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Saturday, August 21, 2010

What Kampung Baru land is worth

Although land and property values in Kampung Baru have been “locked up” for a very long time and lagged far behind those in Kuala Lumpur’s inner city, property valuers concur that the redevelopment of the oldest Malay settlement in the city should augur well for the landowners.

“The redevelopment will unlock the value of the land and it will be a windfall for them,” VPC Alliance (KL) Sdn Bhd managing director James Wong says.

Wong says it will be difficult to determine a fair long-term value for the Kampung Baru land at this stage as a large percentage of the land will have to be set aside for infrastructures and other services, which will affect the weighted average land value of the land and property.

“The transaction value of development land in Kampung Baru land is in the range of RM200 to RM350 per sq ft. The quantum of appreciation for the land will depend on the implementation policies of the Kampung Baru Development Corp and legislations on how non-Malays and foreigners can participate in the development as well as occupy or buy the completed properties there,” he explains.

Rahim & Co Chartered Surveyors Sdn Bhd executive chairman Datuk Abdul Rahim Rahman stresses the importance of determining the land value to clear any confusion among the landowners.

He says steps are now being taken to value the land and properties in Kampung Baru by both the Government and private valuers.

“With the redevelopment, the land and property value may go up by 100% or more,” he adds.

Abdul Rahim says it will be better to develop Kampung Baru parcel by parcel based on the appropriate land use zoning instead of by lots, adding that local developers can act as development partners to the GLCs.

Wong says that to unlock the value of the land, the Malay Enactment Act needs to be amended to allow long-term leases to be created for non-Malay developers to jointly develop the land with the landowners or the designated government-linked companies.

The Act, which governs Malay reserve land in the respective states, says that the land can only be developed by and sold to Malays.

“It will be necessary to attract non-Malay developers to jointly develop Kampung Baru as they will be able to lend their resources and expertise and share out the costs and risks.

“As demand catches up with supply in the future, the potential new supply at Kampong Baru will be good for the continued growth and development of Kuala Lumpur as a whole,” Wong adds.

CB Richard Ellis executive director Paul Khong says if the Government decides to acquire the Kampung Baru land, there must be a huge budget allocated to finance the entire acquisition exercise first before even redeveloping the land.

“The compensation payable will be very substantial based on development land in the locality being transacted at between RM200 and RM350 per sq ft, and a small number of sales (closer to Sultan Ismail) hitting above RM500 per sq ft. A rough indication of compensation (based on RM500) will be RM500 (per sq ft) x 375 (acres) x 43,560 (sq ft) = RM8.2bil,” Khong says.

He adds that under the Land Acquisition Act 1960, Section 2A of the First Schedule on Determination of Compensation states that in assessing the market value for a Malay reserve land, the fact that it is a Malay reserve land shall not be taken into account except where the scheduled land is to be devoted, after the acquisition, solely for a purpose for the benefit of the persons who are eligible to hold the land under such written law.

“This basically means the acquiring party will have to pay full market value for the land now via the Act, which is over and above what is being transacted in the local market,“ he explains.

Khong says a classic example of such exercise involved the acquisition of Penchala Link for the Sprint Highway where the authorities had to pay full market value (RM70 to RM100 per sq ft) for the Malay reserve land which was actually worth half the value at that point of acquisition in the open market.

He points out that the acquisition party may be faced with a mammoth task to deal with the huge number of landowners.

“One land title could easily have 30 to 100 co-owners now if it has been handed down the generations following the Muslim Inheritance Laws, and given the large area involved, of more than 300 acres, it is quite a Herculean task.”

Also, some of the landowners may not agree to the quantum of compensation payable and may drag the matter to court, says Khong.

“If the values then get out of hand and the compensation payable is too huge, the project may then be no longer economical to proceed.

“Ultimately, the project financial must be viable and, in real commercial terms, it has to also work. Market forces will prevail at the end of the day,” he adds.

By The Star

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