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Sunday, September 13, 2009

Vietnam projects set to take off

An artist’s impression of Gamuda Land’s Yen So Park project in Hanoi.

Malaysian developers with property projects overseas, especially in Vietnam, are getting ready to proceed with their project launches after an almost year-long delay brought on by the global financial crisis.

Vietnam has attracted one of the largest Malaysian participation. Local developers with projects there include SP Setia Bhd, Gamuda Land Sdn Bhd and Berjaya Land Bhd.

Tan Sri Liew Kee Sin … ‘The fundamentals of the supplydemand dynamics for Vietnam’s property market remain intact.’

According to SP Setia Bhd president and chief executive officer Tan Sri Liew Kee Sin, the market is seeing a rebound in terms of property demand as sentiments improve and the Vietnamese begin switching out of more conservative asset classes like gold.

“The macroeconomic environment also seems to be more supportive of this, with inflation falling to a seven-year low of 2% and with positive impact on financing rates, although most property buyers in Vietnam do not require bank financing. Limited launches by property developers during the crisis has also helped in terms of limiting supply – resulting in a more favourable supply-demand scenario,” Liew tells StarBizWeek.

Despite the global crisis, he says the fundamentals of the supply-demand dynamics for Vietnam’s property market remain intact.

“Supply of well-planned dwellings are on the low side. On the other hand, the well-known and much spoken about demographics reality of a 86 million strong population with a high youthful proportion will ensure a healthy demand side.

“This is against a backdrop of rising incomes of a generally hardworking and homogenous populace.

Post-crisis, going by our own project and other launches, demand is encouraging. It is interesting to note that even second-home vacation dwellings launched in the last quarter were very well taken-up. This shows the kind of appetite that still prevails in Vietnam,” he adds.

Houses priced below US$100,000 are still in high demand as 70% of the population are below 35 years old and have yet to own a home.

Liew says Vietnam continues to have a shortage of well-planned retail space and strategically located projects of decent size.

“Where applicable, we will have such retail-space offerings in our projects. Both EcoLakes and EcoXanh will offer such retail components,” he notes.

Liew says although the global financial crisis has somewhat delayed the company’s regional expansion plans in Vietnam, “the response to EcoLakes’ first launch has been very encouraging in current market conditions and we hope to ride on the back of the strong sales momentum to resume our projects there.”

Phase 1, called the Garden of Splendor, comprised 257 terraced houses while phase two will have 58 semi-detached houses and villas.

Its first two phases, comprising 257 terraced houses in phase one and 58 semi-detached houses and villas in phase two, have received encouraging response, with 95% and 60% interest respectively. Construction of Phase 1 has already begun and is expected to be completed by the end of next year.

Meanwhile, Berjaya Land Bhd says it has received investment licences for four of its six projects in Vietnam.

Senior general manager for properties and marketing, Mah Siew Wan, says the company is targeting to launch its Bien Hoa project in Ho Chi Minh later next month and Thach Banh New City project in Hanoi by the year end.

Gamuda Land Sdn Bhd managing director Chow Chee Wah says the launch of the residential component of the company’s Yen So Park project on 500 hectares in Hanoi is targeted for the first quarter next year.

The project involves the development of a sewage treatment plant, transformation of an existing park into an international thematic park, and integrated commercial and residential developments. It has an estimated gross development value of RM8bil over a 10-year period.

“Our design, technical and construction works are on schedule. The development of the sewage treatment plant and upgrading works of the park is smoothly moving on. We will be launching our township parcels (links and apartments) in early 2010. By then, we will be in the right time as the economy improves,” Chow says.

He sees a great potential in Vietnam because of its largely untapped property market.

“Vietnam has a population of over 186 million people (this is three times of Malaysia’s population), and it is the 13th most populated country in the world. Of this, more than 30% of the nation’s population is concentrated in Hanoi and Ho Chi Minh.

“The Vietnamese are rapidly upgrading their lifestyle and standards of living. The demand for nice housing surpasses the present supply. Hence, there is a ready market for us to draw on and it is an excellent chance for us to introduce resort lifestyle living which Gamuda Land is renowned for,” he says.

By The Star (by Angie Ng)

Asean’s largest wholesale complex taking shape

An artist’s impression of GM Klang Wholesale City

After gaining the recognition from Malaysian Book of Records in 2007 for developing Chow Kit’s largest wholesale plaza called Plaza GM, TSI Group Malaysia is now developing the largest wholesale city in Malaysia and Asean.

Located in Klang, GM Klang Wholesale City as it is known, will house more than 2,000 units of wholesale shops for traders, retailers distributors, agents and manufacturers of various type of goods and products, once fully completed in eight to ten years time

Group managing director Lim Seng Kok says development for the project with gross development value (GDV) of about RM2bil is ongoing with the first phase of the project scheduled for opening in October.

“Build on 5ha of commercial land in Bandar Botanic, the project is divided into four phases and when completed will boast more than 1.5 million sq ft of total built up,” he tells StarBizWeek recently.

The company, he says, bought the land about 13 months ago and since then has started to develop the first phase of the project. It will launch the second phase by the middle of next year.

“The location is strategic as it is accessible from major highways and thoroughfares including air and sea. We are not just targeting the local business people but also those from all around this region including India and Pakistan,” he says.

He adds that the company has sent a team to study various marketing strategies on the wholesale business in Thailand, Indonesia, Dubai and China. “We have also sent our marketing team to market and promote this project to the Asean region,” he says.

Lim says GM Klang Wholesale City will contribute positively to the country’s economic development, providing micro and macro economic opportunities for all.

“It will also improve and strengthen regional ties, inter-relations and international trade, enhancing business to business tourism and also stimulate more retail/trading for business people,” he says, adding that the city will eventually provide more than 8,000 job opportunities.

“Another thing on this project, we want to help the young graduates such as interested bumiputra entrepreneurs to set up their business here. We will offer them a competitive rate to start their business,” he says.

When ask how will GM Klang Wholesale City with the upcoming wholesale city called Kenanga Wholesale City in Kuala Lumpur, Lim says the latter focuses more on garments and fashion products while the former offers a more diverse product range.

“Our plan is to also emphasise on other products such as timepiece, spectacles, souvenir, electrical and electronics goods, IT related products, hand phone, hardware and many more,” he says.

For the record, a new 22-storey Kenanga Wholesale City is currently being developed at Jalan Kenanga, off Jalan Loke Yew.

Scheduled for completion by end 2010, the project sits on a 1.28ha site and has a GDV of RM800mil.

He says phase 1 of GM Klang Wholesale City will offer 259 units of wholesale shops with sizes ranging from 290 sq ft to 582 sq ft. All units are for lease purposes.

TSI Group plans to keep most units at phase 2, 3, and 4 as it wants to develop six distinctive pavilions for the purpose of segmenting and categorising the products for the convenience of retailers and traders when sourcing for their goods, Lim says.

He adds that GM Klang Wholesale City will be fully air-conditioned. It will have three dedicated loading and unloading areas for fast and easy transit of goods.

“Since the complex will eventually have more than 3,000 car parking bays, we will deploy security guards to facilitate the traffic in the area,” he says.

TSI Group is also focusing on another project in Kepong called First Residence. Comprising two levels of shops and 474 units of condominium in two towers, scheduled for completion by the middle of 2011.

“For upcoming development, we plan to launch a mixed residential development in Puchong comprising 520 units of condominium and 12 units of conventional shops by early next year. The project is estimated at RM130mil in GDV,” he says.

By The Star (by Edy Sarif)

Penang Challenges

The island sees new hope amid the global recession

George Town was declared a heritage city by UNESCO World Heritage List.

The liberalisation of the Penang property market to counter the challenges of the global recession has given the market new drive and inspiration.

Stimulus packages, low interest regimes, special financing packages and the recent revision of the plot ratio guidelines by the state government were some of the measures to keep interest high among both consumers and developers when the island’s property market went into a slowdown for the first quarter of this year.

StarBizWeek chief reporter David Tan meets up with property players at The Star Property Fair 2009 roundtable discussion to gauge the impact of these measures and takes a peek at the island’s future property market.

The panellists are state executive councillor Chow Kon Yeow, Ministry of Finance’s valuation and property services department director Lau Wai Seang, Real Estate Housing and Developers’ Association (Rehda) Penang chairman Datuk Jerry Chan, Eupe Corp Bhd managing director Beh Huck Lee, SP Setia Bhd general manager (North) S. Rajoo, IJM Land Bhd managing director Datuk Soam Heng Choon, Henry Butcher (Malaysia) Penang director Dr Teoh Poh Huat, Socio-Economic & Environmental Research Institute (SERI) research fellow Dr Goh Ban Lee, and Blossom Time director Kan Weng Hin.

The following are excerpts of the roundtable discussion:

StarBizWeek: Has the liberalisation of property investment guidelines for foreigners increase properties sales?

(For example, the acquisition of residential/commercial units valued respectively at RM250,000 and above and RM500,000 and above that do not require permission from the federal government. The said minimum threshold will be increased to RM500,000 beginning Jan 1, 2010.)

Datuk Soam Heng Choon: Buyers under Malaysia My Second Home (MM2H) programme are buying properties RM500,000 and below. The other thing to note is the vast price differences even within the state. For example, prices on the island and in Seberang Prai.

We are also seeing this in Selangor, where prices have already moved up; RM500,000 is considered low in Petaling Jaya, but high in Kuala Selangor. (Both these locations are in the state of Selangor)

In recent sales of property in Penang, we hardly hear of foreigners buying. Foreign money may be coming in but these are all Penangites who are working in Singapore or Hong Kong.

Chow Kon Yeow: Are they going for new units or re-sale units, those from the secondary market?

Dr Teoh Poh Huat: The total number of successful MM2H applicants since the programme started in 2002 is about 12,000. We do not know how many of them live in Malaysia because there is no necessity for them to actually stay here. Of these, 500 bought properties, with the majority of them buying from the secondary market. Those who bought to invest is small.

The conditions for the MM2H can be improved. The demand is for strata-titled properties, landed and high-rise projects, in gated communities. The price of these strata-titled properties range between RM300,000 and RM800,000. The landed properties that were transacted in the secondary market range between RM700,000 and RM1.2mil.

Foreigners want the lifestyle that Batu Ferringhi offers and security is crucial« BLOSSOM TIME DIRECTOR KAN WENG HIN

Kan Weng Hin: Location is important. We have sold units priced between RM800,000 and RM900,000 in Batu Ferringhi to foreigners.

They prefer to buy completed units, and price is not an issue. They want the lifestyle that Batu Ferringhi offers and security is crucial.

Beh Huck Lee: Foreigners are buying our condominiums priced at RM400,000 to RM550,000 in Sungai Petani but they do not come under the MM2H programme, which they consider as too restrictive. These being restrictions on work and children having to apply for student visa in order to study here.

Seventy percent of them are professionals buying for their retirement.

StarBizWeek: What were the property sales like for the third quarter, compared with the first two quarters of this year?

Soam: Figures from February until today have been encouraging, not only in Penang alone but nationwide.

S. Rajoo: Our financial year ends on Oct 31, 2009. The first quarter saw a sudden surge thanks to our 5:95 home loan package launched on Jan 19.

Datuk Jerry Chan: Confidence is back. The low interest rate regime has helped. At the end of last year, the banks were all very cautious and that made it very difficult for buyers. The low interest regime basically made property cheap and a good alternative to fixed deposits.

Lau Wai Seang: When it comes to purchasing residential properties, a lot of buyers look at the track record of the developer. The location, whether it is a signature address or not, is next.

Historically, the second half of the year is traditionally stronger than the first half. The good sign is there is no dumping of properties or panic selling. People still have the money, the question is where to put it.

Teoh: This resurgence in interest was obvious in the third quarter. They were taking a wait-and-see stand and made their decision pretty quickly, both in the primary and secondary market. The same thing is happening in Singapore and Hong Kong. The fire sale did not come.

Chan: It is a slow recovery. The stock market has recovered from 50% to 80%. What is the next thing to do? The property market and we are expecting a quick rebound with the high end moving first.

Lau: In terms of volume, we will not be worst off than last year. In terms of value, we may not reach last year’s figures. Higher end property on the island did not perform well in the first half of 2009.

StarBizWeek: What are the key challenges that developers in Penang need to overcome over the next few years and what are the measures that could energise the property market?

Rajoo: We would like to see further relaxation of policies such as waiver of stamp duty and a speeding up of government approval process. The restrictions of development for landbanks above 250ft sea level need to be studied.

Soam: One of the challenges we are facing is land shortage. There must be quality urban redevelopment projects for the island. If we continue with the requirement for social housing and public amenities, the cost of construction will go up, which forces developers to leave Penang.

We could explore the Singapore model to see how we want to plan for urban redevelopment programmes, not only for housing but also for supporting industries.

Chan: Social housing is the responsibility of the federal government. Everyone pays taxes. The federal government should take care of healthcare, education, and social housing as well.

Rehda’s approach to the government has always been to build public amenities such as hawker centres on a need-to basis rather than a blanket requirement. Otherwise, we will have these amenities multiplying in every new development.

If I build something and hand it over to the council and it does not know what to do with it, we end up with a white elephant. And then we complain why there is no green space; the green space is taken up for all the little elephants.

Although in 2007 Penangites paid about RM3bil in taxes, what we got back from the government in terms of infrastructure is pitiful.

The last major infrastructure work in Penang was the Jelutong Expressway. However, in Malacca, every year for the past seven years, there are major changes such as flyovers, road expansions and land reclamation work.

»With income rising, why is there a need for social housing projects?« IJM LAND BHD MANAGING DIRECTOR DATUK SOAM HENG CHOON

Soam: With income rising, why is there a need for social housing projects? Something is wrong somewhere.

For example, not even 10% of our low-cost Desa Sri Pinang, comprising 2,000 units of apartments, is occupied. Every house has an Astro and air-conditioning units. I’m surprised how those who buy the units at RM25,000 to RM40,000 can afford Astro and air-conditioning.

Goh: The low-cost housing system must be changed.

Teoh: We should not be looking at the old philosophy of home ownership as the main thrust. It should be having a roof over our heads. So we should be looking at renting out homes instead.

StarBizWeek: Has George Town’s World Heritage Site Status (WHS) helped to increase property sales?

Soam: I don’t think the heritage status affects prices. People may come for a holiday but they don’t buy property because of it.

»The question is: Does the World Heritage Site status enhance Penang as a state?« STATE EXECUTIVE COUNCILLOR CHOW KON YEOW

Chow: The question is: Does the WHS status enhance Penang as a state?

Kan: George Town’s WHS status does not attract foreign buyers, nor is it going to bring tourists back.

Foreigners are willing to spend thousands to stay in Phuket because it is clean and has good infrastructure. Batu Ferringhi beaches can be rather dirty.

Chan: The listing is a badge that we can carry with pride. There’s a prestige attached to it. Regardless whether you have the status or not, there are infrastructure and hygiene issues to be attended to.

Lau: Some of the properties at the heritage buffer zone have increased in value, but it is not clear whether the increase was due to the WHS status. George Town today is in a dilapidated and shocking state.

StarBizWeek: What will be the impact of the state government’s revision of property density guidelines?

Chan: The revision of plot to ratio guidelines give developers more scope for innovation and creativity. The revision allows developers to develop apartments with a variety of prices.

They can now build homes for families with different generations staying near to each other, all within one block.

Rajoo: It is a win-win situation for all. It will allow developers to increase the supply of homes in the state and give purchasers more choices. This will help to stabilise property prices.

StarBizWeek: Is there a mismatch between property prices and household income?

Kan: For the past six months, you would only need to pay 5% to buy a home.

The rest can be deferred for three years. The problem is that the payment is three to four years down the line.

Chan: We should not question the way banks granted such loans. The onus is on the developer is to deliver. The buyer has to figure out if he has a job tomorrow. We are seeing prices moving up because of demand.

Beh: From our statistics over the last 12 years, most houses were sold to those aged above 40. Last year, we sold 1,600 units and 45% of buyers were below 30. I was also shocked, I don’t know how they can afford it.

But these people generally have much better income. Their parents would have to work 20 years to get a combined income of RM4,000 in Sungai Petani but the starting salary of today’s young people can easily be RM1,800.

Plus incentives, bonuses and other combined income. And they generally believe their salary will go up.

So, working couples making RM4,500 to RM5,000, go for properties of RM300,000 to RM400,000, and borrow a bit from their parents at no interest.

Mismatch is relative. The demographic has changed.

Goh: Some 30% of the amount that is for the partial settlement of a property usually comes from the savings of parents.

StarBizWeek: Is there an oversupply of properties?

Lau: There is an overhand in location. On the island, there is none, there is some overhang on the mainland.

However, the situation in Penang is not as critical as in other states. Selangor has a high oversupply of low-cost housing.

Beh: Certain properties are of the “hardcore unsaleable” type, due to their location or design. Or maybe they are still priced too high.

StarBizWeek: What is the economic implication of the MM2H programme?

Teoh: Based on research, the average price of a house bought by a foreigner is about RM1mil. The total expenses of a small household who are renting spends about RM10,000 per month.

If we multiply those numbers with the 12,000 applicants under the MM2H and assume that half of them buy one house each in the region of RM1mil, the figure is astounding. Even if they don’t buy a house and just live here, we cannot deny that the numbers are astounding.

Under the recent ruling they are now allowed to work, subject to certain conditions. Foreigners only buy 3.5% of the country’s total housing transactions. In Singapore, they account for 25% to 30% of transactions.

The fear that foreigners will take away our real estate is unsubstantiated.

Countries like Bangladesh, Pakistan, India, China and Indonesia are top of the list of the MM2H programme because of the social economic political situation back home. If they can bring in money and are talented, we should pay attention to this segment of the market.

Chan: We should not just target MM2H buyers. We should focus on tourism and make Penang liveable. Australia does not make it easy for you to buy property or become a permanent resident, but many would like to go there because of the lifestyle.

MM2H alone is not big enough to move Penang’s property market or the economy. But if tourism picks up, it will help the state economy.

Goh: I still don’t see how we are benefiting from the MM2H programme. The focus should be to make Penang exciting for the locals.

If the foreigners want to come, they are welcome. If only our Malaysian government treat our own citizens the way we treat the MM2H buyers.

By The Star

KL builders upbeat on Penang property market

An artist’s impression of the IJM’s Light Point project along the Jelutong Expressway.

GEORGE TOWN: Kuala Lumpur-based developers expect Penang’s property market to further improve next year, with their projects in the state to contribute significantly to revenues.

IJM Land Bhd managing director Datuk Soam Heng Choon said although the country was technically in a recession, “the worst is over.”

“We are now in the initial stages of a recovery, as there are signs of improvement.

“The contributions from Penang will be important, forming more than a third of the group’s revenue for the 2010 fiscal year,” he said.

IJM Land’s new launches in Penang include the RM108mil mixed development maritime project, The Light (comprising The Light Linear, The Light Point and The Light Collections schemes) located on a 16.8ha freehold site off the Jelutong Expressway.

Next fiscal year, the contribution from Penang should be more than a third of the group’s revenue, Soam said, adding that the remainder should come from its projects in the Klang Valley.

For the first quarter ended June 30, IJM’s Penang projects contributed about 25% to 30% of the group’s revenue of RM284mil.

“The key drivers of property growth for 2010 should still be low interest rates, stability in employment, and demand from a younger generation who still require housing,” Soam told StarBizWeek after the Star Property Fair Roundtable discussion recently.

The other panellists were state executive councillor Chow Kon Yeow, Finance Ministry’s valuation and property services department director Lau Wai Seang, Eupe Corp Bhd managing director Beh Huck Lee, SP Setia Bhd general manager (North) S. Rajoo, Real Estate Housing and Developers’ Association Penang chairman Datuk Jerry Chan, Henry Butcher (Malaysia) Penang director Dr Teoh Poh Huat, Socio-Economic & Environmental Research Institute research fellow Dr Goh Ban Lee and Blossom Time director Kan Weng Hin.

Rajoo said SP Setia was also positive about next year’s property market.

“Our projects in Penang should bring in RM200mil next year. So far this year, the contribution from Penang’s projects is about RM170mil.

“We should be able to do about RM180mil by Oct 31, when our fiscal year closes,” he said.

In FY08, SP Setia’s projects in Penang contributed about RM130mil to its RM1.4bil revenue, with the balance coming from its Klang Valley and Johor Baru projects.

The group was now looking at introducing new financial packages for its new projects to be launched by year-end, Rajoo added.

These projects included the Reflection, a 25-storey condominium block, the Aura and Caria semi-detached schemes, both located at the 44.8ha Setia Pearl Island in Sungai Ara, and the final phase of the Setia Vista project located at a 8.4ha site in Relau.

Kan said the property market next year would greatly depend on what Budget 2010 had to offer as incentives to drive further the pick-up in momentum.

“The stimulus packages have restored confidence and its continuation would depend on Budget 2010,” he said.

He added that the high-end property market segment could not sustain without foreign buyers.

Chan said the property market should still be stable next year but he was not sure if property prices would increase as a result.

“We are looking at launching more diverse types of landed residential properties next year,” he said.

Lau, however, was more cautious.

“Let us talk about now till the end of 2009, instead of making projections for next year. I foresee a softening in market demand for higher end properties priced from RM500,000 onwards,” she said.

Lau’s outlook is based on the value of residential properties transacted in the first half of 2009, which amounted to about RM1.6bil, compared with RM1.74bil achieved for the first half of 2008. Transactions for the whole of 2008 were valued at around RM3.69bil.

“However, the volume of residential property transactions in Penang for 2009 is expected to surpass that of 2008.

“For the first half of 2009, transactions registered in the state hit 7,901, up 4.5% against the same period of 2008,” she said.

In the first half of 2009, property sales on the island totalled 4,633 units while Seberang Prai recorded 3,268 units.

By The Star (by David Tan)

Shoppers scout for best deals on opening of three-day property fair

Visitors started to walk in almost from the start as The Star Property Fair 2009 opened at the new venue of G Hotel and Gurney Plaza in Penang.

Return exhibitors from past years were generally happy with the turnout yesterday after the initial anxiousness over whether the change of venue from the previous Penang International Sports Arena (PISA) would have any adverse effect on the crowd.

SP Setia Bhd property division (north) sales and marketing manager Yeoh Chee Beng said the response was positive for a Friday but it was still too early to tell in terms of sales.

Mah Sing Properties Sdn Bhd marketing and sales manager Venus Ho said the turnout exceeded her expectations.

“PISA used to attract the factory worker crowd with their two-hour lunch breaks on Friday. But here, we have the shopping crowd turning up to check out the properties instead,” she added.

Among those seen checking out Mah Sing Properties’ Southbay project was student Nikki Tham, 21, who was accompanying her parents on their first visit to the fair, which is now in its seventh year.

“We’re here to research the market and see if there’s anything interesting for a future home,” said Tham.

Bank employees Mohd Zaidin Backeer Mohd, 42, Amira Fadzil, 22, Zian Zuryane Idris, 25, and Muzafar Tahir, 27, decided to check out the fair during their lunch break.

“We’re all interested in investing in property and are taking this opportunity to scout around together,” said Muzafar.

Orthopaedic surgeon Datuk Dr Suresh Chopra and his wife Datin Dr Meenakshi Chopra were at the ‘lifestyle’ section of the fair to check out flooring materials for their home in Alor Setar. They were accompanied by their daughter Kajal, 12, and close friend Simran Kaur and her son Sunil Singh Pantlia, 12.

“A friend of ours is showing us around Penang and was supposed to take us to the shops to check out flooring and other materials for our renovations. Since we are here at Gurney Plaza, we decided to browse the fair instead.

“It’s an even better arrangement, as we get to compare the range of products and prices, and the companies are also offering discounts,” said Dr Suresh.

Jia Yee Corporation (M) Bhd business development executive Lai Tong Hai said he expected the company would do better in terms of sales compared to previous years judging by the crowd, but he acknowledged that it was still too soon to be certain.

“Usually, visitors to the fair would spend the first two days browsing and buy on the last day,” he said. Standard Chartered Bank Bhd unit sales manager Andy Poh said there was a good crowd of quality customers and this seemed promising.

“It’s only a Friday and there are so many people,” he said, adding that the bank received good response to its latest credit card and mortgage packages.

The fair, themed Modern Lifestyle, features over 50 exhibitors occupying some 100 booths at G Hotel’s function rooms on Level 2 and the ground floor area of the Gurney Plaza shopping complex’s new wing.

Besides checking out property, home improvement products and financing packages at the exhibition booths, visitors also took the chance to attend various talks and forums, participate in contests, and watch performances.

There is the ‘Surf, Click & Win’ contest sponsored by IJM for a chance at a daily grand prize of a 32” LCD TV and other consolation prizes worth a total RM35,000, and the ‘Lucky Catch contest for a chance to win Blackberry phones, MP4 players, MP3 players, GPS navigators, MAS Airlines return flight tickets, reclining chairs, and Chinese liquor hampers.

Performances include a belly dance and a fashion show featuring various pieces of jewellery which would be auctioned off by Henry Butcher after tonight’s show.

The grand auction of natural gemstones from around the world is targeted to raise RM25,000 in aid of the Penang Pure Lotus Hospice of Compassion and Asia Community Service.

Organised by Star Publications (M) Bhd in collaboration with Henry Butcher and supported by The Expat Group, the three-day fair is open from 10am to 10pm until tomorrow.

By The Star

Are we attracting foreign buyers?

Malaysia stands out as one of the few countries in the world that have extensively liberalised their property markets to attract foreign buyers.

The country’s current investment environment is especially inviting, with no restrictions on domestic funding for foreign investment in local properties, in addition to further deregulation in Foreign Investment Committee (FIC) guidelines.

Foreign acquisition of residential property priced above RM250,000, and commercial property and industrial land valued at RM500,000 and above will not require FIC approval.

However, from Jan 1, 2010, the minimum threshold of residential units that can be sold to foreigners will be doubled from the current RM250,000 to RM500,000.

While other neighbouring countries impose various restrictions, Malaysia allows the purchase of freehold property by foreign purchasers.

Many countries including Thailand, Indonesia and the Philippines do not allow foreigners to buy their freehold property. In Singapore, foreigners are only allowed to buy strata property, except on Sentosa Cove where they can also opt for landed property.

To buy a residential or commercial property in Thailand or Indonesia, a foreigner needs a local partner to get approval for the transaction.

The prices of our property are also much lower compared with those in other countries.

Despite the much better terms, lower prices and the offer of freehold property, foreigners are still not coming in droves to invest.

Of the total property transacted nationwide, less than 5% – around 3.5% to be exact, were purchased by foreigners. This compare with about 25% to 30% of foreign purchases in Singapore today.

It goes to show that by dangling “carrots” alone to entice foreign investors will not carry much weight and attract the right targets to our shores.

So, how can the government’s liberalised environment and industry efforts to promote foreign real estate purchases translate into greater interest from foreign investors?

To set up an international market place for our property, the Malaysia Property Inc (MPI), a joint public-private sector initiative, has been launched to promote Malaysia as the preferred international real estate destination.

The country is targeting RM200bil in foreign direct investment (FDI) into the real estate sector over the next 10 years.

The MPI has been allocated a grant of RM25mil by the government to kick start its promotional efforts through road shows and conferences in various target markets including Britain, Hong Kong, Singapore and the Middle East.

These efforts will go a longer way if they are undertaken cohesively and holistically together with the Tourism Ministry to promote Malaysia as a favourite tourism and second home destination.

One way of showcasing Malaysia is through the “back to basics” gamut of the people’s way of life, culture and religious practices.

Promoting a strong Malaysian identity that reflects the true multi-racial and social-cultural make up of the people will go a long way to cement a stronger bond and acceptance among the various ethnic groups and in the process, raise the country’s attractiveness among foreigners as a worthwhile place to visit or settle down.

The relevant authorities and industry players must understand that foreigners who are adventurous enough to venture out of their “comfort zone” and their home country to buy property in a foreign land have very unique needs.

For those who are considering to retire or set up second homes, what they are looking for is the chance to savour the “local experience” of living in a foreign country.

They are certainly not looking to settle down in another concrete jungle where they may probably come from.

That could explain why Bali and Phuket, despite their largely “laid back” and undeveloped environments, are favourites with foreign visitors and retirees.

Closer to home, Penang, Malacca, Sabah and Sarawak are also favourite attractions among foreign visitors because of their unique heritage and environment.

By leveraging on our uniqueness and the many pluses – a year round tropical climate, affordable cost of living, good infrastructure, and a largely friendly, English speaking and peace loving Malaysians – there are much that the people and country will gain by further harnessing its diversity in this highly globalised and borderless world.

Given the big contribution made by the property sector to the country’s economy – last year the industry contributed close to RM11bil to the economy – efforts by the government and industry players to promote Malaysia’s real estate to the rest of the world should be further harnessed.

And given its close connection to the people’s basic lifestyles and interaction with each other, all Malaysians have a role to play to ensure the efforts are successful.

·Deputy news editor Angie Ng hopes Malaysians will take pride in their strong bond and friendships built over so many generations and leave a legacy that will make our future generations truly proud.

By The Star (by Angie Ng)

PNB plans mixed property projects

Permodalan Nasional Bhd (PNB), the country's biggest fund management company, plans to develop next year its 7.2ha surrounding Merdeka Stadium and Stadium Negara in Kuala Lumpur.

Its president and group chief executive officer Tan Sri Hamad Kama Piah Che Othman said it will undertake mixed property projects that add value to the surrounding areas.

PNB had said earlier that it planned to develop the land into posh residential areas and business plazas at a gross development value of RM3 billion.

Hamad Kama Piah said that PNB was stepping up property development as earnings from its property arm provided an important source of revenue for the well-diversfied group.

"PNB will increase real estate investment to ensure it reaps commensurate returns," he told reporters after handing over Hari Raya goodies to seven organisations and orphanages from Selangor in Kuala Lumpur yesterday.
On Amanah Saham 1Malaysia (AS 1Malaysia), Hamad Kama Piah said that an estimated 2.4 billion units had been subscribed to date. More units of the fixed income fund are still available.

The fund, launched by Prime Minister Datuk Seri Najib Razak on July 31, offered 10 billion units for sale at RM1 each. It has the same features as Amanah Saham Wawasan 2020 and Amanah Saham Malaysia.

By Bernama

A test for Islamic home financing?

When Islamic home financing came on the scene, interest rates were neither as low, nor as attractive, as today. House buyers opt for them because the “interest”, or what banks called “profit sharing”, was capped at 10%.

Having seen interest rates going up to 14% during the 1997/98 crisis, 10% may be acceptable for some of them. How times have changed! Today, it is still volatile but interest rates are also at a 33-year low. And it looks like it will remain low for a while.

Most of us want to finish paying off our mortgages as soon as possible. Depending on how young one is, home buyers give themselves a time line of about 10 to 15 years to pay up their mortgages. A 30-year-old may consider a longer tenure.

Under today’s low interest regime, what are house buyers leaning towards? The scenario seems fuzzy.

Three banks interviewed say Islamic financing for properties are growing and Bank Negara Malaysia’s statistic testify to that. However, bank officers say customers prefer conventional loans.

Foreign banks OCBC and HSBC decline to answer questions on Islamic property financing. A marketing officer with OCBC says he is referring Islamic financing enquiries to local banks. Ironically, both HSBC and OCBC have set up Islamic banking outlets.

Phone enquiries at CIMB and Maybank suggest interest among house buyers is towards conventional loans at the moment because of the low interest regime. A second reason may be due to house buyers’ interest to pay up the loan as quickly as possible.

“Generally, those who opt for an Islamic packages are not in a hurry to pay up the loan,” says a bank source.

Paradoxically, these same banks report healthy growth numbers for its Islamic packages.

Maybank Islamic Bhd executive vice-president, acting CEO Ibrahim Hassan says financing of residential and non-residential properties grew at an average rate of 6% from 2007 till June 2009.

It is expecting growth rates of 8% and 12% for financing of residential and non-residential properties respectively. Customers are diverse – Malays make up half of them, Chinese 37%, Indians 8% and others 5%.

The majority are categorised under the mass affluent segment with total financial assets ranging between RM100,000 to RM400,000.

At present, residential properties (landed and condominiums) portfolio comprises a fifth of bank’s total financing, while non-residential properties accounts for almost 3%.

Over at CIMB, they expect to close the year on a strong note for its Islamic property financing. It sold more than RM300mil of its flexi Islamic home package within the first three months of its launch, says CIMB Islamic CEO Badlisyah Abdul Ghani.

CIMB’s 2007 and 2008 growth for Islamic property financing was RM100mil and RM1bil respectively. The introduction of new products last year and this year gave them an average growth rate of about 100% year-on-year.

Badlisyah says its growth rate for the first quarter of this year exceeded that of the industry’s growth; putting their overall Islamic property financing market share at 9.8% (RM2.5bil out of RM25.7bil) as at June 2009. It was RM6mil in 2005.

CIMB Islamic now ranks seventh out of 16 Islamic banks for the financing of residential properties in Malaysia.

He says this year, new bookings of Islamic property financing are about 50% of total property financing for the group (CIMB Bank + CIMB Islamic Bank). Our market share has moved from 11% in 2006 to about 14% of the entire industry in the first half of this year, he says.

While the healthy growth story is also being trumpeted at Bank Simpanan Nasional (BSN), the story is slightly different but no less interesting. BSN is currently promoting its Islamic home financing, but unlike Maybank and CIMB, the rates are fixed. BSN is the third largest bank after Maybank and CIMB in terms of branches.

The bank is promoting a five-year low instalment package, with variants, where rates will be as low as 1.95% for the first two years and 4.79% for the next three years. Thereafter, it is fixed at 5.88%. This package is for loans up to RM100,000 for completed properties. Customers pay for the legal fees. The offer ends Dec 31. (See table for comparison with another variant)

BSN deputy chief executive (consumer banking and business development) Norazian Ahmad Tajuddin says as of June 30 this year, BSN has RM3bil mortgages, a third of which are under Islamic financing.

BSN has dispersed Islamic property loans totalling RM727.9mil in 2007. This represents a 36% growth rate; they started from a low base.

Last year, it amounted to RM821.9mil, representing a growth rate of 13%. The bank expects a 10% growth this year. As of July this year, its Islamic property financing is RM846mil.

Norazian says these are healthy numbers for them. “Please do not compare us with other local banks; in value terms, our numbers are small. We are starting slow and BSN is not like other commercial banks. We pride ourselves as a provider of banking services at reasonable rates. We are evolving and provide services to all levels of society from the poor to the rich. But the very rich don’t come to us.

“We like mortgages because it provides a steady stream of income for at least 15 years,” she says.

The national savings bank will have five Islamic banking outlets by the end of this year, and adding 11 more by the end of next year. It has a total of 377 branches.

Says Norazian: “Our customers are questioning if BSN offers Islamic banking. So like other banks, we will open Islamic banking outlets.” They are targeting customers in Klang Valley and Johor, the growth areas and those who buy to stay. More than 90% of its customers are Malays.

A quick check with Bank Negara Malaysia’s website shows that monthly Islamic house financing is growing steadily. For June 2008, it recorded RM17.83bil while June 2009, it reached RM20.40bil.

By The Star (by Thean Lee Cheng)

Government to revive 78 projects

PETALING JAYA: The Government is taking the initiative to revive 78 abandoned housing projects under its new Housing Revival Initiative, said Housing and Local Government Minister Datuk Seri Kong Cho Ha.

However, he said it was difficult to estimate how much time was needed to revive these abandoned projects as many were difficult cases.

“From 1990 to 2007, there were 136 abandoned housing projects, or about 2% of the total housing developments in the country.

“Among them, 49 projects are currently being rehabilitated and 17 are difficult cases (to revive),” he said after launching the Housing Revival Initiative yesterday.

Kong said the previous and new developers, house buyers and bankers should negotiate and discuss “win-win” solutions for the revival of the abandoned projects such as writing off the loan interest for house buyers.

He said the Government would not provide funds for this initiative as it was not right to use tax payers’ money for the exercise.

However, coming up with the money could be the Government’s “last resort only” “should the problem be prolonged further,” he added.Under the initiative, corporate organisations are encouraged to undertake the revival of the abandoned housing projects.

By The Star

LCL seeks partners for UAE projects

DUBAI: Interior fit-out (IFO) group LCL Corp Bhd will be looking at strategic partnerships with both local and foreign parties to financially support the sustainability of its future projects in the United Arab Emirates (UAE), according to group managing director Datuk Low Chin Meng.

He said LCL expected to finalise a strategic partnership with a public-listed Malaysian construction company with on-going projects in Abu Dhabi by the end of the month.

At the same time, the group was negotiating with parties from Abu Dhabi for other strategic partnerships, Low told Malaysian media in Dubai recently.

LCL is a well-known group in the UAE, especially in Dubai, for its IFO projects such as the newly-launched RM28bil Dubai Metro, dubbed the world’s longest fully-automated driverless metro system, the Dubai Mall Hotel and Dubai Marina Hotel.

The group was also involved in the IFO works in Dubai’s latest and luxury Atlantis The Palm Hotel.

To date, LCL has five major contracts in Dubai with the size of RM50mil each.

“We still have confidence in the property market in Dubai but given the current slowdown and slow recovery rate possibly in another one-year period as anticipated by industry experts, LCL will now focus on IFO projects in Abu Dhabi. Our interest will be in government-funded projects, such as hospitals, universities and clinics,” said Low.

On the group’s operation in Dubai, Low said: “We will not be taking many new jobs in Dubai.

“Despite the tough market conditions, we still have confidence that Dubai will recover and we will not throw in our towel just yet. Unlike some other contractors, we have a good track record of completing our jobs in Dubai.”

Low admitted that the group’s cashflow was heavily affected by the tight liquidity situation in Dubai, resulting in losses to the group.

However, he said: “We are currently in the process of recovering our claims and entitlements from property developers in Dubai estimated at not less than RM200mil.

“We have a strong case to make these claims as we have completed our jobs and expect these claims to materialise within the next eight to 10 months. This will lead to a substantial reduction in our high borrowings.”

Currently, the group gearing ratio is about three times.

By The Star (by Hanim Adnan)

Good rates for good borrowers

PETALING JAYA: A new approach by banks called risk-based pricing is expected to boost both their top line as well as bottom line, say industry players.

Under this new system, different interest rates may be set based not just on different portfolios of loans but also different types of customers.

The more creditworthy consumers who show, among other things, that they can repay promptly and do not over-borrow, will likely obtain better interest rates.

This is in line with the current global banking trends as seen in initiatives such as Basel II, which encourages voluntary internal-based ratings that place an increasing importance on the accuracy of risk measurement and pricing of risk portfolios.

Alliance Bank Malaysia Bhd group chief executive officer Datuk Bridget Lai said by being able to recognise its quality borrowers, it would be able to further enhance cross-sell opportunities, which in turn would boost its topline.

“In terms of bottom line, higher-risk borrowers can be identified, and their risks addressed and mitigated through higher pricing. This should serve to protect our bottomline,” she told StarBizWeek.

Lai said its pricing differentiation on home loan applications was based on a margin-of-advance or loan-to-value ratio, as well as the loan size.

She said its home loan borrowers were also rated or categorised based on their loan application score card, which comprises various criteria that differentiate credit quality and, hence, lending rates between borrowers, even within asset classes.

“These criteria or attributes of the loan application score card are derived statistically from our internal loan and customer data, calculated over a period of time,” Lai said.

RHB Banking Group head of retail banking Renzo Viegas concurred that risk-based pricing was a more efficient pricing hypothesis as the rate offered to the customer would efficiently reflect the cost of the credit risk associated to the borrower.

“This is a win-win approach for both the bank as well as customers – a higher rate for customers with higher risk while rewarding low-risk customers with lower rates. We are then able to shift our portfolio towards low-risk borrowers, hence reducing non-performing loans (NPLs) and making the mortgage business more profitable,” he noted.

Bank Negara’s latest quarterly bulletin said net NPL ratio in the local banking system was seen to be flattening at 2.2% for the first half of this year, mainly attributed to higher recoveries and restructuring of loans to performing status.

In fact, on the sectoral front, the lower NPL ratio was driven by the decline in NPLs in the household loan segment, the report added.

With RHB being one of the first local banks to implement the risk-based pricing approach, its customers were pleased with the new system due to the attractive rates offered to the low-risk category, said Viegas.

However, Lai cautioned that the approach was not flawless in nature.

“Customers from the lower-income group and self-employed customers with no credit history are generally accorded high-risk ratings. This is in line with the bank’s prudent practice to ensure risk is mitigated to the minimum while accommodating financial needs of the customers,” she said.

Lai also said the approach was a flexible rating device that could be applied for other loan products, such as hire purchase and personal loans.

“We plan to introduce risk-based pricing on individual borrowers after the full implementation of our mortgage application credit score card by the first half of 2010,” she said.

By The Star (by Laalitha Hunt)

Builders welcome govt move to delay stamp duty rule

The government has decided to delay a stamp duty rule that would raise costs for the construction sector to 2011, following objections from industry players.

The rule, which would have raised costs by up to 2 per cent, was supposed to take effect this year.

"We're thankful to the government for considering the plight of a multitude of stakeholders in the construction industry," said Master Builders Association of Malaysia (MBAM) president Ng Kee Leen.

Under Budget 2009, the government said it wanted to simplify stamp duty assessment. However, it turns out that industry players have to pay more.
From January 1 this year, they will have to pay 0.5 per cent duty on all construction services agreements that do not require collateral.

This covers consulting contracts, operation and maintenance contracts and facilities services contracts.

It means that a RM10 million construction contract will attract a total stamp duty of RM50,000. Previously, the stamp duty on an ordinary service agreement was just RM10.

On Wednesday, the Finance Ministry said from September 15 to December 31 2010, all service agreements will be imposed a flat stamp duty of RM50.

The government is only able to gazette the above ruling next Tuesday onwards. For application requests before the gazetted date, approval for stamp duty will be considered on a case-to-case basis under Section 80(1A) of the Stamp Act 1949.

MBAM told members to include the stamp duty cost in the contract. Contractors should also split the cost for materials and services as this will result in lower stamp duty.

After January 1 2011, all service agreements, including construction contracts, will be charged a stamp duty of 0.5 per cent of the total contract sum.

"We will continue to appeal to the government to consider maintaining the RM50 flat stamp duty for all construction contracts beyond 2011," Ng said.

By Business Times (by Ooi Tee Ching)