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Saturday, April 14, 2012

Going up the property value chain

High-profile projects like the KL Metropolis and Platinum Park are taking Naza TTDI to the next level of the property sector.

AUTOMOBILES often pop up in people's mind when Naza Group is mentioned. It's understandable given its history and position as the country's largest private car company.

There is, however, another part of the group's business that's fast catching up. The sprawling group years ago added property development to its portfolio of companies and it's looking to create the same type of awareness for that side of the business when it comes to name association.

Its ambition to get involved in bricks and mortar instead of just nuts and bolts came by way of an acquisition in 2004.

That year, Naza Group's unit, Ekspedisi Nikmat Sdn Bhd bought over TTDI Development Sdn Bhd from Danaharta. That was the first step and ever since then, that property business has slowly been manicured and groomed into Naza TTDI Sdn Bhd.

TTDI Development, formerly known as UDA SEA Park Development Sdn Bhd, was a joint venture between SEA Park Development Sdn Bhd and the Urban Development Authority (UDA) that turned 286ha of rubber estate land into the highly-acclaimed Taman Tun Dr Ismail (TTDI) township during the 1970s.

Today Naza TTDI is making waves with a number of high impact projects, notably KL Metropolis and Platinum Park, that will take it to the next level of the property value chain.

Naza TTDI deputy executive chairman cum group managing director SM Faliq SM Nasimuddin says these projects will showcase the company's branding to a broader market and build a higher profile for the company.

He is confident that Naza TTDI will be able to record RM1bil in sales this year. Last year, it recorded sales of RM655mil.

Faliq says that although the group's automobile business is the main growth driver and is doing well, its property division is also growing into an important contributor to the group's bottomline.

“Naza TTDI is probably one of the largest privately-owned property developers in the country today and our vision is to become one of the top ranking property players within the next five years,” he tells StarBizWeek.

However, he says the company, being a private entity, does not want to expand too fast but prefers to grow steadily and systematically.

“What is important is that we have the right projects to meet an annual growth target of 10% to 15%, and a strong balance sheet.

“We want to make sure that any project we bring to the table will be of quality and will be ahead of schedule. That's why, first and foremost, we place great importance on building up an exemplary team with the right resources and expertise,” Faliq says.

Expressing his satisfaction with the company's performance thus far, he does not discount a listing of the property outfit in the future, but notes that the timing must be right to reap the right value from any listing exercise. The probable timeframe for listing is in the next three to five years.

“Our internal track record has been quite strong, and we already have in place the necessary corporate governance and performance standards required of a listed company,” he says.

Signature projects

One of the most touted projects by Naza TTDI is KL Metropolis a 75.5-acre mixed development comprising residential, commercial, retail, office towers, exhibition and convention, and arts and culture facilities.

Positioned as Kuala Lumpur's international trade and exhibition district, the development has been master planned by renowned international architect firm Skidmore, Owings and Merrill, famed for developments such as London's Canary Wharf, Burj Al-Khalifa in Dubai, and Singapore's Marina Bay.

The master plan of KL Metropolis, launched last October, shows that KL Metropolis will be based on sustainable development principles that promote the preservation of the environment as well as meeting the needs of the working and living population of the area.

According to Faliq, KL Metropolis is designed to the Green Building Index requirements and will be among the most environmentally sound mixed-use communities in the country. The development is also aiming for MSC Cybercentre status.

“It will be the first registered LEED for Neighborhood Development (LEED-ND) project in Malaysia. LEED-ND certification is an internationally-recognised green rating system that incorporates the principles of smart growth, urbanism and green building, that meets accepted high levels of environmentally responsible and sustainable development,” he explains.

Expounding on details of the master plan, he says it is designed in a manner where it can be implemented and developed in a series of manageable phases.

“This will encompass a new generation of buildings, with sustainable architecture and energy efficient engineering that is sensitive to the environment and directly improves the quality of life and productivity of their occupants.

“The RM15bil development will stretch until 2025 and will need a lot of our attention. We are talking to a few developers as well as retail and hotel investors to become partners for the various components in KL Metropolis,” he adds.

Naza TTDI's unit which is developing the project, TTDI KL Metropolis, signed a privatisation agreement with the Government and Syarikat Tanah dan Harta Sdn Bhd to develop the Matrade Centre for the Government at a cost of RM628mil.

Designed to promote year-round events, Matrade Centre on 13 acres will have a gross floor area of 1 million sq ft and net lettable area of 600,000 sq ft. The completed building is to be handed to the Government by end-2014.

Faliq says another major component of KL Metropolis will be the shopping mall which will be designed to allow future “horizontal” expansion after the gestation period is over.

“The retail component will be one of the key plays in KL Metropolis and will herald a new shopping experience with some key unique features,” he explains. Another of its high visibility project is Platinum Park, which is located on nine acres in the Kuala Lumpur City Centre vicinity.

Designed by Foster + Partners, the nine-acre project comprises three Grade A office towers, two luxury service apartment towers and one hotel cum luxury service apartment tower. There will also be 150,000 sq ft of retail space and a 1.5-acre park.

The first office tower, Felda Tower will be handed over in mid-2012 while the second tower, for a government-linked company, is due for completion in late 2013. The third tower for the Naza Group, Naza Tower, is to be completed in the second quarter of 2014.

The project with gross development value of some RM4bil is due for completion in 2016.

Spreading its wings

Naza TTDI has 1,300 acres of landbank 500 acres in the Klang Valley and 800 acres in Penang that the group feels have a potential gross development value of over RM20bil combined.

Faliq says Naza TTDI is looking to expand its market presence outside of the Klang Valley to other fast-growing markets such as Penang and Sabah.

The company owns 800 acres in Bertam on the mainland of Penang which it plans to start developing around end-2013.

As for Sabah, Naza TTDI is keen to explore opportunities in Kota Kinabalu.

He says the new airport in Kota Kinabalu and the many attractions there have contributed to a surge in tourist arrivals from various countries including Hong Kong and South Korea. Foreigners from those countries are keen to invest in properties there.

On whether Naza TTDI harbours any overseas ambition, Faliq says: “TTDI is a brand we can take overseas, but this will not be happening so soon. We are studying a number of opportunities.”

The markets being looked into include Singapore and the other Asean countries.

Faliq says being creative and having unique selling propositions to offer property buyers are very important criteria to succeed in the highly competitive property development sector.

“Creativity, functionality and quality are part of the value propositions of our projects whether it is a township, business park or retail development. Moving into the highly sought after Kuala Lumpur City Centre vicinity and other major integrated developments will offer the opportunity for us to do even better in those areas,” he explains.

Having completed more than 15,000 residences and commercial units spanning over 1,650 acres, the company has established a good development track record and sound fundamentals.

“The Naza TTDI brand is synonymous with quality, early delivery and proven capital appreciation in the secondary market,” he says.

Faliq says the company has to be vigilant on the challenges in the property business that include growing competition, getting hold of the right landbank for its projects, having to face an oversupply situation of high-rise residential projects and office space and rising cost.

According to him, the surplus in the high-rise residential market comprises mainly over-sized units of more than 2,000 sq ft while supply of more average sized residences is still limited.

To gauge the market's preferred size of residential property, a survey was conducted in Singapore last year, and the results show that the majority still prefer smaller units mainly for the reasons of affordability and easier maintenance.

“Demand is stronger for residences of average sizes of 600 sq ft to 1,500 sq ft which are still in short supply. This is the market we are targeting at,” Faliq says.

The company will also have larger units in the range of 2,000 sq ft or bigger but this will only account for about 30% of its projects.

Naza TTDI's portfolio of completed projects include Section 13, Shah Alam and Laman Seri semi-detached and bungalows.

Another TTDI project is Laman Seri upmarket semi-detached and bungalows enclave and Laman Seri Business Park commercial development in Shah Alam.

It successfully built the Giant Hypermarket within a record six months as well as constructed the Shah Alam Malawati Indoor Stadium in 1998 for the boxing event of the Commonwealth Games.

The company has two ongoing township developments TTDI Alam Impian, a 208-acre township development in Section 35, Shah Alam; and TTDI Grove Kajang, a 118-acre township in Kajang. These projects are the company's “bread and butter” which can cushion the company against a market downturn.

Another upcoming project set to kick off in mid-2013 is TTDI Puchong, a RM1.2bil mixed development on 53 acres in Puchong.

It also has some pocket developments at its two TTDI townships in Kuala Lumpur and Shah Alam the RM137mil TTDI Ascencia and RM207mil TTDI Adina.

By The Star

Stopping foreign property purchases

Hard facts: The notion that allowing foreigners to buy high-end properties will not affect other properties is false. When Malaysians are squeezed out from that sector by rising prices, they will move down the line and house prices will be affected all the way down.

RECENT reports of the Government considering doubling the minimum price of houses that foreigners can buy to RM1mil is positive for it is a step in the right direction. But you probably need something more drastic than that.

It’s a strange thing, property. As much as it can keep the economy going and get prosperity levels up and up, it can send them all crashing down at other times. As much as property developers and banks contribute to societal well-being, they can just as well destroy it.

It’s a basic human necessity when you call it shelter and every society aspires for a minimum standard of comfort. But it is more than shelter – it’s a lifestyle, it’s luxury, and it caters to the rich, the poor, the middle class and the working class.

It’s a workplace, it’s a production facility, it’s a place to go for entertainment, to shop, to stay for short periods of time and it’s big business. So, when do you allow foreigners to own a property or not own one?

That’s not an easy question to answer for you have to think about prices, crowding out, demand and supply, dreaded bubbles and the like.

The trick may be to allow foreign purchases in some areas and not in others.

If property is purely for commercial purposes when it is used for offices, factories, shopping complexes, hotels and so on, by all means let those be open to foreign purchases, not to encourage speculation, but to facilitate business.

But if it is for residential purposes, it is best to keep the foreigners out for two reasons – one, our currency is probably still undervalued which will enable them to buy residential property cheaply from their point of view, driving up the prices of residential property to all Malaysians.

Two, this along with schemes such as 5/95, which allows payment of 5% of the property price and nothing more for two years, simply encourages speculation in property, encouraging a boom-bust scenario in property which we can ill afford.

One will do well to remember the United States’ sub-prime crisis when, incredibly, purchasers could get loans of more than the value of the house. And then incredibly too, many such mortgages were pooled together and given investment grade rating.

That basically enabled loan originators to simply pass on their loans to others in the United States and throughout the world who were blissfully unaware of the risks they were really taking because they believed the rating agencies who did not know their work.

When the crash came, as it inevitably does under such circumstances, the US economy shuddered to a halt and threatened to go under and take the whole world economy along with it. It took a lot of printing of money to stop that, something only the US could do because other countries lent it money in US dollars!

But, coming back to Malaysia, the notion that allowing foreigners to buy high-end properties will not affect other properties is false. When Malaysians are squeezed out from that sector by rising prices, they will move down the line and therefore house prices will be affected all the way down.

Ask Singaporeans – they know that well. Because there is such a lot of foreign demand for houses from foreigners, most Singaporeans are stuck to their Housing Development Board flats with no chance of moving higher up in more ways than one.

In fact, there is a school of thought that this allowed the opposition to make inroads in the last Singapore elections following which Mentor Minister Lee Kuan Yew left the Cabinet and his son, the Prime Minister, made an apology to the Singaporean public.

There is only so much land and therefore so many houses that can be built. Houses should be reserved for those who stay in this country – residents. Period. That way, developers can meet genuine demand from those who want to stay here, not those who want to buy property to make a quick buck.

Developers are the wrong people to ask whether foreign buying of houses should be permitted. They will say yes, because they want greater demand for their products. But ask them how they are doing now when they marketed their high-end products in areas in and around Mont Kiara and the twin towers of KL, first to foreigners and only then to locals.

Some of them are finding out that it is better to cater to genuine demand – people who want to stay there rather than those who speculate on house prices. If speculators outnumber those who want to stay there, then you are going to have a problem and a property bubble that will burst.

Even if you don’t allow the foreigners in, this can happen. So why let them in the first place when you deprive residents from decent places to stay.

Yes, property prices appreciate in the longer term but let them appreciate in terms of local conditions, according to local income levels. Then, the vast majority of Malaysians who don’t have a house can still afford to purchase them at a reasonable price.

The lack of lights in many high-end condominiums as dusk settles on Kuala Lumpur should be a stark, dark reminder to the Government that speculative foreign purchases of residential property do nothing for Malaysia, raise property prices for Malaysia and create eerie places.

Independent consultant and writer P Gunasegaram continues to hope that the authorities will see the light of day sooner rather than later.

By The Star

Protecting local house buyers

Out of reach: House prices have appreciated considerably over the past few years and it is becoming increasingly difficult to find residential properties priced below RM500,000 in Kuala Lumpur or Penang.

INCREASING the floor price of residential property for foreign buyers from RM500,000 to RM1mil will be a positive development for the housing market, according to analysts and consultants.

Many quarters are in favour of the move to raise the floor price as it would protect the housing market for the masses.

They say the move is timely due to the continued uptrend in home prices which are forcing financiers to start providing “second-generation” type of home loans which extend the servicing of the debt to the purchasers' children.

Sarkunan: ‘I think overall, this is a proactive policy measure by the Government to reduce competition for houses valued at below RM1mil.’

Property consultancy Knight Frank's executive director Sarkunan Subramaniam says the increase in floor price for foreigners would be positive as it would benefit the local buyers as the foreigners have been pushing up house prices.

“I think overall, this is a proactive policy measure by the Government to reduce competition for houses valued at below RM1mil. However, there could be some slight impact on foreign purchasers in Johor who choose to stay in Johor Baru but work in Singapore,” Sarkunan tells StarBizWeek.

Hong Leong Research's property analyst Sean Lim says that the move is “positive for the domestic buyers who have been frustrated by the rise property prices over the last two to three years”.

Lim says in a report that the impact on the overall property market will be minimal as “less than 5% of all transactions is by foreign buyers”.

Lim also states that the RM1mil floor price could be irrelevant as most foreign buyers are buying in the KL City Centre area and the Golden Triangle in Kuala Lumpur with valuations in excess of RM1,200 per sq ft.

“In the greater Klang Valley area, channel checks indicate that majority of foreigners are renting instead of buying houses,” Lim says.

Lim maintains his overweight rating on the property sector.

Koh: ‘A limit on foreigners which allow them to buy only houses that are priced above RM1mil will protect the mass market segment of residential properties and see less competition.’

DTZ Debenham Tie Lung executive director Brian Koh says that the latest measure that is being considered by the Government will help protect the mass segment of residential properties from foreign speculation.

“A limit on foreigners which allow them to buy only houses that are priced above RM1mil would protect the mass market segment of residential properties and see less competition,” Koh says.

“There may be some impact on the foreign buyers of houses that are priced RM800,000 and above.

“But most foreigners normally buy properties above RM1mil so there will be limited impact on the property sector. These foreigners are from Hong Kong and Singapore,” Koh says.

Soo says that the measure will have limited impact on the property sector as most foreign buyers are already buying properties that are priced above RM1mil.

CB Richard Ellis Malaysia's managing director Allan Soo says that the measure will have limited impact on the property sector as most foreign buyers are already buying properties that are priced above RM1mil.

CIMB Research says in a research note that it is “not entirely surprised by the proposed ruling as house prices have appreciated considerably over the past few years and it is becoming increasingly difficult to find residential properties priced below RM500,000 in Kuala Lumpur or Penang”.

“We believe the impact on developers with significant foreign buyers such as Eastern & Oriental Bhd would be minimal. Only 2.4% of residential properties transacted in 2011 were priced above RM1mil and foreigners typically chose higher-end properties,” it adds.

Should this higher floor price be approved, it would also mean protection for the mass market segment of property purchasers.

The Government intervention into the property market with the objective of eventually cooling down house prices to more realistic levels is also in line with the current trend by governments in Singapore, Indonesia and China.

Analysts say that the move shows how much property prices have spiralled locally and that the move is proactive amid growing fears of a property bubble.

An economist with RHB Research Institute says that sustained high property prices and news about financiers starting to offer second generation loans show the seriousness of the non-affordability issue.

“These financiers need to stretch the loans to the second generation which only indicate that houses are becoming unaffordable for a normal salaried person,” RHB Research said.

“From an economic point of view, if affordability issue continues to deteriorate it would not be a good feeling for the people. Moreover, these second generation loans may have legal implications as the financiers don't know the credit rating of the children of the current buyers,” the RHB spokesperson added.

A senior analyst with a foreign research house observes that property prices have sky-rocketed and reckons that the current prices are unrealistic.

“I think the Government should implement the measure immediately.

“There is no doubt that looking back, prices were more realistic in the past without people having to extend the loans to their children.

“The trend is for developers to offer small-sized units nowadays as the prices keep going up. The houses are becoming smaller and smaller because of the rising cost factor,” he adds.

According to statistics of the Valuation and Property Services Department, the number transactions for properties priced up to RM150,000 decreased year-on-year by an cumulative average of 30.6%.

By The Star

Naza TTDI boss shares his vision

Naza TTDI deputy executive chairman cum group managing director SM Faliq SM Nasimuddin, 27, took over the helm at Naza TTDI in February 2009. He shares his vision and plans for the company with StarBizWeek deputy news editor ANGIE NG in this question and answer session.

StarBizWeek: What is your vision for Naza TTDI and what are the key performance indices for the company in these 2 years?

Faliq: Naza TTDI's vision is to be in the country's top property developer league in the next five years. Our vision will be met by the development of our high impact projects such as the KL Metropolis and Platinum Park and supported by our “bread and butter developments” townships such as TTDI Alam Impian and TTDI Grove Kajang.

For 2012, we are targeting to reach a RM1bil turnover.

How has the company evolved as a property developer and are you happy with its performance so far?

From a developer that developed the award-winning Taman Tun Dr Ismail (TTDI) township in Kuala Lumpur, I am proud to say that we have not only maintained our position as a premier township developer but also over the last few years evolved into the development of high-impact projects such as the projects mentioned above.

The Naza TTDI brand has stood well among our potential buyers and customers. We have received both international and national recognition for our product, quality, innovation and brand through awards and certifications such as the Asia Pacific Property Awards, Cityscape Asia, FIABCI, Brandlaureate, ISO Certification MS9001:2008 and QLASSIC Certification.

What do you count as the major achievements and milestones of the company?

Thirty-nine years ago, the company started off as a township developer by developing Taman Tun Dr Ismail in Kuala Lumpur. By and by, we ventured into boutique developments (TTDI Adina, Shah Alam and The Valley TTDI, Ampang) as well as commercial developments (Laman Seri Business Park, TTDI Dualis and Jayamas 3). Now, we have embarked on high-impact projects such as the Platinum Park which is set to be a prime mixed integrated development in the KLCC vicinity and KL Metropolis which is positioned to be KL's International Trade and Exhibition District.

As can be seen from our track history, we have grown by leaps and bounds in just nearly four decades. Thus, I would say that our major achievement is in being a “full-fledged” property developer in just four decades.

What are some of the challenges that lie ahead for the company and the property market in general?

For the company, the challenge we face is to constantly suit market demands. Looking at market trends for the greater Kuala Lumpur and Klang Valley areas, we see that buyers are now opting to buy smaller residential units. Thus, we now put more focus in developing residential properties which are space efficient with enhanced safety and security features for the increasing demand by executives and those with smaller families.

Parallel to introducing the right products for the market, we are also continuously improving our product quality and features so as to maintain our 39 years of brand legacy.

How do you describe the company's property projects so far in terms of design and concept?

Our concept is simple: Affordable luxury backed by a good track record in delivery and quality.

On top of that, we are continuously injecting technological advancements and innovative designs that will translate into a source of architectural pride and meet customer's expectations.

This is evident from the strong brand following that we enjoy where almost a third of the purchasers for any new launches are our repeat buyers.

(click image to enlarge)
Which are the projects you are particularly proud of and why?

The Platinum Park and KL Metropolis.

Platinum Park marks our first foray into a high impact project development which makes us one of the few developers in this league. The 9.1-acre development is located in one of the biggest contiguous land in the KLCC area where we will build compelling components such as professional spaces, residential, retail and hotel that will integrate with 1.5 acres of public space. I believe that our collaboration with acclaimed architect, Fosters & Partners, in the master design of this development will make Platinum Park an international landmark and destination in Kuala Lumpur.

As for the development of KL Metropolis, we are proud to play a role in the country's goal to be the premier and preferred MICE (meetings, incentives, conferencing and exhibitions) destination in the region by creating Kuala Lumpur's first international trade and exhibition district. In the design of the master plan, we have incorporated these conducive elements, MICE focused facilities, convenient access for logistics and transportation, hotels, grade A offices, regional retail centres and public spaces.

These two mega projects are our flagship developments which will propel the company to the next level.

Following the launch, we received a lot of enquiries and response from local and international investors. Having worked with both local and international architects such as Fosters and Partners and Skidmore, Owings & Merrills to develop the master plan for Platinum Park and KL Metropolis respectively, I believe these developments will be new landmarks and benchmarks of architectural excellence in our country and, perhaps, in the region.

What is your outlook for the local property market and expected performance of the various property sub-sectors?

Our outlook for the local property market is moderate. But backed by the Government's Economic Transformation Programme, we believe the property market especially in the Greater Kuala Lumpur and Klang Valley will continue to prosper especially with the establishment of new growth areas as well as initiatives for the provision of transportation facilities and accessibility. As long as the buying activities are supported by economic fundamentals and genuine purchases, we are confident that the local property market in Malaysia will continue to be on the upside.

By The Star

SP Setia expands its property portfolio into China

It will be a busy period ahead for SP Setia Bhd and Rimbunan Hijau Group as they are in a joint venture with Qinzhou Jingu Investment Co Ltd to develop the Qinzhou Industrial Park (QIP) starting with the RM2.6bil start-up district of QIP.

Spanning 1,945 acres, the start-up district of QIP will give SP Setia a foothold in the vast China market as it now owns 45% equity stake in a Malaysian joint-venture (JV) company known as Qinzhou Development (M) Consortium Sdn Bhd.

Qinzhou Development will hold 49% stake of the China-Malaysia Qinzhou Industrial Park Investment Co Ltd (QIPIC) to be formed with Qinzhou Jingu as its JV partner.

SP Setia executive vice-president and chief financial officer Datuk Teow Leong Seng tells StarBizWeek that the sizeable and high-profile nature of the project was envisaged to provide a significant boost to its long-term ambitions of achieving meaningful and sustainable overseas expansion, which already included projects in Australia, Vietnam and Singapore.

“QIP presents a unique opportunity for the group to participate in the development of a government-to-government (G2G) supported project that is well-placed to benefit from the growth in China-Asean trade and China's own continuing economic growth,” he says.

Besides SP Setia, Rimbunan Hijau has a 45% stake while Datuk Beh Hang Kong and James Lau Sze Yuan own 5% stake each in the Malaysian JV.

Though details remain scarce as the parties are still in the framework stage of the agreement, Teow said that investors and enterprises registered in the QIP could look forward to a 15% reduced corporate income tax rate and a host of investment friendly incentives to encourage industries registered in the QIP.

The Chinese premier proposed the QIP during the Malaysia-China Economic, Trade & Investment Cooperation Forum in April 2011, and it will become the third industrial park in China to be developed under a G2G collaboration, following Suzhou Industrial Park and Tianjin Eco-City.

Though the Chinese government had recently introduced several cooling measures to curb rising property prices, the challenges met by foreign parties attempting to tackle Chinese market might still be a concern.

“Your network or guanxi is the way things are done in China, and your guanxi could open many doors for you. Looking at the joint venture between the Malaysian parties and Qinzhou Jingu, communication barrier is non-existent and it seems that the mentioned parties can get things going, with the backing of the Chinese and Malaysian governments,” says an analyst.

He says the cooling measures implemented might also bode well for the JV as steady property prices might not expose the companies to volatile market trends.

To sweeten things, the Chinese government has also pledged that all preferential policies of China's West Region Development and Guangxi Beibu Gulf Economic Zone would be applicable to the QIP.

Apart from that Qinzhou Jingu has also committed to inject the land into the JV vehicle, QIPIC, at cost price and not seek any profit from its capital contribution by the provision of land.

QIP consists of five functional districts, which are industrial, residential, supporting facilities, port new city production central, life central and scientific and technology research service.

The industrial park is located 10km south of Qinzhou City and 5km north of the Guangxi Qinzhou Free Trade Port Area, a national economic and technological development zone.

Maybank Investment Research says QIP is strategically located between the port cities of Beihai City to the east and Fangchenggang City to the west.

“The former is a developing hub for shipping oil between South-East Asia and China and the latter is a major regional shipping and trade hub between Guangxi and Vietnam. QIP is accessible from these two port cities and from Nanning to its north via existing expressways,” it says.

The added accessibility to QIP would be improved upon the completion of the Liuging-Qinzhou Expressway and the Coastal Highway to the South.

By developing QIP, the new JV vehicle is also trying to get its hands on the more developed Binhai New Town. It is seeking approval from the Chinese government to allow up to 30% of the commercial and residential land in the start-up district to be swapped for another piece of commercial and residential land.

This deal will ultimately allow the JV company to gain access to be part of the development at Binhai New Town, which has a total planned area of 110 sq km and a net development area of 45 sq km.

Hong Leong Investment Bank Research says in a report that the latest development demonstrates the company's commitment to overseas expansion despite their previous setbacks in China and Vietnam.

“Positive but hard to quantify, given the lack of information on gross development value and product mix. We believe SP Setia's products will likely be landed townships similar to Bandar Setia Alam, catering to local conditions over there,” it says.

“We also see this as a harbinger of future goodies domestically, as we consider SP Setia a potential frontrunner for government-redevelopment projects in Sungai Buloh, thanks to its Permodalan Nasional Bhd parentage,” it says.

By The Star

Investing in foreign property seems harder now with changing rules and economic climate

With the permission from my friend, and with her thoughts on investing in London, this piece is about her considerations when buying into a unfamiliar foreign market.

For quite a while, she and her husband have been considering the option of buying a residential property in London. She attended seminars on properties and lettings, spoke to other potential investors and those who have already invested.

After a long deliberation with her spouse, they both decided to keep their money closer home.

It was not the 2012 Budget announced on March 22 by the Chancellor of Exchequer, equivalent to finance minister, and the slew of changes that govern foreigners buying British properties that made them change their minds. They had made up their mind to drop the idea before that.

They had other considerations. The first was the distance and they questioned the practicality of having to deal with long distance administration issues, be it ownership or tenancy. The second was the uncertainties that govern the world today. Uncertainties and instability exist all the time, but the last several years, the vagaries of the changing world seem to be coming fast and furious. Added to that were the changing rules and regulations by governments.

Foreign ownership, at one time welcomed, may cease because of national considerations. They also reasoned that at this point in their lives, if they did not sell the property, it would be left to their children.

This couple was not hoping to make lots of money with their overseas investment. Neither were they speculating. They just wanted to diversify while at the same time, preserve the value of what they have.

There are many who have invested abroad. And their reasons for doing so may be well justified. But there is something about changes in rules and regulations, at national level, that add to the current load of global economic, financial and political uncertainties that govern the world today.

“Just as there are changes in Malaysian government rules and regulations about what residential properties foreigners can buy, so are there changes in the United Kingdom,” she says.

She was referring to a report early this week that the Malaysian government was mulling over raising the minimum floor price of houses that foreigners were allowed to buy from the current RM500,000 to RM1mil. The move is to control the rise in property prices.

In the same way, other governments around the world too would make changes to suit their national agenda.

Last December, the Singapore government imposed a 10% additional buyer's stamp duty applicable to all foreign purchasers, bringing it to 13%. Foreigners were snapping up about 9,300 private homes last year making it a record one-third of total sales.

Early this month, Singapore government announced that it would end a programme that allowed wealthy individuals to gain permanent residence quicker by putting money in the island, after an influx of foreigners in recent years spurred property prices and fueled voter anger, Bloomberg reported.

Back in 2010, Australia tightened rules on foreign investment in real estate, and introduced penalties to enforce the changes, to ensure pressure was not placed on housing availability for local residents. Temporary residents required approval from the Foreign Investment Review Board to buy property, and had to sell them when leaving Australia.

About three weeks ago, the British government introduced a new Stamp Duty Land Tax (SDLT) rate of 7% for residential properties over £2mil, applicable from March 22 this year.

London-based property consultant Knight Frank in an initial note on the changes says there would be a new 15% SDLT application from March 21 this year for residential properties over £2mil purchased by “non-natural persons”, such as companies.

The British government is also consulting on the introduction of an annual charge on residential properties valued at £2mil owned by “non-natural persons” (that is, properties bought in the name of companies). The intention is to legislate this in the 2013 Finance Bill and if this goes through, this annual charge will commence April 2013.

A fourth issue is an extension of the capital gains tax to gains on the disposal of UK residential properties by non-residents, non-natural persons, such as companies, commencing from April 2013.

In other words, says Knight Frank, the British government was saying that if you bought expensive residential properties as individuals, rather than a company, you would pay 7% and not 15% SDLT, and avoid a future annual charge.

The rationale is to target rich individuals who buy in the name of a company. However, property consultants and lawyers say individuals may come using a company vehicle because they wanted to protect their privacy and not to avoid paying a hefty 40% inheritance tax.

Whatever it is, to avoid all that hassle, my friend has decided to just keep her money closer home.

Assistant news editor Thean Lee Cheng thinks the vagaries of today's global outlook, coupled with changing national rules and regulations, make any investment a colossal consideration.

By The Star (by Thean Lee Cheng)

Should we park and ride?

RECENTLY, one of my long-serving staff decided to give up her job. In most cases, people leave a job for greener pastures. Her case was different.

She lives at one end of Kuala Lumpur (KL) and works at the other end of KL. It would be reasonable to believe that travelling within KL should be a breeze. Yet, on average she spends up to three hours each day on the road to travel to and from work. While she loves working with the company, the tiring years of spending many hours on the road has worn her down and her family time has been greatly shortened.

To many, the announcement of the Klang Valley My Rapid Transit (KVMRT) project is like a timely rain to ease the drought. The development of public transportation dictates the ease of mobility and connectivity in a city, which is a key factor for KL to become a world-class city, and for Klang Valley to elevate to the next level.

Attractive line

Being an architect and a developer, creating quality lifestyle has always been my keen interest, and I do look forward to the development of KVMRT. The first Sungai Buloh-Kajang line that has 51km in total length is expected to generate great benefits along the route once it is completed.

It will attract more people to move into Klang Valley, achieving the mission of growing the Greater KL's population, and eventually spurring the development of the country.

As the MRT project shoulders the important role of changing lifestyles of a huge population, it is important to be prudent in every single detail right from the planning stage to ensure the desirable outcomes are achieved, to the benefit of all, including the owner and operator of the MRT, as well as its end users.

Serving its purpose

Based on the plan, the Sungai Buloh-Kajang line is targeted to serve a catchment of 1.2 million people with 31 stations in total. Thirteen of these stations are expected to have the park-and-ride facilities. How viable are these facilities? Will they do more harm than good in solving the issue of traffic congestion, scarcity of land for housing and preservation of environment?

Before we delve further, let's ask ourselves this question: “How far are we prepared to walk under Malaysia's tropical weather?”

Answers may vary but the average acceptable distance will be 300m to 500m. If this is the comfortable distance for people to walk to the MRT stations, how many cars can we accommodate within the neighbourhood of this radius? How big a space should be allocated as parking bays next to the stations?

If one acre is allocated, it can only accommodate 150 cars, which is too few to satisfy the demand.

If the car park area is increased to three acres for 450 cars, it will be a huge waste of valuable space as the land next to the MRT station is a prime property. The construction and maintenance costs of these car parks will result in high parking fees for the users. Unlike shopping complexes which can charge reasonable parking fees to attract more shoppers and in turn, subsidise its car parks' maintenance cost.

In some developed countries, the same piece of land would be used to develop high rise dwellings or commercial buildings.

For example, instead of constructing a car park, the same three acres can be utilised to build 450 units of apartments of 1,200 sq ft each.

The idea of constructing 1,200 sq ft apartments will also attract more middle income group who can afford to own cars to use MRT instead. This will generate more volume to the MRT stations, increasing the economy of scale and thus lowering the price of ticket.

These stations will eventually become centres of attraction for commercial activities, creating more business and employment opportunities for the areas.

In addition to constructing high-rise buildings nearby the stations, feeder buses can be used to increase the accessibility to the MRT station. The MRT operator must ensure the feeder buses are frequent and timely in delivering reliable services to MRT commuters. Another option is to build covered walkways to encourage more people to use the MRT facility.

Riding quality

In order to attract people to stay near the MRT stations, noise and pollution from the MRT system should be reduced. One of the most effective ways of doing so is to go underground.

We should have more underground stations to ensure the quality of living for those who stay around the stations. Such areas can later on be expanded to become commercial hubs, complementing the existing business activities on the ground, such as what have been practised in Singapore, Hong Kong and Taipei.

Going underground may be expensive. Nonetheless, one has to consider the economic and social impacts of MRT stations in the long run. If it is not viable to go underground, are there any other options that are worth considering? What about building an elevated tunnel enclosed with fiberglass (similar to our KLIA's Skytrain) to cut down noise pollution?

There are many possibilities that can be explored with the development of MRT system. With proper planning, MRT system can ease the traffic flow and enrich quality of life for the people living in Klang Valley. However, with park-and ride stations, the concern is, does it serve the purpose of easing traffic congestion within if MRT commuters still need to drive to MRT stations?

Datuk Alan Tong is the group chairman of Bukit Kiara Properties. He was the FIABCI world president in 2005-2006 and was named Property Man of The Year 2010 by FIABCI Malaysia.

By The Star (by Datuk Alan Tong)

Far East upbeat on property sales

FAR East Organisation, a private developer with an annual revenue of S$5.5 billion (RM13.4 billion), expects investors from Southeast Asia to continue buying its properties despite the global turmoil.

The diversified group is targeting property buyers from Malaysia, China and Indonesia, said its chief operating officer Chia Boon Kuah.

This is because they accounted for a majority of property sales to foreigners last year.

According to a report by Savills Singapore, about 9,300 of the 15,904 properties sold last year were acquired by foreigners, and Malaysia took 20 per cent of the share.

Chia said for properties launched by Far East, Malaysians bought mainly in Woodlands, Bukit Batok and the Thompson area, each worth between S$1 million (RM2.45 million) and S$3 million (RM7.3 million).

"The buyers were mostly from Johor, followed by Penang and Kedah. Malaysia is an important market to us. It is the second biggest market after Indonesia," Chia said in an interview recently.

He said the group will continue to attract investors from Southeast Asia who want to be part of Singapore's growth story.

"Demand for property is there because wealth is growing. There is enough liquidity and foreigners continue to find Singapore attractive despite cooling measures by the government to curb speculative buy," Chia said.

But Far East is launching three to four projects less this year, compared with 14 in 2011. It is also targeting to achieve S$3 billion (RM7.3 billion) in property sales this year, lower than the S$4 billion (RM9.8 billion) achieved last year.

"We had the highest market share of 25 per cent last year in terms of property sales. We are lowering our sales target because demand for properties is expected to slow down in the second half of this year," Chia said.

Far East had launched five projects since early this year and achieved sales of S$1.8 billion (RM4.4 billion).

Some of the group's recent projects which had attracted Malaysians included Alba, Boulevard Avenue, Orchard Scotts, The Scotts Tower, Woodhaven and Watertown.

"We hope to maintain our 2011 revenue of S$5.5 billion this year but it would be challenging. We are bullish on the hospitality market and room sales have been holding strong so far," Chia said.

Far East, founded in 1960, owns and operates the largest corporate leasing and hospitality portfolio in Singapore, including eight hotels and 11 serviced residences.

By Business Times

Bumiputera property expo sees RM50m sales

The 5th Bumiputera Property Exhibition 2012 (BPEX 2012) is projecting RM50 million in sales and some 30,000 visitors this year.

The expo, which started yesterday at the Mid Valley Exhibition Centre in KL, will end tomorrow. It showcases RM2.3 billion worth of properties located mainly within the Klang Valley and Negri Sembilan.

A total of 50 property developers showcased their current and future development at BPEX 2012 including IJM Land, MK Land, SP Setia and Sime Darby Properties.

The properties featured include both residential and commercial developments ranging between RM70,000 and RM7 million per unit.

"About 60 per cent of our visitors are those looking for residential properties.

"BPEX 2012 is like a one-stop centre for those looking for residential areas within the Klang Valley," said organiser MMC Sdn Bhd managing director Shikin Taib.

"The exhibition also gives a chance to those who are looking for a house under the My First Home Scheme," she added.

There will be two more series of BPEX 2012 this year, which will be held between July 14 and 15, and November 23 and 25 at the Putra World Trade Centre here.

By Business Times

Tabung Haji to invest RM975m in UK property

KUALA LUMPUR: Tabung Haji expects to make at least one investment amounting to £200mil (RM975mil) in a commercial property in the United Kingdom this year.

Its managing director and chief executive officer, Datuk Ismee Ismail, said the property had been identified for investment from a study carried out since 2008.

Among the considerations taken in the study included the adherence to syariah principles.

“We had to be careful as we needed to study each of the tenant company occupying the property and ensure their compliance with syariah,” he told reporters after signing the Malaysian Corporate Integrity Pledge here yesterday, along with his senior management, CEOs of subsidiary companies and 450 members.

Tabung Haji yesterday became the first government-linked investment company to have taken the corporate integrity pledge in order to bring up further its corporate governance, accountability and culture of transparency.

By Bernama

Boustead plans shopping centre with Ikano

KUALA LUMPUR: Boustead Holdings Bhd plans to develop and manage a shopping centre here with Ikano Pte Ltd, the operator of Ikea stores in Southeast Asia.

In a statement yesterday, Boustead said its wholly-owned subsidiary Mutiara Rini Sdn Bhd had entered into an agreement with Ikano to form a joint-venture company called Circuit Wealth Sdn Bhd.

Mutiara Rini and Ikano will eventually each contribute RM100 million to the issued and paid-up capital of the joint-venture company.

Boustead said the joint-venture company will acquire land from the Armed Forces Fund Board for the shopping centre.

By Bernama