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Monday, August 30, 2010

UDA aims to enhance its property value

It is better not to have a fixed quota for Bumiputera properties, but yet maintain the Bumiputera agenda for it to be an effective business model, says UDA chairman

Government-owned UDA Holdings Bhd's priority for the long term is to enhance the value of its properties with an optimum Bumiputera and non-Bumiputera mix of buyers and tenants to ensure their appreciation.

Newly-minted UDA Holdings chairman Datuk Nur Jazlan Mohamed said the organisation needs to change its concept of promoting mainly Bumiputera interest to ensure a favourable mix with higher purchasing power in order to be a profitable developer.

"We need to change the expectation that properties developed by UDA are 100 per cent, or even 80 per cent, for Bumiputeras.

"It is better not to have a fixed quota for Bumiputera properties, but yet maintain the Bumiputera agenda for it to be an effective business model," Nur Jazlan told Business Times when met in Johor Baru recently.

He admitted that there were Bumiputeras who sold off their properties for a quick profit to non-Bumiputeras after purchasing them from UDA Holdings at preferential prices.

"Many of UDA Holdings' properties are freehold and the Bumiputeras who benefited from us should have the moral integrity to not sell them to non-Bumiputeras.

"Our priority for Bumiputeras is not only about providing residential and retail opportunities, but also to ensure that those properties stay in Bumiputera hands while the value increases in the long-term."

Nur Jazlan stressed that UDA Holdings must make a profit first before it can realise its Bumiputera agenda as many of the Bumiputera properties are subsidised by as much as 15 per cent.

He said the first rule of thumb in sustaining a successful business model was: "If you don't make money, then there is no money to give out."

Nur Jazlan said that perception must change in the face of new socio-economic challenges.

"We need to understand that the purchasing power of Bumiputeras today is still limited as most of them are civil servants with fixed incomes. At the same time, the success and value of a development is dependent on the target market.

"So it is important to have a good mix of buyers and tenants to improve the value of the property."

Nur Jazlan cited the BB Plaza in Bukit Bintang, Kuala Lumpur, that is under the company as an example to indicate the importance of having a healthy mix of tenants.

He said the adjacent Sungai Wang Plaza, acquired and renovated by Singapore-based property developer CapitaLand, was enjoying a 20 per cent higher rental yield compared to BB Plaza.

Nur Jazlan suggested that an equity break-up could be as much as 60 per cent Bumiputera and 40 per cent non-Bumiputera, or even an equal 50 per cent, to be healthy.

He believes that such a proposal can improve the property value and is in line with the 1Malaysia concept, without UDA Holdings losing sight of its goal of promoting Bumiputera participation.

By Business Times

Property sector may face downgrade

The property sector is likely to be downgraded if Bank Negara Malaysia imposes a lower mortgage Loan-to-Value (LVR) ratio, says Kenanga Research.

Bank Negara is reported to have written to financial institutions to secure feedback on the possibility of capping the LVR for mortgages at 80 per cent to avert the risk of a potential property bubble.

Currently, banks can usually lend up to 90 per cent of the house value, or up to 100 per cent in selected cases, which has been handy for developers promoting their newly launched under interest absorption schemes like 10/90 home loan schemes.

Kenanga Research in a research note today said it would not be surprised if Bank Negara implements the 80 per cent cap on the mortgage LVR, or at least for properties more than RM500,000, as the government is clamping down on investment related property acquisitions.

"If implemented, we are likely to downgrade our sector call, as we expect property transactions to fall since deposit requirements will double, or essentially doubling the investment risk, limiting the number of homes that an individual can buy.

"We expect buyers to become more discerning when it comes to property choices, meaning stronger market leaders with branding and quality will be winners, when it comes to grabbing the market share of a smaller pie," Kenanga Research explained.

It is also maintaining a "trading buy" call on the property sector for now.

Kenanga Research said currently, the "buy call" is largely premised on strong sales achieved for developers, who are well positioned with several projects or aggressive landbanking.

"We look to review our sector and company calls in the next couple of weeks, pending further light on the matter," it added.

Meanwhile, OSK Research said it is unlikely that Bank Negara will enforce a strict capping of the LVR at 80 per cent across all residential property classes, but rather impose a restriction only on higher end properties.

"We understand however, most banks would have an internal risk control policy limiting the LVR to 85 per cent for higher end residential properties of more than RM700,000," it said.

Residential properties currently contribute to 26.6 per cent and 49.8 per cent of total industry loans and household loans respectively.

"Any excessive credit restrictions by Bank Negara on residential properties could be counter-productive, as it would encourage banks to redirect more of the liquidity to higher risk unsecured personal and credit card loans or lumpy corporate loans," OSK Research said.

By Bernama

UEM Land's Symphony Hills rakes in RM52m

UEM Land Bhd's development project, Symphony Hills in Cyberjaya, raked in RM52 million within the first three weeks of its launch, MIDF Reseach said.

"We believe it will continue to be a hit, given it easy accessibility via the Maju Expressway (MEX) and eventual migration to Kuala Lumpur city fringe (sub-urban) living," MIDF Research said in its research note today.

The research house has maintained its neutral call and forecast for the company shares and revised upwards its target price to RM1.63 from RM1.25, citing the execution risk, improved strategic land sales and capability to attract Foreign Direct Investments (FDIs) as factors.

UEM Land is the real estate investment and property development arm of UEM Group Bhd.

The company posted a pre-tax profit of RM41.268 million for its second quarter ended June 30, 2010, up 361.2 per cent from RM8.948 million in the same period last year while revenue increased to RM88.003 million from RM68.686 million previously.

By Bernama