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Saturday, June 4, 2011

Bertam Alliance: Property development outlook 'exciting'

PETALING JAYA: Bertam Alliance Bhd is confident of growth this year helped by a favourable outlook from the local property development industry.

Its managing director Tan Ai Tong however did not provide a forecast on the firms's growth numbers for this year.

Last year, the firm's net profit stood at RM15.2 million against RM4.2 million in 2009. Its revenue increased to RM60.2 million last year. from RM39.7 million in 2009

"The outlook for the local property development industry is exciting considering the favourable demographics (65 per cent of the population under 35 years old) and high population growth rate, particularly in the Klang Valley. With the new economic initiatives being driven by the government, both the GDP growth and the property development industry are expected to remain strong.

"We are confident that our 2010 results are sustainable, with the new strategies being adopted," he told reporters after the company's annual general meeting here, yesterday.

Tan said the group is planning a development soon in Cheras which is within walking distance to a proposed MRT station site.

He said the company is also collaborating with a prominent developer, which he refused to name, in the southern region to develop a 270 acre land in Muar, Johor into a mixed development.

"This project will contribute positively to the group's earnings over the next 6 years," he said.

By Business Times

Bigger homes may not be happier homes

The phrase “old is gold” certainly holds true for many things such as family relations and friendships, but it does not seem to apply to consumer items, especially trendy ones. Barely months old gadgets are being replaced by new and trendier ones these days.

This underscores the strong consumerism movement and how it is promoting buying frenzy among the young and old alike.

The list of “must haves” is growing longer and it is not surprising that many of the items are actually status symbols.

One of the most easily replaceable items include mobile phones and other tacky communication devices. The big rush for Apple's new iPad 2 is a good example of how much headway these tacky gadgets are having a hold on the people.

Even though it has been more than a month since its release, there is still a long waiting list for this latest tablet computer. Just try to place a booking for one with an authorised distributor in Kuala Lumpur and you'll know what I mean.

When the economy is doing better, there is a tendency for people to splurge a bit more on themselves and their loved ones.

The property market is certainly one of the biggest beneficiaries of this stronger consumer confidence. Many developers are turning in one of their best sales ever.

From just a handful previously, there are now more developers who have surpassed the RM1bil annual sales mark.

The housing market is riding on this wave and there is a rush for a variety of property, especially well located landed housing projects.

Beelines are once again making their appearance at project launches, and more people are snapping up property either for their own occupancy or for investment purposes. There are also those who are buying to upgrade to bigger houses or move to better neighbourhoods.

It is undeniable that one's residential address has become a status symbol and many can't wait to move to more prestigious neighbourhoods.

Although it is uplifting to have a more prestigious address or move into a better community, one should also think about the consequences of uprooting one's family when moving to a new area.

It will mean new schools, new friends and neighbours, and grown up children, especially teenagers, often don't take to such changes easily. Having built up their bond with their schoolmates, teachers and neighbours over the years, they will need time to adjust to their new environment.

Another issue that needs to be considered thoroughly pertains to how much space the family really needs and how much loan one should commit to.

A bigger house may sound like something to look forward to but it can be a dampener to family bonding, unless efforts are expended to ensure the family find time to gather together in some common areas, like the study and computer rooms, and of course the dining room.

When there are too many floors (more than two storeys), sections and rooms in the house, it may mean the family members may not “bump” into each other often enough, and communication may suffer.

With many families having both parents working and their grown up children driving themselves around, the communication gap may grow wider.

Buying a new property may also mean more borrowings from the financiers unless the buyer has the means to make higher cash downpayment.

Banks have become very innovative these days and a number of them are promoting housing packages where the repayment can be stretched up to the next generation.

The question is whether it is wise to commit to such high loans to the extent of involving one's children in the loan repayment.

I believe one should not over commit in their borrowings, and it is advisable to be prudent and leverage up to one's own ability to repay.

Instead of buying, it can even make better economic sense to rent a house. This way, one gets to enjoy the choice of address, and do not have to fork out any downpayment, or be bothered with the high maintenance and renovation costs to upkeep a property.

Deputy news editor Angie Ng subscribes to the maxim that while everything is in a state of flux and change, sound values should be upheld at all times.

By The Star (by Angie Ng)

Housing dream come true?

PROPERTY players are eagerly waiting for clear guidelines from the Government on how the recently launched My First Home (MFH) scheme is supposed to work. Social housing generally does not provide good returns, developers and consultants point out, and without concrete details, it is even harder to expect the private sector to be actively involved. As always, land is a central issue.

First announced last October in Budget 2011 and officially launched in March by Prime Minister Datuk Seri Najib Tun Razak, the scheme is aimed at helping young professionals between 18 and 35 to own a home priced between RM100,000 and RM220,000. At the launch, Najib expressed his hope that the private sector would view participation in the scheme as a corporate social responsibility (CSR) activity, and not as a venture to profit from.

Ghazali: ‘There are still a lot of existing affordable homes in locations such as Nilai, Rawang and Sepang.’

In other words, the developers are expected to shoulder the costs of MFH projects as part of being dutiful corporate citizens. Nevertheless, it has been reported that the Government was considering providing land at very low cost or for free, even in the Klang Valley, in joint ventures with the private sector. If this indeed happens, says Real Estate and Housing Developers' Association (Rehda) president Datuk Seri Michael Yam, it will help developers to lower costs.

Still, there is this next question on the minds of developers: If the land comes free or cheaper, where will it be? If the sites are far from the city centre or in areas that lack public amenities, will there be enough buyers? As it is, many low-cost housing projects built by the private sector are in areas such as Nilai, Rawang and Sepang, which cannot boast of high demand. If the scheme's objective is to meet demand for homes, allocating land in such locations would be self-defeating.

Lightening the developers' load

Yam says land generally constitutes a fifth of the total gross development cost of stratified properties. “For most parts of the Klang Valley and Penang, the likehood is that housing units below RM220,000 would be stratified apartments with relatively small built-up areas, despite land being free,” he adds.

Elsewhere in Malaysia, it may still be possible to deliver landed properties with smaller built-up areas in less prime areas, if access to completed roads and infrastructure is available, and certain conditions and cross-subsidy requirements are waived.

He points out that the expenditure in developing a property project covers land, manpower, construction materials, consultancy fees, utility contribution, bank interest, cross subsidy for low-cost homes and discounts to meet national aspirations. “If all the stakeholders can review their cost, provide subsidised materials and reduce utility contributions, the final delivery cost can be lowered,” he says. He also suggests that the Government consider providing upfront infrastructure and utilities to further reduce the burden on developers.

Hua Yang Bhd chief executive officer Ho Wen Yan believes that it is possible for developers to offer better homes if the Government supplies the land.

He argues: “With cheaper land cost, better homes with larger living area and better amenities can be provided. With good transportation infrastructure such as integrated highways, the MRT (Mass Rapid Transit), KTM Komuter and other forms of public transport, it is possible to live further away and work in the city. This is a proven model in developed cities all over the world.”

At present, says Ho, urban density in Kuala Lumpur is increasing rapidly. To reduce social and economic pressures, there is a need to look at alternatives beyond the city centre.

He points out that while property developers may not be looking to earn sizeable margins from the MFH scheme, some profit is still needed to make participation viable for them. “Balancing all the factors of cost, land allocation and earnings will be critical towards the long-term sustainability of the scheme. Financial incentives such as tax breaks, rebates and other forms of support will be welcomed by the private sector,” he says.

What buyers want

While the developers focus on costs, the buyers are primarily concerned about three things location, location, location. This has been a perennial point of contention with social housing, be it low-cost or affordable housing. Or any form of housing, for that matter. Because land within or close to the city is expensive, developers tend to build social housing in less-than-prime areas, which explains the poor demand.

Normlly, low-cost housing costs about RM42,000 a unit with a build-up of 650sq ft. Affordable housing, such as those that come under the MFH, is priced between RM100,000 and RM220,000 a unit. Size for units under the scheme has not been determined so far.

With land cost escalating, property consultancy Rahim & Co executive chairman Datuk Abdul Rahim Rahman reckons that developers should be allowed to build premium units in tandem with MFH homes so as to give them a chance to make a profit.

“If the Government provides a 100-acre plot for the scheme for free, or at very low cost, conditions should be imposed whereby the private developer must allocate fixed portions of the project for low-cost and affordable housing. Perhaps 30% of the project can be low-cost housing and 20% for affordable housing. The remainder can generate profits for the developer,” he says.

Generally, Rahim adds, location, demand and transportation are issues that the Government needs to consider. “Old apartments sized at less than 1,000 sq ft can be found for less than RM220,000 in the Gombak area. However, for double-storey houses in Gombak and Cheras, the prices are upwards of RM350,000 and RM450,000 respectively. If they stay in Rawang or Klang, and work in Kuala Lumpur, the cost of daily transport to work is prohibitive.”

Boustead Holdings Bhd director (property) Datuk Ghazali Mohd Ali says if an MFH project is located in the Klang Valley, the developer should be allowed to build affordable homes in place of low-cost units. For similar projects outside the Klang Valley, he says, developers can opt to build low-cost homes instead, as buyer income tend to be lower in such locations and demand may not be as strong given that there is abundant land in these areas.

Ghazali says the MFH affordable homes need to be built in locations where demand is strong as they are meant for young working professionals. “There are still a lot of existing affordable homes in locations such as Nilai, Rawang and Sepang. So it would defeat the purpose of the scheme to build more of such homes in these areas. The Klang Valley remains the top draw for young adults looking for job opportunities. It will continue to be the location of choice for young adult home buyers, unless there is an efficient transportation system serving Nilai, Rawang and Sepang,” he adds.

“Poor response to these units will mean higher holding and opportunity costs for developers.”

The provision of social housing is not something new to developers. Developers of projects of a certain size are required to carve out a portion of their land for low-cost housing. There is also Syarikat Perumahan Negara Bhd (SPNB), a unit of the Minister of Finance Inc, which was set up in 1997 to provide affordable housing.

But for whatever reasons, public response to affordable homes built by SPNB has not been encouraging. Recent reports highlighted the lack of response to 11,400 low and medium-cost housing units completed by the company.

SPNB chairman Datuk Idris Haron says this could be due to the lack of publicity about the homes. With the launch of this MFH scheme, SPNB will act as a one-stop centre for applications and access to financing for homes. National mortgage company Cagamas Bhd will guarantee 10% of the financing for the home purchases. A total of 25 banks have agreed to give out home purchase loans under the scheme.

So far, about 4,516 housing units with retail prices that are categorised under the MFH scheme, have been completed in 12 projects by SPNB. Another 8,991 units in 16 projects are under construction. As of April 30, 772 people had applied for loans under the scheme, while 143 applications have been approved, amounting to RM21.3mil in loans, with an average value of RM149,365 per loan.

By The Star

Fine-tuning necessary for housing scheme

BESIDES the possibility of the Government providing land for free or at low cost, another issue surrounding the My First Home (MFH) scheme is the general consensus that it is unrealistic to have the same limit on monthly income and property price across the country. To date, it has been announced that houses under the scheme are priced from RM100,000 to RM220,000 per unit, and to qualify, buyers must have a monthly salary of not more than RM3,000.

Developers are of the view that the higher land values in the Klang Valley and major cities should be reflected in the MFH scheme.

Leong: ‘The scheme should reflect the higher land values.’

“The scheme should reflect the higher land values, living costs and incomes in the Klang Valley and major cities to ensure there is no mismatch between demand and supply,” says Mah Sing Group Bhd group chief executive and managing director Tan Sri Leong Hoy Kum.

Leong and other developers say a price limit of RM350,000 is more realistic in Greater KL and Penang, and the monthly income limit should be raised to RM5,000.

Real Estate and Housing Developers' Association (Rehda) president Datuk Seri Michael Yam says the present threshold household income for the purchase of low-cost houses is RM2,500, which is just RM500 less than the RM3,000 income limit for MFH buyers.

The minimum property value of RM100,000 should be set aside so that those who are not entitled to the RM42,000 low-cost homes be given a chance to own a property, says Yam.

Chang calls for home buyers to be given preferential interest rate.

Loan financing is another issue linked to the MFH scheme. National House Buyers Association (HBA) secretary-general Chang Kim Loong says buyers with a monthly income of RM3,000 may have problems with mortgage payments, despite the 100% financing provided under the scheme.

Chang explains that based on the previous BLR (base lending rate) of 6.3% and a “market rate” of BLR less 1.8%, the effective interest charged to a house buyer is about 4.5% per annum. Generally, banks practise a rule of thumb whereby any single loan repayment should not exceed one-third of the borrower's gross pay.

“For a RM220,000 housing loan with a tenure of 30 years and 100% financing, a buyer with a monthly salary of RM3,000 would be paying monthly repayment of RM1,115, which is 37% of his gross monthly salary. These borrowers would not have much savings and could default on their loan obligations in the event of personal emergency expenses. Also, it would be impossible for these house buyers to take up additional loans to buy cars.”

Chang calls for home buyers under the scheme to be given a preferential interest rate of 3% fixed throughout the loan tenure. He also says the Government must make it compulsory for MFH projects to be based on the 10:90 BTS (build-then-sell) concept to give maximum protection to home buyers and to shield the Government from potential liabilities as such projects are easier to revive in the event they are not completed.

Under the BTS concept, a buyer only pays 10% of the price on signing the sale and purchase agreement, with the balance to be settled only after completion of the house.

Yam of Rehda concurs with Chang and calls on banks to allocate a block of loans at preferential interest rates with longer loan tenures and with the provision of having joint multiple borrowers.

By The Star

SP Setia plans RM2.8bil projects

PUTRAJAYA: Property developer SP Setia Bhd will redevelop the Sri Johor, Sri Pulau Pinang and Sri Melaka low-cost apartments and the Taman Ikan Emas low cost homes in Bandar Tun Razak, Cheras at a total development value of RM2.8bil.

SP Setia's deputy president and chief operating officer Datuk Voon Tin Yow said the first phase of the project would take off next month.

He said this at a press conference yesterday after a meeting the Federal Territories and Urban Wellbeing Minister Datuk Raja Nong Chik Raja Zainal Abidin on the proposal to rebuild the housing area.

Raja Nong Chik said the first phase of the project would involve the development of affordable, quality homes totalling 1,255 units. They would be completed in three years.

He said SP Setia would also undertake an apartment housing project in the area for young executives with each unit to cost not more than RM300,000 and with a built-up area of at least 800 sq ft.

The decision to build quality, affordable homes in the area was made in view of the housing area which has been rundown. The area will be modernised with well appointed homes as well as public facilities and improved landscaping.

Under the second phase, Raja Nong Chik said the housing developer would also develop a commercial and residential centre which will take 14-15 years on the 53.4ha.

By Bernama

Beating traffic congestion

Driving in Kuala Lumpur during rush hour, when people are going to office or going home, one cannot help noticing that the number of cars heading in one direction is matched by the number of cars heading in the opposite direction. People seem to live at one end of the city and work at the other end. The amount of petrol consumed and the number of hours wasted must be phenomenal. How does this come about? Is there a solution?

Improvement of public transportation could reduce the number of cars on the road but the new cars registered every year seem to cancel out the reduction. Restriction of cars from certain parts of the city by imposing a fee for entry during peak hours has been considered and abandoned. These solutions do not seem to work in Kuala Lumpur. Taking taxis is not a pleasant experience because taxis are often old and dirty and the drivers seem to be a grumpy and choosy lot. They avoid certain destinations at certain times of the day, which are usually the very destinations that you need to get to in a hurry.

Actually somebody, whom I will call CK, has found an interesting solution to the problem. CK was a manager in a large foreign manufacturing company and the division under him was famous for the loyalty of its staff. The staff turnover rate in his division was the lowest in the company. There was no need to keep retraining new staff and there were hardly any disruption due to staff quitting.

What was his secret? It was not something you will find in any management book. When he recruited, he selected only people who lived in other towns, not in KL. When they came to KL to work, they would be in a totally new environment and would have to look for accommodation. Naturally they would look for accommodation close to their place of employment, preferably within walking distance. In time, they would get married and buy a house in the same area. Then their children would go to school in the same area. They would be less likely to change jobs and move away.

If your enterprise is located in Cheras and you hire somebody from Kepong, at the opposite end of town, you will create an unhappy commuter who has reason to quit upon getting the first alternative offer.

I saw a somewhat similar principle applied in Singapore when I visited the Marina Bay Sands project while it was still under development. This was a megaproject employing thousands of foreign workers, who would have caused great social disruption in Singapore had they been obliged to find accommodation all over the city. The employers were obliged to house all the workers in quarters nearby so they could walk to work. Food was provided in large comfortable canteens within the project areas. I was told this was the norm in all big projects in Singapore. In this way there is minimal human congestion caused by megaprojects.

Another innovative way to reduce traffic congestion has been tried out in Santiago, Chile and Beijing, China. This was to allow cars with odd-numbered plates and those with even-numbered plates to drive on alternate days. In theory, this should halve the number of cars on the road. But in Santiago, everybody began to keep two cars, one with odd-numbered plate and the other with even-numbered plate. The car population doubled and congestion got worse. The same idea was applied in Beijing during the period of the Olympic Games, and it worked better. The time period was too short for people to consider getting two cars.

In Bangkok, they have motorbike taxis and it has become a common sight for executives in coats and ties to ride pillion in order to get to their meetings on time.

In the Philippines in the 1970s, they gave up getting to meetings on time. The first time I attended a seminar in Los Banos, which is an hour's drive from Manila, I turned up early and thought I had made a mistake about the date and time. Then a few locals turned up. Slowly, the hall filled up. Students came first, then junior academics and junior civil servants, then professors and senior civil servants. Finally, the minister who was to perform the opening ceremony arrived, two hours late. He started his speech with a joking apology, blaming the traffic in Manila for the delay. However, the participants seemed to have timed their arrival very accurately according to their social rank. It looked like a well-practiced pecking-order display, in which everybody knew when to arrive except the foreign participants.

That display, involving about 200 people, would have wasted 600 man-hours. If every minister and provincial governor repeated this every working day, the effect on national productivity would have been calamitous. This was during the early days of Asean, when President Fidel Marcos ruled by decree and the Philippines prided itself as the most advanced country in Southeast Asia. Makati district in Manila had the most modern shopping malls in the region. The streets were filled with big American limousines.

Unknown to us, the country was already beginning its decline to the bottom. The proliferation of time-wasting habits may have been a major cause.

Botanist and researcher Francis Ng is the former deputy director-general of the Forest Research Institute of Malaysia. He is now the botanical consultant to Bandar Utama City Centre Sdn Bhd and the Sarawak Biodiversity Centre.

By The Star (by Francis Ng)

N. Korea launches city facelift to mark anniversary

North Korea said Friday it had launched a construction project to change the showcase capital "beyond recognition" in the run-up to the centenary of its founder's birth next year.

The massive construction will centre on the Mansudae area of Pyongyang where the giant statue of late president Kim Il-Sung stands, the official Korean Central News Agency said.It will include a "monumental edifice", high-rise apartment blocks, public buildings and cultural and leisure facilities including a round people's theatre facing the existing Mansudae Assembly Hall where parliament meets.A restaurant will also be built to face Pyongyang's famous Okryu Restaurant, along with a park.

The new construction will match existing monumental edifices dedicated to the memory of the founder and his Juche (self-reliance) ideology, the agency said."This will change the appearance of the capital city beyond recognition," it added.

The North in 2009 announced plans to build 100,000 new high-rise apartments in three districts of the capital to mark the 2012 anniversary.The latest project has been announced despite chronic food shortages in the impoverished communist state.

UN agencies say six million people, a quarter of the population, urgently need aid.The North has vowed to become a "great, powerful and prosperous nation" by next year, the 100th anniversary of the birth of its founder who died in 1994.The country fosters an all-pervasive personality cult built around the late Kim and his son and current leader Kim Jong-Il.Kim Jong-Il is now grooming his own son Jong-Un as heir apparent.