on project take-up rate, sales revenue and earnings for the company next year?

We expect the high-end and niche market to continue flourishing as the demand-supply situation is more favourable. BRDB has a very strong brand and unblemished track record in delivering quality homes to satisfied purchasers.

Our enthusiasm results from the fact that our launches next year are in very much sought after locations.

Based on our previous experience and current high demand for such properties, we anticipate a good take-up rate.

With the favourable market conditions, maturing projects and new launches, BRDB expects strong earnings growth next year.

By The Star - 2008 CEO OUTLOOK

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