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Flipping can make an average oF US$ 30,000 each deal

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A L L P R O P E R T Y F O R T N I G H T L Y W I T H FRIDAY, DECEMBER 14 , 2012

Don’t wait to buy real estate;buy real estate and wait

A MODERN metropolis of international standards that transforms the region’s real estate landscape. That vision of Iskandar Malaysia in Johor is becoming a reality with the coming on board of a number of top-notch local developers with proven track records.

Several of them have already signed up to partner with Iskandar Investment Bhd (IIB), the strategic developer of cat a ly t ic projects in the huge regional development, and their focus is on Medini, while another accomplished developer, an early bird in Medini, is expanding its landbank to further grow the area in a link-up with IIB.

And more prominent property players, including from overseas, are beating a path to the doors of IIB. This lends credence to t he a s s e r t i o n t h a t w h i l e 2011/2012 was defined as the Tipping Point for Iskandar Malaysia, 2012/2013 is being touted as the Banner Years in v iew of t he ex pe c ted launches of various projects.

IIB president and CEO Datuk Syed Mohamed Syed Ibrahim stresses that it is important for the agency to i d e n t i f y t h e c r i t i c a l comp o ne nt s t h at w i l l complement the ecosystem that has been put in place in

positioning Medini as the central business district of Nusajaya.

The ultimate aim of these joint ventures (JVs) with developers of distinction is to elevate to new heights the profile of Medini as a preferred real estate and investment destination, he adds.

Medini, stretching across 2,300 acres, is Malaysia’s s i n g l e l a r g e s t u r b a n development to date and its deve lopme nt i s b e i ng undertaken as a public-p r i v a t e p a r t n e r s h i p involving companies of note. Overall, the international mixed-use development in Medini will have a maximum permitted gross floor area (GFA) of 182 million square feet. The expected gross development value (GDV) is US$20 bi l l ion (RM61.32 billion) over 15-20 years. About a fifth of Medini is to be developed by 2014 with a targeted populat ion of 50,000.

“Our vision for Medini to emerge as a central business district and a regional hub for contemporary business and lifestyle solutions is fast becoming a reality. With the 3 I s – w o r l d - c l a s s infrastructure, investments and industry support –Medini in the next 3-5 years will be one of the most promising and preferred destinations for business, generating multiplier effects on the economy of Johor as

build The Meridin@Medini, a n i c o n i c i n t e g r a t e d de ve lo pme nt w it h a n estimated GDV of RM1.1 billion.

WCT Bhd, a leadi ng Malaysian construction and pr op e r t y deve lopme nt company with a global presence in key markets, especially the Middle East, plans to put up a mixed c o m m e r c i a l p r o j e c t comprising office spaces, reta i l components a nd apartments in Medini North over the next five years. Its unit, WCT Acres Sdn Bhd, is paying RM99.47 million to lease 18.12 acres for the development, which will have a GFA of 2.763 million square feet and an estimated gross GDV of RM1.5 billion.

Syed Mohamed welcomes the WCT group’s entry due to its global expertise, having completed more than 300 high-quality projects in Qatar, the United Arab Emirates, Bahrain and India, as well as in Malaysia. With the group’s impressive track record valued at RM20 billion worth of construction contracts and RM4 billion worth of property sales achieved to date, he is confident that WCT will set new benchmarks of quality in Iskandar Malaysia.

Meanwhile, local real estate developer Distinctive Ace Sdn Bhd, a member of the Distinctive Group, is acquiring 18.05 acres on lease for RM99.92 million. The mixed commercial project comprising business and

acres adjacent to the 691 acres which it obtained about a year ago. The two pieces of land are being bought by a JV formed with a subsidiary of IIB for up to RM412.7 million.

This expands Sunway’s total landbank in Iskandar Malaysia by 29% to 3,580 acres while the proposed development will boost the company’s total GDV to RM43 bi l l ion. In total, Sunway will have 1,558 acres of development land in Johor, with an estimated GDV of RM25 billion, making it one of the largest landowners in Iskandar Malaysia.

The JV for the Sungai Pe n d a s p r o j e c t w i l l concept ual i se, ma nage, implement and develop the site into a mixed integrated development with a potential GDV of R M12 bi l l ion, capitalising on the beauty of the natural surroundings along the river and the Straits of Johor.

Syed Mohamed says, “With our continuing efforts to create an urban operating environment by catalysing change, Iskandar Malaysia c o n t i n u e s t o a t t r a c t investments and innovative developments from industry giants such as Sunway, which are committed to contribute to the creation of an ecosystem of a liveable city that will significantly transform the region's real estate landscape.”

Sunway’s construct ion division has completed the construction of the Legoland Theme Park and is currently undertaking two major construction jobs – Pinewood Iskandar Malaysia Studios and the Central Utilities Facility at the Bio-XCell biotechnology park.

SEE P4

well as the country,” says Syed Mohamed.

IIB, formed in November 20 0 6, i s t a sk e d w it h promoting, coordinating and investing in strategic and catalytic initiatives through JVs or contribution of land, either through sale or lease, or granting of concessions or development rights. Its main mission is to accelerate and enhance the overall growth and world-class status of I sk a nda r Ma l ays i a by realising its maximum value through strategic ventures. Hence, it is select ively forging JVs with “best in class” partners who share its vision of creating an iconic hub of development in Asia.

IIB has already sold on lease some of its prime land in Medini to the likes of Mah Sing Group Bhd, WCT Land Bhd, Distinctive Ace Sdn Bhd, UM Land Bhd and Zhuoda Real Estate Group from China. It is also forming a JV company with Sunway Bhd whereby 779 acres are being bought for RM412.7 m i l l io n f o r a m i xe d integrated development at Su ngai Pendas wit h a potential GDV of RM12 billion. The accumulated total GDV to come out of these JVs is estimated at RM31.25 billion, and IIB is in the midst of identifying new JV projects for 2013.

Among the partners in the four recently-signed JVs is Mah Sing Group, which is to

lifestyle components with expected GDV of RM1.5 billion will have a GFA of 2.752 million square feet.

Called 18@Medini, it is designed to be a unique lifestyle destination.

“Together with Distinctive Group, we have synergised our capabilities to give form and function to the real estate landscape for the development of 18@Medini, which by all means will s e r v e t o m a k e a n d complement Nusajaya into one cohesive ecosystem that b e f i t s wh at we h ave envisioned,” says Syed Mohamed.

Distinctive Group also has a JV with IIB to develop a luxury condominium project, to be launched in early 2013 with a GDV of RM500 million. Iskandar Residences will consist of two towers of 39 storeys and 28 storeys with a total of 633 units.

Meanwhile, a subsidiary of the United Malayan Land Bhd (UMLand), Lextrend Sdn Bhd, is paying RM82.49 million for 13.22 acres on leasehold for a m ixed commercial and residential project with an expected GDV of RM1.4 billion.

Syed Mohamed says the development will contribute towards shaping a new real estate landscape with a muc h - i mpr ove d u rba n operating environment.

Sunway Bhd continues to increase its foothold in Iskandar Malaysia with the acquisition of two parcels of freehold land totalling 779.07

Medini on course for projects with gross development value of RM31.25 billion, with more in the pipeline

T Harv Eker,motivational speaker andmulti-millionaire

Mah Sing group expects a gDV of rM1.1 billion for The Meridin@Medini

How Medini is anticipated to shape up

Syed Mohamed says Medini is

being positioned as

the central business district

of Nusajaya

Momentum gathers at key Iskandar Malaysia zone

by gUNAPrASATH BUPALAN

2A L L P R O P E R T Y F O R T N I G H T L Y W I T H

FRIDAY, DECEMBER 14, 2012

NEWS

If Malaysia doesn’t seize the opportunities and brand itself in countries that are looking outbound, it stands to lose out, says Loh

Wealth Mastery Academy will hold its Property Outlook Conference in KL on Jan 12-13

by PavIther SIdhu

by ZOe PhOON

by GeraLdINe LIM

MPI: Anti-foreign sentiment elsewhere benefits M’sia but …

MAHB rebrands its hotels under Sama-Sama

OUR country is likely to be a significant, if not the biggest, beneficiary of “anti-foreigner property tax” in Hong Kong and other places, and of in-creasing outbound foreign direct investment (FDI) from Singapore and Japan.

In Hong Kong, the govern-ment introduced a 15% prop-erty tax on foreign and corpo-rate buyers of real estate. Like Singapore, it also raised stamp duty for speculators.

In mainland China, the gov-ernment announced limits on foreign buyers of its residen-tial and commercial properties and in Australia, foreigners are prohibited from buying existing housing stock for in-vestment.

“The implications of anti-foreign sentiments would ben-efit Malaysia as that redirects FDI to the country.

“Most of the FDI are tied to real estate as multinational corporations (MNCs) look for suitable locations to target their markets, use the avail-able talent pool or natural resources,” said Malaysia Property Inc (MPI) general manager Veena Loh.

“Soft and hard infrastruc-tures have made today’s globalised world flat … this makes Malaysia a good logis-tics centre as well as potential outsourcing and IT hubs,” Loh said in response to Real

MALAYSIA Airports Hold-ings Bhd (MAHB) is con-solidating its airside and landside hotels to create a new brand identity as part of plans to create a niche in the airport hotel business.

The three properties – the existing landside hotel Pan Pacific KLIA currently man-aged by Pan Pacific Hotels Group, KLIA Airside Transit Hotel (ATH) and klia2 ATH

WHITHER the Malaysian property market? Wealth Mastery Academy Sdn Bhd (WMA) is organising a two-day conference fea-turing real estate invest-ment experts, valuers and other players locally and overseas who will share their views at DoubleTree by Hilton Hotel Kuala Lumpur from Jan 12-13.

WMA CEO Terry Ong told Real Reserve that the forthcoming Property Out-look Conference 2013 (POC 2013) will be different from those it organised earlier as the speakers will not only cover the outlook for the market but also highlight the opportunities in and investment strategies for the different sectors.

Reserve’s questions on whether market cooling measures in Hong Kong, Singapore and elsewhere would favour Ma-laysia.

She also sees Malaysia as the biggest beneficiary of Sin-gapore’s increasing outbound FDI. In the meantime, she said, outbound FDI from Japan, as well as China-Japan squabbles over the “contested islands” and China’s lack of control over intellectual property which have made China less attractive to Japanese inves-tors, would also benefit coun-tries such as Malaysia which offer competitive wages, rent and logistics.

On Hong Kong’s 15% prop-erty tax, Loh said it not only diverts mainland Chinese buy-ers’ attention elsewhere but is also punitive on expatriates who want to set up a perma-nent base in the special admin-istrative region.

In addition, MNCs previ-ously considering to set up base in Hong Kong’s finan-cial district may now look at Tun Razak Exchange in Kuala Lumpur which offers tax breaks and incentives to lure international Islamic banks, Islamic funds and wealth man-agers, venture capitalists and property developers.

“Hong Kong and Singapore markets are volatile. During the global financial crisis, Sin-gapore saw a 14% quarter-on-quarter drop in the house price index in Q1 2009 and four con-

which will be ready in May 2013 – will assume the new Sama-Sama label.

MAHB said in a statement that it “feels now is the right time to set a new direction for the future growth of its hotel business”. The new direction also means new opportuni-ties for career growth for its hotel associates as it expands its business overseas.

It said the internal an-nouncement to the staff in-cluding plans for the hotels was well received.

Additionally, an inter-national speaker from the United States will give an overview on investing there as it has been attract-ing many mainland Chi-nese investors.

The POC 2013 will cover, among others, an over-view of the local economy and property market; de-mand and supply trends of property development and investment opportunities locally and overseas; the regional hotspots that will drive the market in loca-tions such as Klang Valley, Greater KL, Penang and Is-kandar; and each real estate sector’s performance and outlook.

Participants will also get to know the Malaysian real estate investment trusts (REIT)’s performance and prospects, discover the se-

secutive declines compared to a one-off 2% softening in Ma-laysian real estate in Q4 2008.

“Being Asia’s financial cen-tres, Hong Kong and Singa-pore have been recipients of global money. Once touted as the world’s freest econo-mies, both have pulled the brakes on foreign investors. Asian governments have been concerned about impending property bubbles as a result of speculation spurred by rising wealth and high savings.

“This situation is exacerbat-ed by greater ease in the flow of global hot money to the few remaining growth spots while consecutive quantitative eas-ing by the United States Fed-eral Reserve has increased global liquidity, making mat-ters worse,” she pointed out.

However, she said foreign investors have never consid-ered Malaysia as a significant market for real estate play despite it being relatively low risk and stable. For instance, the Malaysia My Second Home programme has drawn property buyers but the num-ber, around 1% of annual total residential property transac-tions, has been insignificant.

On what the country can do, she suggested a depar-ture from a “cheap image” to “branded image”: “Malaysia has been drawing MNCs tar-geting the mass market and small and medium enterprises (SMEs) which support them. This year, the country has be-

Sama-Sama, meaning “togetherness” and “you’re welcome” in Malay, will see the airport hotels offer “an environment in which dif-ferences reside together – be they cultural, lingual or ethic”, the statement noted, adding they are intended to be “a place that connects all who pass through its doors to a multifaceted experi-ence”.

According to MAHB, it is also in the process of up-grading its existing hotel fa-

gun to attract investment in-terests from China to relocate SMEs keen to build a brand using it as a hub to reach out to the Asean marketplace. In Jo-hor, the industrial parks tend to appeal to investments from SMEs in Singapore.”

She said more marketing is also required for Malaysia to compete with others: “As our availability of cheap oil and gas has dwindled, promo-tional bodies need to market the country for its talent pool as have Singapore and Hong Kong.

“Malaysia has an edge over them. Being multiracial has conditioned Malaysians to manage diverse workforces and multicultural teams for global or regional project management. Already, our workforce is tapped for high value service support project management and operations across Asia Pacific.”

cilities to provide “the best possible” services and expe-riences to guests.

The Sama-Sama brand will be ready for operational launch for Pan Pacific KLIA by Jan 1, 2013.

With the new identity, MAHB’s fully-owned sub-sidiary KL Airport Hotel Sdn Bhd and Pan Pacific Hotels Group have mutu-ally agreed not to extend the management agreement for the landside hotel beyond Dec 31, 2012.

crets of buying properties with no mortgage or de-posit, and learn how to use creative tax saving strate-gies to avoid costly prop-erty taxes.

Speakers will include Ho Chin Soon, director of Ho Chin Soon Research; Previndran Singhe, CEO of Zerin Properties; George Stewart LaBrooy, CEO of Axis REIT Managers Bhd, vice president of the Asia Pacific Real Estate Asso-ciation and chairman of the Malaysian REIT Manag-ers Association; and Milan Doshi, property guru and author.

Other local speakers are Michael Geh, senior vice-president of Raine & Horne International Zaki + Partners Sdn Bhd; Mohd Noor Abdul Salam, head of marketing & investment,

Iskandar Regional Devel-opment Authority; and Veena Loh, general man-ager of Malaysia Property Inc which promotes Ma-laysia as an international real estate investment des-tination.

Meanwhile, those from the United Kingdom and US who will also be shar-ing their thoughts include Vincent Wong, author of Step by Step Guide to Lease Options; and Thomas Sena-tore, an authority on US Tax Lien and Tax Deed in-vesting.

The conference is expect-ed to attract 1,000 partici-pants from Malaysia and Singapore. Those who sign up now will get an early bird discount.

For more information, visit www.propertyout-lookconference.com

WorldNews

CONTACT

real@themalaysianreserve.comEDITORIALAndrew Wong Zoe Phoon S. Sivaselvam Gunaprasath Bupalan Geraldine Lim Pavither Sidhu Daniel Hong

ADVERTISING SALESBC Tiang 016.333.1288

POC 2013 on what’s hotin real estate, and more ▶ Saudi Arabia on a RM400 billion building spree

SAUDI Arabia’s massive US$130 billion (RM398 billion) social spending package being fed into its economy, including a US$67 billion (RM205 billion) aid for housing, has sent some of the kingdom’s property stocks rallying on expectations of a new residential building boom.

Shares of Dar Al Arkan, its largest listed property developer, for ex-ample, have gained 20% this year and close to 50% over 2011, outper-forming Saudi Arabia’s benchmark index.

“The government is willing to spend a lot of money in the property sector. We are really in the right spot,” said Youssef Al Shelash, chair-man of Dar Al Arkan.

Although the authorities have put the number of additional units needed by 2014 at 1.25 million, so far only 500,000 have been signed off, making the shortage of affordable units grave.

Analysts said demand is fuelled by the passage of a mortgage law that provides a regulatory framework for issues ranging from foreclo-sure to oversight. The law is also expected to help feed an active second-ary market and boost effective capital utilisation by lenders.

Compared with the United Arab Emirates and Kuwait, Saleem Khokhar, head of equities at the National Bank of Abu Dhabi, told CNBC they are facing an oversupply situation whereas demand in Saudi Arabia is strong and competition is much less.

In 2011, Saudi King Abdullah announced a stimulus plan to create jobs and build houses after the Arab Spring took the region by storm toppling leaders in Tunisia, Egypt and Libya.

▶ Dubai shines againFROM being a financial desert, the Dubai property market worked itself back into being recognised as an investment oasis in 2011 and it is now one of the best places in the world to buy real estate, said local agents.

In downtown Dubai, Select Property said rents are rising, which are boosting yields and making the emirate a global property investment destination once again.

According to CEO Mark Scott, the firm has seen sales of properties hit RM74 million a month with Russians and Middle Easterners among top purchasers, followed by the British, thanks to Dubai’s potential for higher returns compared to the United Kingdom’s.

The recession has matured the Dubai property market from being speculative to being more real estate-focused comparable to that of London, only with better yields, said Scott.

In the last year, Select Property had seen a significant rise in sales, spurred on because Dubai properties now have the potential to return a yield of between 10% and 12%, Scott said, adding “when you take into account the average yield of 5% in London city, Dubai “remains one of the world’s best places to invest in properties”.

▶ S’pore caps home loan tenure at 35 years THE maximum tenure of all new residential property loans in Singa-pore has been capped at 35 years while loans exceeding 30 years will face significantly tighter loan-to-value limits.

The Monetary Authority of Singapore (MAS) said the new rules are aimed at curbing the continued upward pressure on residential prop-erty prices driven by low interest rates and rapid credit growth.

The rules, which apply to both private properties and Housing De-velopment Board flats, are part of the government’s broader aim of de-flating the property bubble.

Without the new regulations, analysts feel the current global low interest rate climate will likely persist and spur demand in the resi-dential property market, pushing up prices beyond sustainable levels. The eventual correction can be painful to borrowers and destabilise the economy, it noted.

MAS said it is requiring more prudent lending because financial institutions have been lengthening the tenures of residential property loans with the average tenure rising to 29 years from 25 years over the past three years.

Also, over 45% of such new loans granted by them have tenures ex-ceeding 30 years.

▶ Women-only city in Saudi Arabia CONSTRUCTION of the world’s first women-only city in Hofuf, a ma-jor urban centre in the Eastern Province of Saudi Arabia, is expected to start next year. And it’s not to become the world’s largest harem, but a place where 5,000 members of the fairer sex will be able to work in the textile, pharmaceutical and food processing industries.

Targeted to create 5,000 jobs, the site was chosen for its proximity to residential neighbourhoods to facilitate the movement of women to and from their workplaces.

The site will be equipped for female workers in an environment and working conditions consistent with the privacy of women according to Islamic guidelines and regulations.

In Saudi Arabia, women are not allowed to drive but they make up 15% of the workforce.

Now, new instructions from the Saudi government said they should have a more important role in the kingdom’s economic development and the proposed city is a part of the scheme.

Designed to give women more opportunities to work while main-taining Saudi Arabia’s strict laws of gender segregation, it would be the first of several such cities there.

PROFILE

by S. SivaSelvam

GOING off the beaten track and blazing new trails has apparently become second nature to property developer Andaman Group. Since it came into being seven years ago, it has developed a knack for seeking out niche areas where its projects pay off handsomely.

When Andaman came onto the scene in 2005, the Klang Valley was already experi-encing a property overhang but it managed to secure pockets where property de-velopment had yet to pene-trate on a large scale. Bangi and Serdang are cases in point. And its commercial and residential schemes took off.

Likewise, the guaranteed rental returns scheme it in-troduced was true to its word. It made sure of this by creat-ing demand for these proper-ties and tying up the tenants to long-term occupancy be-fore embarking on these schemes.

It is little wonder, therefore, that Andaman is moving into another greenfield: Tier-3 towns, which are the small urban centres of rural areas. It is bringing the amenities of an urban lifestyle to these pockets of commercial activi-ty. In doing so, it has un-earthed latent pent-up de-m a nd f o r c o m m e r c i a l properties that could subse-quently lead to urban-style residences.

“You don’t know what you need till you come across it” is the mantra behind this move. More than that, how-ever, it is a demonstration that the private sector can play a significant role in stim-ulating economic transforma-tion in the rural areas.

Andaman has launched this Tier-3 initiative in two towns in Perak – Pantai Re-mis and Slim River – which are generally tucked away from the major traffic flows. While each of them is a hive of economic and business ac-tivity in its own right, serious property development has been absent for decades. Until now.

Pantai Remis is a small ru-ral coastal town about 180km from Kuala Lumpur and 50km from Ipoh. With a pop-ulation of some 16,000, most of them engaged in the palm oil, rubber, rice, sugar cane and fishing industries, the

Rural transformation private sector-styleInjecting urban lifestyle into the outback is good business for property developer Andaman Group

area has a thriving economy as reflected by the presence of four banks and a super-market.

However, the current crop of commercial developments there is not very large, under-taken mainly by private land-owners developing their own small pockets of land.

The absence of a sizeable commercial centre has led the Andaman Group to note a pent-up demand for new and modern offerings. While it sees the majority of the cus-tomer base to come from the town itself, it also discerns a larger catchment area: With-in a 30km radius, there are four larger towns – Ayer Ta-war population 30,000; Si-tiawan, 30,000; Seri Manjung (the district’s principal urban centre), 250,000; and Lumut 40,000 – that it regards as forming a unique economic belt.

Andaman Group’s sales and marketing director, Da-tuk Vincent Tiew, says: “In undertaking this commercial project, we are following our true calling, which is devel-opment. We are not con-structing buildings but rath-er, creating projects that can spur the development of an area.

“We see Pantai Remis as being in a strategic location that, together with improv-ing infrastructure and con-

the t wo-storey Centra l Square, consisting of retail lots, restaurants, a food court, multipurpose hall and a modern bus and taxi stand. The ground floor will be tak-en up by a hypermarket, while the first floor will pro-vide recreation, entertain-ment and sports facilities.

“We envisage Central Square as being the main commercial and transporta-tion hub of Pantai Remis,” says Tiew.

“We are confident its facili-ties, now lacking in the larg-er area, will draw the crowd and drum up business for Pantai Remis – until now, its populace have no after-work recreation and leisure places to go to and our project aims to alleviate this situation.

“The influx will also gen-erate business for other com-mercial activities within the development, especially with the presence of the bus and taxi stands.

“We believe that the inher-ent factors of the area, cou-pled with the reasonable pricing and modern and sleek design of our shop-of-fices, stand us in good stead.”

According to Tiew, the Perak government as well as the Opposition have wel-comed Andaman’s move into Pantai Remis as both sides recognise that no one had come to the area for decades with a systematic and strate-gic plan to transform it into a modern centre with all the facilities for an urban life-style.

“We are in fact spurring social and economic growth through our development. As has happened with our other projects elsewhere, other developers are bound to stream into Pantai Remis in the wake of our efforts,” he adds.

The development is being carried out by Anjuran Sen-tosa Sdn Bhd, a wholly-owned subsidiary of the An-da ma n Group, a nd i s expected to be completed in mid-2014.

Andaman launched its sales gallery at Pantai Remis in the middle of last month.

Slim River is the second largest town in the Tanjung Malim district, with an esti-mated population of 100,000. It is exactly halfway between Kuala Lumpur and Ipoh (100 km either way).

The majority of its people are engaged in the palm oil and rubber industries, as well as manufacturing, cou-pled with some business ac-tivities in the automotive in-dustry due to its proximity to Proton City in Tanjung Malim. Slim River is about

20km north of Tanjung Malim town.

Within the thriving town centre are a couple of banks but there is neither a shop-ping centre nor big super-market, rather surprising given the population of 100,000, who do their shop-ping mostly in Tanjung Malim. The townsfolk live mostly in small and scat-tered housing estates, as well as villages all over Slim Riv-er. Many of them also live within the town, in tradi-tional double-storey shop-houses. There are just a few newer shop/office develop-ments.

Andaman sees in this rea-sonably thriving town pent-up demand for new and modern development units and has come up with plans for a hypermarket, sur-rounded by shop-offices. Aside from the expected de-mand from the local people of Slim River, it feels that the business communities in neighbouring towns like Tanjung Malim, Behrang and Sungkai would also be keen to invest in such a size-able commercial develop-ment just 20km to 30km from where they are.

Andaman’s development, Taipan @ Slim River, will con-sist of 99 units of double-sto-rey shop-offices, four units of three-storey shop-offices (all at 22ft by 70ft) and 11 units of dual-frontage 22ft by 80ft shop-offices with alfresco la nd, pr iced be t we en RM488,000 and RM2.4 mil-lion.

The centrepiece will be a double-storey 40,000sq ft commercial centre, consist-ing of a supermarket, restau-rants as well as retail shops and service centres.

“The reasonable pricing, coupled with the modern and sleek design, should stand us in good stead when offering our shop/offices for sale to the public,” says Tiew.

Bella Advance Sdn Bhd, a wholly-owned subsidiary of Andaman Group, will de-velop Taipan @ Slim River on 13 acres of freehold land at the exit of the Slim River In-terchange at the North-South Expressway.

The sales gallery for the development has opened in town and the expected com-pletion will be in mid-2014.

nectivity, will allow it to form a strategic economic al-liance with Ayer Tawar, Si-tiawan, Seri Manjung and Lumut.

“It is also directly connect-ed to Taiping, which is why we believe that many of our purchasers will come from there, too.”

Andaman’s development – Taipan @ Pantai Remis – spans 13.4 acres of freehold land about a kilometre out-side the town centre. It con-sists of 118 units of double-storey shop-offices, three units of three-storey shop-offices (all with dimensions of 22ft by 70ft), priced from RM488,000 to RM728,000 for standard intermediate lots.

The focal point of this commercial project will be

3FRIDAY, DECEMBER 14, 2012THE MALAYSIAN RESERVE | REAL RESERVE

Tiew: We spur social and economic growth through our development

above and below: These modern and sleek designs bring city lifestyle to Tier-3 towns

Pantai RemisPopulation: 16,000Main economic activities:Palm oil, rubber, rice,sugar cane and fishingCatchment area:(Total population: 340,000)Ayer Tawar, Sitiawan,Manjung, Lumut

Slim RiverPopulation: 100,000Main economic activities:Palm oil, rubber, manufacturing, automotive support Catchment area: (Total population: 150,000)Tanjung Malim, Behrang, Sungkai, Sabak Bernam

4A L L P R O P E R T Y F O R T N I G H T L Y W I T H

focusFRIDAY, DECEMBER 14, 2012

DEVELOPERS in Johor are generally a lucky lot: Buyers are cash-flush and sales of their projects brisk.

Kenanga Research “feels extremely bullish” on the Johor property market following its November 2012 assess-ment since its last in March, citing two major factors for the vigorous market: Singapore-Malaysia government-to-government collaborations and robust population drivers such as employ-ment and affordable housing content.

“The unusual buyer profiles and de-mand trends indicate an extremely resilient market as there’s a lack of supply of industrial spaces and con-cept-play residential properties.

“At the same time, Singapore’s hous-ing affordability issue makes Johor an attractive option. We remain positive on Johor over the next 24 months, as-suming minimal general election risk,” the research house says.

Its assessment is also based on its recent site updates of developers in Jo-hor such as Crescendo Corp Bhd’s Nusa Cemerlang Industrial Park (NCIP), SP Setia Bhd’s Setia Sky 88, IJM Land Bhd’s Nusa Duta, WCT Bhd’s 1Medini and UEM Land Bhd’s East Le-dang and Puteri Harbour.

The southern state is “shaping up nicely” with Marlborough College having its first intake of students; Newcastle University Medicine Ma-laysia almost a year into operation now; and talk that the Johor-Singapore MRT could be launched in 2014 and built in four years, and when complet-ed is expected to narrow the gap be-tween Johor property prices and Sin-gapore’s.

Industrial space demand bullishCrescendo’s NCIP covers 527 acres of freehold industrial land surrounded by Educity, Southern Industrial and Logistics Clusters or SiLC, and Ger-bang Nusajaya. It is located close to Port of Tanjung Pelepas, Pasir Gudang Port and Tanjung Langsat Port and is

RM1.2 billion.Commencement of the Educity com-

ponents, Legoland and Mall of Medini is said to have excited property buyers.

Sellouts despite aggressive pricingGoing by the sellout of the first phase comprising 353 units of semi-fur-nished serviced apartments of 500sq ft to 1,300sq ft priced from RM600,000 in the 55-storey Setia Sky 88 located at JBCC, Kenanga Research believes the second phase of over 300 units with similar built-ups, features and promo-tion schemes targeted for launch in mid-2013 will still achieve strong take-up despite “the indicative ASP being extremely aggressive at RM1,500psf”.

This is because the area lacks high-end residential supply and such pric-ing, it says, is easily comparable to that of serviced apartments in Kuala Lumpur City Centre pegged between RM1,000psf and RM2,000psf.

All units in the first phase were snapped up within weeks of launch even though prices were stepped up aggressively: Tower 1 started out at an ASP of RM850psf in October and Tow-er 2 was sold at an ASP of RM1,200psf.

JBCC property prices fast catching up with KLCC’sThe RM1,200psf average selling price of luxury serviced apartments in JB City Centre is easily comparable to KL City Centre’s, notes Kenanga Research

THE MALAYSIAN RESERVE | REAL RESERVE

5

accessible to the Second Link, Jurong Port and the Second Link CIQ.

Kenanga Research says the main in-vestors at NCIP are Singaporean (56%) and Malaysian (31%) small and medi-um industries such as engineering, food processing, parts manufacturing and packaging. Others are from the United States, Germany, Korea, Tai-wan and Indonesia. With prices rising, Crescendo enjoys about 50% gross margins from the industrial park.

Currently, about 300 acres there are undeveloped and Crescendo estimates a gross development value (GDV) of RM1 billion based on an average sell-ing price (ASP) of RM350psf. Kenanga Research sees more upside to capital values, noting that rental yields are still decent at 6%.

Given its low land cost, Crescendo is looking to keep 10% of the GDV for in-vestment and develop 150 acres front-ing the main road into commercial properties, and is believed to be in talks with a car showroom investor.

Meanwhile, it will continue to launch semi-detached and detached factories at NCIP. It is also completing earthworks and the show village at its 1,300-acre Bandar Cemerlang (GDV: RM3 billion) township and plans to unveil 300 units of terraces in 2013 priced at about RM400,000 each target-ing Malaysians working in Singapore. Sales are expected to be swift.

Located near the Mount Austin and Setia Indah townships, Bandar Cemer-lang is a 20-minute drive via the East-ern Dispersal Link from JB City Centre (JBCC).

Crescendo has another 222 acres along Sungai Rekoh intended for a mixed development in three years’ time and 794 acres near Petronas’ Rap-id (Refinery and Petrochemical Inte-grated Development) project site in Pengerang. The developer’s plans for the 794 acres would depend on pro-gress of the Petronas project.

Crescendo estimates its remaining landbank of 3,000 acres to be worth RM2 billion at current prices. Most of the land is three to 16 years old, imply-

“Buyers are willing to pay as such developments are hard to come by. We also notice increased buy-in of the Jo-hor-Singapore collaboration story. About 60% of the buyers are locals,” Kenanga Research adds.

Growing upgrader marketLikewise, IJM Land’s freehold gated-and-guarded Nusa Duta development located on the other side of the mature Bukit Indah township and 10 minutes’ drive to Medini and JBCC via the Coastal Highway is experiencing “very quick take-ups of international lots” by cash-rich buyers, mostly Ma-laysians working in Singapore, and as a result “there’s no need for financing plans such as developer interest bear-ing schemes”, according to Kenanga Research.

New launches include two-storey cluster residences with 2,900sq ft to 3,300sq ft built-ups priced from RM900,0000 to RM1 million (a consid-erable increase from similar units sold from RM700,000 to RM800,000 12 to 18 months ago) and two-storey semi-dees of 3,300sq ft to 3,600sq ft priced be-tween RM1.2 million and RM1.3 mil-

have commenced operations. Singapo-reans are considering Educity as a fa-vourable-cost tertiary education desti-nation for their children,” the research house says.

On the CS2 @ Puteri Harbour 1,200-unit mixed development (esti-mated GDV: RM900,000), it expects the units’ ASP to be close to Impe-ria’s RM750psf “to ensure sustaina-ble capital values”.

About 60% of the buyers are Singapo-reans “willing to consider living in Nusajaya and commuting to the island nation for work”.

“Given the dearth of residential offer-ings in Nusajaya, rental yields are ex-tremely promising at 7% to 9% … semi-dees can fetch monthly rental of RM8,000 and terraces RM4,000. We be-lieve East Ledang’s main driver is its proximity to Medini and Educity which

ing an extremely low land valuation of RM3.43psf compared to current valua-tions of greenfield landbanks at RM-8psf to RM10psf, says Kenanga Re-search.

Fast take-ups in 1MediniTake-ups have been “extremely en-couraging” at WCT’s 1Medini as the latter is the only “pure residential play” and has a special land title with no restrictions on foreign buyers in-cluding the RM500,000 threshold for property purchase, according to the research house.

Located at the Medini mixed devel-opment, 1 Medini features 1,332 units of one- to four-bedroom apartments of 720sq ft to 1,704sq ft housed in two towers.

Tower A’s 322 units released in Feb-ruary 2012 at RM450psf were fully sold even without incentives offered while 80% of Tower B’s 322 units were booked within a few weeks after they opened for registration at RM500psf, and many were repeat customers.

WCT plans to roll out Medini Signa-ture soon at RM550psf. 1Medini and Medini Signature have a total GDV of

lion.For 2013, it plans to unveil its

50%-owned 96-acre gated-and-guard-ed township (estimated GDV: RM2 bil-lion) in Tebrau located across Setia Tropika. The residential units are ex-pected to be sold at ASP of RM400psf to RM500psf.

The township will include an esti-mated 850,000sq ft retail mall which IJM Land, said to be in discussion with a foreign mall operator, may keep for investment.

In the affordable segment, it launched D’Rich serviced apartments at RM-500psf (80% taken up, remaining units are Bumiputera lots) early this year.

Meanwhile, UEM Land’s East Le-dang @ Nusajaya and CS2 @ Puteri Harbour are “seeing fruit”, according to Kenanga Research. The developer re-cently launched Phase 4A bungalows, priced at RM3.5 million to RM4 million or an ASP of RM700psf (“considered a new benchmark pricing for the devel-opment”) and Phase 5 semi-dees priced at RM1.8 million to RM2.3 million or ASP of RM600psf. Its upcoming Phase 9 townhouses are pegged at RM1.1 mil-lion to RM1.5 million.

From a trot to a gallop:

Investor interest in

Iskandar

by ZOE PHOON

by GuNaPrasatH BuPaLaN

ISKANDAR Malaysia has become a favourite property investment destination for both Malaysian and overseas buyers, in particu-lar Singaporeans, due to prox-imity and comparative value for money.

Other incentives also abound, including exemption from the minimum threshold of RM500,000 for purchases by for-eign buyers and the exemption from having a Bumiputera quota, hence international buyers will also have a pick of choice units.

Eligible companies in Medi-ni, which takes up 2,300 acres within Iskandar Malaysia, that commence qualifying activities before Dec 31, 2015 can register for IDR (Iskandar Development Region) status to enjoy a 10-year income tax exemption, a 10-year withholding tax exemption for

Mah Sing Group BhdMAH Sing will be developing The Me-ridin@Medini, an iconic integrated de-velopment in Medini, with an estimat-ed gross development value (GDV) of RM1.1 billion.

The RM74.7 million 99-year lease purchase for 8.19 acres of prime de-velopment land in Zone A, Medini, was signed on Oct 18, 2012. The de-velopment will have a permitted gross floor area (GFA) of 2.14 million square feet or RM34.90psf.

The Meridin@Medini will be a pur-pose-built development with a Live, Work, Relax and Rejuvenate concept comprising Meridin Suites residences, Meridin Linx small office versatile of-fices (SoVo), Meridin Walk lifestyle re-tail and Meridin Exchange corporate towers. The project is expected to take off in the second half of 2013 and reg-istration of interest is underway.

Distinctive GroupON Nov 8, 2012, IIB signed a lease purchase agreement with Distinc-tive Ace Sdn Bhd, a member of the Distinctive Group, for 18.05 acres of prime land in Zone A of Medini involving a GFA of 2.752 million square feet for RM99.92 million.

Strategically located at the con-fluence of Lebuh Kota Iskandar and the spine road leading to Legoland Malaysia and the Mall of Medini, the land will be developed into a mixed commercial project comprising business and lifestyle components called 18@Medini with a GDV of ap-proximately RM1.5 billion.

It will potentially emerge as a unique lifestyle destination, with a wide array of options to include re-tail spaces, small office home office (SOHO) units, small office versatile

United Malayan Land Bhd (UMLand)IIB signed a lease purchase agreement with property devel-oper Lextrend Sdn Bhd, a sub-sidiary of United Malayan Land Bhd (UMLand), on Nov 21, 2012 involving a GFA of 2.17 million square feet on 13.22 acres of prime land in Zone B of Medini for RM82.49 million.

The purpose-built develop-ment, with a GDV of approxi-mately RM1.4 billion, will in-clude townhouses, apartments, serviced apartments/SoHo, ho-tels, retail promenade with F&B outlets and a specialty retail centre. The location is readily accessible from the Johor Baru

services and royalties, import duty and sales tax exemption and exemption from real prop-erty gains tax.

In line with Malaysia’s aspira-tion to be a developed nation by 2020, Iskandar Investment Bhd (IIB), the catalyst developer of Is-kandar Malaysia, has geared itself towards contributing towards this realisation.

Hence, it has identified sev-eral top developers in Malaysia with whom it is establishing joint ventures under lease purchase agreements that will offer state-of-the-art residential and com-mercial developments to both local and foreign buyers.

The first batch of four lease purchase agreement joint ven-tures have been sealed and more are in the pipeline. Amongst them are with:

“We foresee a lot of interest from parents whose children study in the various institutes of higher learning in EduCity@Iskandar like Newcastle Med-ical School, Marlborough College, Trust School and University of Southamp-ton,” said Mah Sing managing director and CEO Tan Sri Leong Hoy Kum.

“Our project offers an attractive en-try point from only RM288,000, prac-tical layouts, facilities and good secu-rity, giving them peace of mind to let their children reside in The Meridin@Medini. For buyers who are looking for investment returns, an apartment costing RM300,000 can fetch rentals of RM1,500 to RM2,000 per month or gross yields of 6% to 8%, the highest returns amongst the various states.

“We believe it is the right move to launch smaller unit sizes to ensure absolute affordability, in order to tap these markets.”

WCT Land Sdn BhdIIB added another jewel in its crown on Nov 2, 2012, with the signing of a lease purchase agreement for RM99.47 million with WCT Acres Sdn Bhd, a wholly-owned subsidiary of WCT Land, for a property on 18.12 acres with a GFA of 2.763 million square feet. WCT Acres is set to develop the land with an estimated GDV of RM1.5 billion.

The prime land will be developed into a mixed commercial project com-prising office space, retail components and apart-

ments in Medini North over the next five years.

“We are excited at the prospects as well as the future of Medini Iskandar, which will surely emerge as the nerve centre of modern lifestyles in the next decade,” said Taing Kim Hwa, managing direc-tor of WCT.

“Our initial venture, 1Medini condominium, garnered excellent inter-est from the investor com-munity as well as the mar-ket and we are optimistic about our future ventures in Medini Iskandar.”

office (SOVO) units, corporate of-fices, showrooms, food and bever-age outlets, business and enter-tainment centre, indoor sports and exhibition centre, serviced apart-ments and a hotel.

“We are happy that our journey and association with Iskandar Ma-laysia continues with our commit-ment to introduce to Malaysians as well as the world a new, vibrant and liveable city with best-in-class infrastructure, business and lifestyle solutions,” said Distinctive chairman Datuk Dr David Koh.

“We look forward to jumpstart our third project in Iskandar Ma-laysia, 18@Medini, which I am confident will be the very heart of Medini Iskandar upon its successful completion in approximately five years.”

city centre.“With its strategic location

neighbouring Singapore and proximity to some of the world’s most rapidly growing and im-portant economies as well as its range of attractive fiscal and non-fiscal incentives, Medini@Iskandar Malaysia is poised to see an influx of foreign and high-level corporate invest-ments,” said UMLand group CEO Charlie Chia.

“Given the tremendous poten-tial, the UMLand Group is com-mitted to enhancing its presence as well as positively contribute to the emerging property market within this southern economic zone of Malaysia.”

Despite the “extremely aggressive” indicative average selling price of rM1,500psf, the second phase of sP setia’s 55-storey setia sky 88 condo in JB City Centre is expected to still achieve strong take-ups

IIB’s efforts to step up regional development are paying dividends

Flagship B of Iskandar Malaysia sprawls across 2,300 acres of prime land.

(From left) John Ng, IIB executive vice president, strategic marketing; Leong;Md Fuzi ahmad shahimi, Central Johor Bahru Municipal Council president;Datuk syed Mohamed syed Ibrahim, IIB president and CEO; andJen (r) tan sri Yaacob Mat Zain, Mah sing chairman taing (second from left) and Datuk syed Mohamed syed

Ibrahim, IIB president and CEO, exchanging documents while Choe Kai Keang (left), executive director of engineering and construction of WCt Bhd, and John Ng (right), IIB executive vice president, strategic marketing, look on

Datuk syed Mohamed syed Ibrahim (third from left), IIB President and CEO, and Koh exchanging documents, witnessed by Wan Haslan Wan Hassan (left), IIB chief financial officer, John Ng, IIB executive vice-president, strategic marketing, Lim Ech Chan, Distinctive CEO, and tony tan, Distinctive director

Datuk syed Mohamed syed Ibrahim (second from left), IIB president and CEO, and Datuk Ng Eng tee, uMLand deputy chairman & executive director, exchanging documents, witnessed by John Ng (left), IIB executive vice-president, strategic marketing, and Chia (right)

Inspiration Park (above) and Noble Park residences (right) at uEM Land’s East Ledang township

6A L L P R O P E R T Y F O R T N I G H T L Y W I T H

FOCUSFRIDAY, DECEMBER 14, 2012

“A THING of beauty is a joy forever …,” wrote John Keats. For the average man in the street, the term “mainte-nance” can mean many things. From your home to the car you own to the lawn mower you purchased, these things need regular mainte-nance to keep their appear-ance and performance at an optimum level. However, not many of us have a culture of maintenance.

When I went to university in England, I marvelled at the university buildings we stud-ied in. They were well over 100 years old but the brass shone, the floors were clean and the halls well painted. It felt that they would go on serving another 100 years to come. I wonder how many of our schools or universities in Malaysia will have a similar lifespan.

Our cities and towns are littered with ugly neglected buildings – homes or shop-offices. This extends to the recreational facilities offered as well. There is an urgent need to inculcate among our population, especially our

Why building maintenance and compliance are essentialTaking regular care of properties will retain their value and extend their lifespan

children, the need for a main-tenance culture.

Asset managementstrategiesThe advent of REITs has had a significant impact on the be-ginnings of a maintenance culture in Malaysia and they continue to lead the way. The property portfolio of a REIT has to be constantly refreshed to retain tenants and enable a steady rise in rents to match inflation.

The increase in rents is nec-essary as the operating costs of a building are constantly increasing – from the cost of security, electricity, cleaning, spare parts to manpower costs. If a REIT Manager was to let a building deteriorate over time by saving mainte-nance costs, then they would be faced with the loss of ten-ants, rising operational costs, an inability to increase rent and a drop in valuation.

If you were to look at how REITs have steadily improved on their portfolios and organ-ically grown their returns to unitholders, they have be-come a lesson to other prop-erty owners. The success of these asset management strategies is not lost on these owners as we are now wit-nessing more buildings being upgraded to position them-

• Security audits• Lobbies and toilets• Fire certificates• Building audits

Another aspect of the maintenance function centres on the production of annual budgets for the management to enable the finance depart-ment to predict with fair ac-curacy the costs of operating the buildings over a financial year and give a pretty accu-rate forecast of the annual distribution.

The budgets must also cap-ture the incremental cost of the ever changing regulatory landscape imposed by the au-thorities – for example, the fire regulations may change and that will require signifi-cant upgrades in a building or the mandatory organisa-tion of fire drills all add to the operating cost of compliance.

There is a growing need for the REIT Manager to recog-nise the increasing impor-tance being given to green buildings, which means that in the realm of maintenance there is a growing need to be aware of trends in sustaina-bility which has to be ad-dressed in existing buildings to remain competitive.

The need for all these ser-vices has to be wrapped in an organisational structure that can deliver the goods. A dedi-

cated team of facilities man-agement specialists has to be part of the REIT Manager. Some REIT Managers out-source this function and some do it in-house. A dy-namic and responsive facili-ties team is essential to give tenants the necessary confi-dence in becoming a long term tenant in the buildings the REIT serves.

So when you drive around town and see a building be-ing renovated or painted, the chances are it is part of a REIT portfolio.

Maintenance not allabout REITsHowever, maintenance is not all about REITs. The problems I see as emerging today is the prolif-eration of medium- and low-cost condominiums as land price escalation and cost pres-sures force developers to build inexpensive dense accommo-dation to cater for affordable housing requirements.

The challenge here is the ability of owners of these units to organise themselves in management corporations to ensure a reasonable level of maintenance for these prop-erties. Sadly this is not the case and you will see these good looking buildings slow-ly sink into a deplorable state of repair over time, leaving

many scars on the skyline of our cities. The local authori-ties need to come up with a long term solution in the maintenance of these assets.

To conclude, the “If it isn’t broke don’t fix it” adage does not apply if we want to have beautiful cities and town-ships to live in. We need to ensure we fix our homes and buildings in a planned and regular manner.

How many of us paint our house every five years, drain our septic tank every year (it’s free!), have our roofs cleaned every five years and address any rotting gutters, have a plumber to check our pipes every five years, or consider upgrading our kitchen and toilets every 10 years. You will be surprised how house proud you will be and how much better your house will retain its value.

Have a look around and start to pull that paint brush out!

Stewart LaBrooy is a prominent speaker on conventional and Is-lamic REITs in the region. He is chairman of the Malaysian REIT Managers Association, a board member of the Asia Pacific Real Estate Association and CEO of Axis REIT Managers Bhd, the first REIT listed on Bursa Ma-laysia in 2005.

selves to attract a better ten-ant class and prepare the as-set for a possible sale.

The maintenance function is all part of asset planning and facilities management which is at the core of all successful RE-ITs. In doing so, they have es-tablished a comprehensive maintenance policy for their buildings with detailed sched-ules for maintenance cycles of all plant and equipment.

In addition, the establish-ment of life cycle costs for equipment enables the REIT Manager to predict capital ex-penditure requirements for replacement of plant and equipment when they have reached the end of their eco-nomic life.

An example of the areas covered by a comprehensive maintenance programme will include:

• Lift maintenance• Elect r ical panels and

wiring• Firefighting compliance • Air-conditioning • Lighting• Sewerage• Landscaping• Cleaning• Painting of the building• Building wash-downs• Car park equipment• Public address systems• Energy audits

STEWART LABROOY

ISLAMIC financing has been used for real estate transac-tions for decades in Malaysia and the Middle East while non-Muslim countries such as the United Kingdom and Singapore have enacted legis-lative changes to pave the way for such financing ar-rangements.

Now, throughout Asia and Australasia, there seems to be an increasing focus from oth-er countries to tap this alter-native source of capital, ac-cording to a report by information services firm Mondaq Australia.

It said the global appetite is growing for Islamic finance and investment funds as via-ble alternatives to convention-al debt funding especially in the current economic envi-ronment. For entities seeking to raise funds, Islamic finance gives them access to a larger investor pool. Moreover, sya-riah concepts and commer-cial real estate investments are complementary as both adopt a risk-sharing model.

Opportunities Islamic financing structures are not limiting, it said, citing innovations such as syariah-compliant real estate invest-ment trusts (REITs). In Singa-pore, a business trust, which has been employed in con-ventional financing, can also be adapted to meet syariah principles for real estate funding.

According to the report, Is-lamic finance can be used for a wide range of real estate fi-

Rise in syariah-compliant real estate financingnancing, from residential mortgage such as the United National Bank’s lease-based mortgage in the United King-dom to large-scale financing like Qatari Diar’s Chelsea Barracks purchase and con-struction of the Shard of Glass in London.

Emaar Properties in Dubai also used Islamic finance techniques to refinance exist-ing facilities for the Dubai Mall development.

The report said an ideal op-portunity currently to ex-plore Islamic finance as an alternative to traditional debt funding is this: Islamic inves-tors including certain Middle East sovereign funds have traditionally preferred invest-ing in prime real estate in the UK and Europe. Due to Eu-rope’s economic uncertainty, there are increasing capital flows into commercial real es-tate in Asia and Australia, particularly industrial and commercial. Islamic finance can be adapted to suit the fi-nancing size and tenor, local tax laws, and may even be used alongside conventional finance.

Deciding factors However, there are key con-siderations for syariah-com-pliant real estate financing. One is the property’s pro-posed use: Islam forbids preparation or consumption of products including pork, alcohol, armaments and ac-tivities such as gambling and conventional banking. So us-ing Islamic finance to fund a pork factory or casino is not permitted.

It is less clear cut for a mul-

which involves an initial sale and purchase of an owner-ship interest in property cou-pled with an undertaking by the obligor to buy the prop-erty at the end of the tenor. Taxes and stamp duties im-posed on both sets of trans-fers could mean prohibitive costs for the customer and investors.

But Malaysia, Singapore and the UK have amended lo-cal tax legislation to ensure Islamic finance transactions are granted the same tax treatment as conventional fi-nancing techniques.

Financing methodsA murabahah (cost plus fi-nancing) contract comprises a two-stage process whereby the financier buys an asset (commodities such as metals from a metals exchange) from the vendor at cost price and immediately sells it to the customer for a deferred, fixed rate price.

The deferred payment enti-tles the financier to charge the customer a profit margin.

The customer then sells the commodity to a third party at cost price with immediate payment, thereby obtaining the financing to buy the real estate asset. Limitations of murabahah are the fixed sale price limits flexibility on re-bates, and break costs on pre-payment are not permitted.

With an ijara (lease), the fi-nancier buys the property and leases it to the customer for a fixed term in return for rent. Rental payments include the profit component paid to the financier and may also be set by reference to a bench-mark. The customer enters into a purchase undertaking to buy the property at matu-rity or upon a default for a price equals to the financing amount.

As long as the financier has an ownership interest in the property, it must also bear the liabilities arising from owner-ship including maintenance, structural repairs and envi-ronmental matters. A lessor cannot pass these responsi-bilities to the lessee but it can

ti-let property such as a com-mercial building which has a conventional bank branch. While conventional banking is prohibited, it does not form part of the primary usage of the property. Syariah scholars generally accept that Islamic finance can be used for multi-let properties where the threshold of non-permissible activities is below 5%.

Income received from such activities “must be cleansed” (donated to charity) and not form part of the profit distrib-uted to investors.

However, unless the in-come from non-permissible activities is very low or negli-gible, the cleansing element may deter the use of syariah-compliant financing as it means a slice of the income will not be available to pay returns to investors.

The report said another consideration is local tax laws. Many countries impose heavy taxes and stamp duties on transfer of ownership in real property, especially the ijara or Islamic lease structure

pass them on to an agent. The rent will be increased to re-flect the agent’s costs.

The istisna’a (procurement) structure is typically used for con st r uc t ion f i na nc i ng whereby the customer com-missions the financier to de-velop the property for a fixed price on deferred payment terms. The financier will commission the contractor to do the same for a lower price, the difference in price being the financier’s profit.

When the property is deliv-ered, the financier transfers title to the customer. Con-struction and payments may be phased or payments may be made on completion. The istisna’a may be coupled with an ijara to achieve long-term floating rate financing to en-able the financier to receive periodic returns as the prop-erty is being developed.

Another real estate financ-ing method is the diminish-ing musharakah (co-owner-ship akin to partnership). It is based on the principle of risk sharing and is flexible enough to incorporate a variable rate of return, features that make it a popular choice.

The financier and the cus-tomer co-own the property and the proportion of owner-ship reflects their contribu-tions whether financial or by way of provision of manage-ment or other services.

Each payment that the cus-tomer makes reduces the fi-nancier’s share in the proper-ty by the same percentage. Both also share in the risks of construction of the property and any declines in market value.

by ZOE PHOON

Islamic finance can also be used for large-scale funding such as construction of the Shard of Glass in London

7FRIDAY, DECEMBER 14, 2012THE MALAYSIAN RESERVE | REAL RESERVE

Over 70 malls on drawing boardin Greater Kuala Lumpur

THERE are more than 70 shopping malls on the drawing board in Greater Kuala Lumpur of which 35 are under construction in the Klang Valley with an estimated nett lettable area (NLA) of 23.20 million square feet of re-tail space.

Of these, six malls with over six million square feet of nett floor space are expected to open for business in 2013. These are Nu Sen-tral in Kuala Lumpur Sentral by Malaysian Resources Corporation Bhd, Cheras Sentral in Cheras by Malaysian Land Properties Sdn Bhd, KLIA 2 by Malaysian Airports Holdings Bhd, Encorp Strand Mall in Kota Damansara by Encorp Bhd, D’Pulze in Cyberjaya by DPulze Ventures Sdn Bhd and Market Hall @ Pudu along Jalan Pudu by Nihon Properties Sdn Bhd.

Among the others under construction, IOI City Mall in Putrajaya will have the largest NLA, of two million square feet, followed by KL Metropolis Matrade Retail 1’s 1.40 million square feet. The smallest will be One South Street Mall in Seri Kembangan, of 120,000sq ft.

To date, Malaysia has over 330 shopping malls collectively offering over 100 million square feet of NLA and with a real estate value in excess of RM100 billion, said Malaysian Shopping Malls Association (PPK) president HC Chan.

“Malls are huge investments as each could

cost RM400 million to RM500 million,” said Chan, noting that KL is listed as the second best shopping city in Asia Pacific in the Globe Shopper Index, created by the Economist Intel-ligence unit commissioned by Switzerland-based shopping tourism company, Global Blue.

“KL is just one spot below Hong Kong and ahead of Singapore, Sydney, Tokyo, Seoul, Bangkok and Shanghai. The ranking is recog-nition of the Malaysian mall industry, which was non-existent 40 years ago, as being among Asia’s top.

“We have some of the world’s best malls and we look forward to working with the Tourism Ministry in promoting Malaysia as a shopping destination,” he said.

Visiting malls in the Klang Valley has become a national pastime as people do more than shop-ping; they meet up with friends and family, pay bills, catch a movie, do their laundry, visit a den-tist, enjoy a massage or run errands at the post office or bank. They swarm there on weekends to relax in a comfortable environment with con-trolled temperature, he noted.

However, Chan noticed signs of some malls running on deficits lately, which he said is not good for developers, owners, retailers and consumers.

“When mall owners, developers and retail-ers face higher business risk and lower profit margin, the high costs would be passed on to consumers in terms of prices and this is not good for the market.”

EYE ON INVESTMENT

ANDREWWONG

AS we close out the year and prepare for the uncertainty of 2013, I’d like to set the record straight and come to the defence of a group that has for long been maligned.

Much like how we use the four-letter “F” word to show our disdain for people and things that rile us, we have often vented our anger on this group, which coincidentally also has four letters beginning with an “F” in its name.

For a long time, the “flip” of properties has been regarded as one of the main causes of property price surges, with even develop-ers themselves saying flippers are not wel-come in the marketplace as their speculative nature “pushes genuine buyers out and makes prices artificially hot”.

“We don’t want them to come and buy to flip,” Datuk Ng Seing Liong, a former presi-dent of the Real Estate and Housing Devel-opers’ Association of Malaysia, has been quoted as saying.

“Too much speculation is no good (as it doesn’t give rise to) a long-term and sustain-able market … ‘flippers’ are responsible for pushing up property prices faster than our incomes can rise especially in urban areas, and they are crowding out genuine wan-nabe homeowners and investors.”

And so, the flip group has earned the un-fortunate title of being the nemesis of buyers

seeking affordable houses. Because the for-mer exists, the latter cannot – because they buy to flip for quick monetary gains, first timers and “genuine” hunters are robbed of the opportunity to own the roofs over their heads.

So they’re so frowned upon. But whoa. While we can want to shoo

flippers out of the market, we must recog-nise that they exist only because the envi-ronment allows them to exist. Without the right climate made up of buoyant demand, short supply, easy bank lending as well as favourable government controls and tax rates, it is unlikely they would sprout like mushrooms after rain.

Flippers aren’t swindlers or tricksters … they are opportunists who see an opening and take advantage of it, the exit plan in their motivation being to make bags of money unlike home owners, whose inten-tion is to buy for keeps.

Contrary to popular belief, flippers can-not manipulate a market and influence prices. While it’s easy to point fingers at them for driving up prices in a hot market, does it mean they are also to blame when things suddenly turn cold?

Many a time, caught in such a situation, those with the financial stamina have had to change their game plan from what was

to have been a quick flip into a long drawn play. This has led to the birth of the specuves-tor – the person who starts off as a speculator out for a quick kill but later becomes an inves-tor as he tries to ride out a market lull by rent-ing out his acquisition. I daresay more than a few specuvestors exist in the Kuala Lumpur city centre and Mont’ Kiara areas in the Klang Valley.

But just as many – if not more – flippers have also drowned under falling prices, with the cause of their demise landing under the auc-tioneers’ hammer.

So, just as much as they can make profits, they can also suffer and pay a hefty price. Neverthe-less, the point is, for as long as there is a dynam-ic property market driven by free market forces, there will always be flippers. Which is why, rather than treat them as outcasts, unwanted children who should not be seen or heard, they should be brought under the spotlight and edu-cated on the art of successful flipping.

This is what’s happening in the United States in the wake of its subprime mortgage crisis that made the flippers who managed to survive the meltdown understand that they cannot operate merely on guts and glory.

“You gotta be careful, really do your re-search, and know what you’re doing," Mike LaCava, a real estate investor who founded the House Flipping School to teach others about

the trade, was quoted as saying by the US News and World Report.

Peter Souhleris, co-founder of CityLight Homes, a Boston-based house-flipping compa-ny, added that “you have to know your market and compare apples to apples … a lot of novice flippers really want their deals to work (but be-cause they don’t know what their buyers want), they fudge up”.

So closely monitored are America’s flippers that there are even statistics on them: Accord-ing to RealTrac.com, close to 100,000 houses were flipped in the first half of the year, with each flip making an average of US$30,000 (RM92,000).

The US News and World Report pointed out that successful flippers know their strengths and aren’t afraid to engage experts to help them realise their goals. Novices, it said, only “understand the cosmetic side of things, but they miss the fundamentals” of offering a good deal.

Besides intimately knowing how much houses in an area are trading for, House Flip-ping School’s LaCava said flippers also need to know how to renovate their units to make them stand out and sell more quickly.

Done the right way, flipping can be seen as more of an art rather than the crude pursuit of profits.

And like art, sometimes a flip done right can be priceless.

THE NAST Y F-WORD IS NOT ONLY UT TERED IN CELEBRIT Y KITCHENS AND CORPORATE BOARDROOMSBUT ALSO THE REAL ESTATE ARENA. WE MIGHT AS WELL GET USED TO IT …

Nu Sentral will be the country's first integrated green lifestyle mall located next to a transit hub, Kuala Lumpur Sentral

by Pavither Sidhu

P8 FRIDAY, DECEMBER 14, 2012 THE MALAYSIAN RESERVE | REAL RESERVE