AS lands are getting scarce, developers have to form strategies to secure the land that they are keen on.
For Bolton Bhd executive director Chan Wing Kwong, speed is of the essence in deciding whether to purchase a piece of land or not.
To him, a solid war chest allows a developer to do just that.
“A lot of times, we have to make the decision on site. When we look at the land, we have to know what product we can develop there and how we are going to sell it and at what price, on the spot,” he tellsStarBizWeek.
Having a “war chest” then comes in handy.
“You must know the market well ... the moment you procrastinate, another player would have snapped it up,” he says.
When it comes to acquiring new land, the developer, especially those in city areas, may not have the privilege to study the land thoroughly.
Due to the rarity of good land, prices are heading north.
“Margins have become inelastic due to escalating land prices and rising material costs which make it hard to keep costs low.
“To mitigate that, developers have to increase efficiency and launch the projects quickly,” he says.
The increasing cost to fund projects will see more collaborations among developers in the future, he adds.
For Bolton, it has partnered with other developers for its projects at Wangsa Maju, 51G Kuala Lumpur and Mayang Land.
Besides the central region, the developer is also present in Pulau Langkawi, Penang, Sungai Petani (Kedah) and Malacca, with its landbank totalling 1,300 acres.
In East Malaysia, it has partnered with Mobuild Sdn Bhd in Kota Kinabalu, Sabah for a project worth RM480mil.
“We intend to establish ourselves in East Malaysia so most likely we will use Kota Kinabalu as a springboard to enter other areas (in Sabah and Sarawak),” he says, adding that it also aims to set up an office there.
The developer, which has accumulated 40 years of experience, is able to increase its efficiency, hence it is able to provide value products for buyers. He also says smaller players without much experience lacking in confidence may be left behind in the competition.
“What they do is to enter into a venture with bigger players to leverage on their marketing and networking,” he adds.
As for Bolton, it has established its reputation as a niche developer with notable projects like Tijani in Bukit Tunku, which sits on a 42-acre land it acquired in 2001.
Touted as one of the truly high-end projects, the brand “Tijani”, which means crown in Arabic, has travelled far, and is even known in the Hong Kong market, according to Chan. “So, we decided to take this brand to the other side of the town (to Ukay Perdana),” he says.
The company has noticed a shift in high-end development in the Ampang area since the completion of the Duta-Ulu Kelang Expressway.
Known as Tijani Ukay, the project spreads across a 23-acre leasehold land in Hulu Kelang. The site will house 110 units of zero-lot bungalows and eight units of bungalows with a gross development value of RM300mil.
Scheduled to be completed in 2014, the development will have facilities like jogging track, playground, tennis court, surau, and barbeque area.
Besides these amenities, one of the attractions of the project is its low plot ratio, which ensures that there are lots of greenery, so that residents feel relaxed when they return home.
“The cascading pond is carved out from the natural stream,” Chan enthuses while showing the low-density architectural model.
He says the price for a zero lot unit starts from RM2.4mil while the bungalow costs RM5mil and above.
The serene enclave is located between International School of Kuala Lumpur (ISKL) and Zoo Negara.
“ISKL has a strong following of expatriates and further down is the row of embassies.
“There are empty plots of land around that area which leaves room for growth opportunities.
“We love to be the catalyst for future growth,” he says.
When asked if it is harder to sell properties which are priced above the million mark, he says: “People know that land is getting scarce and expensive so they do not mind payng more for a landed property.”
As a matter of fact, its strong following is evident when 50% of the units were snatched up during Tijani Ukay's preview sales.
When asked if there are concerns about earth conditions at the site as it is in the vicinity of Bukit Antarabangsa, he assures that it is not an issue as there are engineering solutions to address it.
“This (piece of) land is not next to a hill slope. It sits on a gradual piece of flat land.
“To be cautious, we have submitted the calculations to the hill slope committee and they have granted us all the necessary approvals,” he explains, adding that there are no Class III and Class IV slopes on the land.
Class III slope has a gradient between 25 and 35 degrees while Class IV's gradient is greater than 35 degrees.
The project is expected to contribute 15% to 20% to its bottomline for the next two years.
Reviewing 2012, he says the company performed well in the first half while the momentum has been maintained for the second half.
Meanwhile, the breakdown of the buyers are 30% foreigners and 70% locals, he says, he says.
According to him, only 8% of Malaysian properties are bought by foreigners.
“Last time, people like to keep cash but over time, they realise that property is a good investment which is why we see many people putting their money into the property market,” he adds.
Going forward, Chan expects sales for the overall property sector in 2013 to be flattish compared with the bullish days in 2009 to 2011.Demand should settle at a sustainable rate pace which bodes well for developers as “we prefer gradual increase in sale price and volume as compared to drastic ones,” he says.
The expanding Malaysian population will also support the growth.
“We can see the trend of buyers purchasing their properties based on location and developers.
“Good developers are generally more credible and they can deliver.
“Besides that, they have the reputation to produce good designs and quality products,” he adds.
He also says gross margins for players will rationalise. As for their net margins, it should be within the range of low teens.
Come 2013, the industry may face a huge challenge in the form of a shortage of labour.
“The labour challenge comes in two forms: the actual costs and the quality of service.
“The booming development in Indonesia in the last two years has led to a shortage of Indonesian labourers coming to Malaysia,” he says.
He also says the problem is alleviated by hiring labourers from other countries like Bangladesh but it is different because they lack the construction and communication skills that Indonesians have.
“The Indonesians know our system so it is easier to work with them. They are also hardworking and has no problem understanding our language,” he adds.
Cost-wise, he expects material prices to trend upwards.
The Government has reduced subsidies so costs of production for cement and tiles will go up, he says.
“As the world economy is burgeoning, we have to compete for raw resources with giant economies like China and Brazil so we can expect material prices to go up.”
On the minimum wage policy, he opines that the increased salary will allow employers to have higher hiring power, including recruiting talents from the region.
“One of the reasons of human capital outflow is due to low wages so we should not be afraid of it,” he says. - The Star
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