Mah Sing has the eye for big deals

Artist impression of Mah Sing’s semi-detached units at M Residence, Rawang.

MAH Sing Group Bhd group managing director Tan Sri Leong Hoy Kumhas just come back from a four-day retreat in Koh Samui. He's looking dapper and his eyes are gleaming with energy.

He apologises for being unable to take us out for lunch as he wants to continue fasting for the remaining week. His holiday wasn't a typical food feast dotted with long periods of winding down.

“I lost 2 kgs! See how loose my pants are,” says Leong as he shows how his pants now hangs copiously on his new slimmer waistline.

For Leong, being healthy is just as important as realising his vision of making Mah Sing the next Cheung Kong Holdings of Malaysia. Cheung Kong belongs to Hong Kong tycoon Li Ka-shing and is one of the largest property developers in Hong Kong.

As it is, Mah Sing currently has 40 projects and is Malaysia's second-largest developer by sales value.

To realise the Cheung Kong vision, which Leong hopes to achieve within the next 10 years, Leong realises he needs to be fit, alert and energetic. Yes, just like Top Glove Bhd's managing director Tan Sri Lim Wee Chai, Leong wants to live to a 100 years of age.

“Being a Cheong Kong means expanding and buying more land. I am always preparing for the future. We do not over-expand our capacity. We have the financial muscle to do that. For example, expanding into Johor. We had done thorough research and know who we want to target. We are not simple,” says Leong.

Not simple indeed. That certainly sums up Leong, who is not easily swayed by other property developers who have gone to foreign countries to launch properties.

Leong: ‘Looking at the right land at the right time is also an art’.

“For now, we will remain focused on Malaysia and we are kept extremely busy with 40 ongoing projects here. While we are focused on our domestic projects, we attract both Malaysian and international buyers, which is why we are starting our sales galleries overseas. We will definitely explore (going overseas) on a longer term basis should any good opportunities come up. It is not necessarily just the United Kingdom; it can be Singapore, Jakarta or Shanghai,” says Leong.

Mah Sing's current customer base comprises mainly Malaysians living in the country as well as those working overseas. Foreign purchasers make up under 10% of its sales. Even so, Mah Sing has exceeded the RM2bil sales mark for two consecutive years from 2011 to 2012. With its new project roll-outs for 2013, Leong expects that to increase by 15% to 20%.

Its closest competitor, S P Setia achieved record-breaking sales of RM4.23bil for its financial year ended Oct 31, 2012 and is setting itself a target of RM5.5bil for this financial year.

Meanwhile, Mah Sing is targeting to achieve total sales of RM3bil this year, which is a 20% growth from RM2.5bil the previous year.

Just a few weeks ago, Mah Sing Group received “overwhelming” response for its 69 units of luxury Aspen bungalows, which the company is promoting on a build-then-sell concept. The units, located within the 60.75ha Garden Residence in Cyberjaya, were launched last week. Priced from RM3.88mil, the 3.5-storey Aspen bungalows in Precinct 4 sits on comfortable lot sizes of 60' x 90' and have spacious built-up areas of 7,796 sq ft.

These are unique bungalows with 9+1 bedrooms that are 3.5 storeys and come equipped with a lift.

“We build things with practicality and style in mind. This bungalow can fit in all generations of a family. Previously, the older parents have to live on the ground floor. Now, with the lift, they can stay upstairs. There is privacy for all, as everyone can stay on a separate floor. Your in-laws can stay downstairs,” explains Leong.

He adds: “Nowadays, selling property is about selling an environment. Even when we do affordable housing, we do it with style. Property development is more art than science. Land acquisition and knowing what the market wants is more of an art. Looking at the right land at the right time is also an art.”

Thus, on his property outlook, Leong says that he is still selectively optimistic about certain sectors as property is acknowledged as the best hedge against inflation.

“People buy properties as a form of wealth preservation and not speculation and we believe there will be strong demand for serviced apartments from 500 sq ft and landed properties below RM1mil in good schemes.

“When I say good schemes, I refer to well-located projects with easy access and amenities or schemes that are mature,” says Leong.

An exciting 2013

CIMB research head Terence Wong is expecting Mah Sing to meet its new sales target for its financial year ended Dec 31, 2012 of RM2.5bil almost spot on.

“This is the group's best-ever performance and is 11% higher year-on-year. Compared with 2007, just before the global financial crisis, new sales have more than tripled,” says Wong.

Apart from targeting total sales of RM3bil this year, unbilled sales of RM2.95bil is 2.2 times its financial year 2011 property segment revenue.

Mah Sing's product range also spans the entire range from affordable housing to premium upmarket homes, high-rise units, commercial properties and industrial properties.

Aspen Bungalows are slated for completion in mid-2013.

For the nine months ended Sept 30, 2012, Mah Sing's net profit rose 37% to RM175.2mil while revenue was up 16% to RM1.3bil from the previous period.

For this year, Leong is launching six new projects which consist of Southville City and M Residence 2 in the Klang Valley, Ferringhi Residence in Penang island, Mah Sing iParc@Tanjung Pelepas and The Meridin@Medini which are located in Iskandar Malaysia and Sutera Avenue in Kota Kinabalu. He says some 77% of sales will come from landed residential projects and niche size high-rise projects

Leong is particularly excited about the RM3.63bil Southville City project in Bangi, a 420-acre township which Leong is hoping to develop from scratch over the next five to seven years and transform it into the next thriving township of Puchong, Cheras and Kota Damansara.

New sales in 2013 will be anchored by the group's new flagship township, the RM3.63bil Southville project in Bangi, where the group is launching RM1.2bil to RM1.3bil worth of properties this year.

So far, Mah Sing has received some 7,000 registrants for the township, and many have been attracted by the affordable pricing for its residential properties. Three-storey superlink houses will be priced from RM760,000 onwards and 2- to 3-bedroom apartments priced at below RM300,000 and from RM208,000 onwards.

Besides the six new projects, the main launches for 2013 will come from Icon City Petaling Jaya, M Residence 1 in Rawang, Garden Residence and Garden Plaza in Cyberjaya and M City in Jalan Ampang.

Mah Sing is targeting to achieve 62% of total sales from its projects in the Klang Valley, 20% from Johor, 13% from Penang and 5% from Sabah.

Leong says Mah Sing is extremely keen to tender for jobs on the Rubber Research Institute (RRI) land once tenders are opened. Last August.Kwasa Land Sdn Bhd, a wholly owned subsidiary of the Employees Provident Fund, announced it had finalised the purchase price of RM2.28bil for 2,330 acres of prime RRI land in the Klang Valley. It is the master developer for this township.

Kwasa Land had mentioned that the proposed township development is expected to create abundant opportunities for developers and contractors to participate in developing residential and commercial properties, main infrastructures and public amenities for an expected population of 150,000.

Mah Sing's gearing level has been an issue of concern for many in the investing fraternity but Leong feels those fears are unfounded. As of Sept 30, 2012, Mah Sing has some RM545.3mil in its coffers.

An artist’s impression of Mah Sing’s Ferringhi Residence project in Penang.

In December, Mah Sing proposed a renounceable rights issue of new shares with free warrants to its shareholders to raise gross proceeds of RM400mil to finance its operations and business expansion. The entitlement basis, date and issue price have yet to be determined.

Leong says Mah Sing is planning up to 0.5 times net gearing post-rights issue in the first quarter of 2013 as it is eyeing new strategic landbank.

“We are certain we will not gear up beyond 0.5 times. Our gearing level now stands at 0.3 times. We have cashflow from our ongoing projects and each of our projects has a 60%-80% takeup rate before we start development works. For this financial year, we are receiving some additional RM228mil from the delivery of vacant possession of our tail-end properties, over and above our existing billings,” he says.

Hong Leong Investment Bank Bhd analyst Sean Lim feels the company is handling its gearing level well, with support provided from a rights issue in December and favourable land payment terms.

Lim estimates that the expected RM400mil proceeds from the rights issue would help bring down net gearing from 0.3 times to 0.22 times currently.

“On top of the proceeds, the additional RM440mil gearing headroom (before gearing hits 0.5 times post-placement) would easily generate RM4bil of new gross development value, conservatively speaking,” Lim says.

Aside from that, Mah Sing is seeking favourable payment terms for its upcoming land acquisitions via joint ventures or prolonged payment periods of four to five years.

Lim notes that the move to seek favourable payment terms and joint ventures could be a good move to mitigate high gearing as sectoral headwinds could cause landowners to become more reasonable in their asking prices.

“In terms of landbanking, Mah Sing beat its target of RM5bil GDV worth of projects last year by around RM900mil and believes it should do better this year. Mah Sing's ability to execute is one of the best in the sector and its earnings prospects remain positive given the high unbilled sales of RM2.95bil, rising annual new sales and aggressive landbanking,” says Wong.

The appeal of Johor

The influx of interest into Johor property has become even more evident.

“The Iskandar region is developed mainly for Singaporeans,” says one investment banker from Singapore, who just bought a bungalow from one of the developers there.

“In Singapore, we don't have space. So here in Johor, we can afford to buy huge landed properties at such cheap prices,” he says.

Singaporean property buyers are feeling the heat even more in recent times. Singapore has imposed more measures to curb speculation on residential and industrial properties after home prices climbed to a record high. Some analysts, including the investment banker, feels that the curbs will fuel demand for Johor properties.

Some of the measures introduced include stamp duty for buyers, which has been increased by between five and seven percentage points. Permanent residents will have to pay the additional tax when they buy their first home while Singaporeans will have to pay the levy from their second purchase onwards.

While Leong is not revealing all of his cards just yet, he does tellStarBizWeek that he has a vision of becoming the largest lifestyle developers in the Iskandar Development Region (IDR) with a minimum gross development value (GDV) of at least RM5bil over the next few years.

In the Iskandar area, the three main areas of economic focus include Nusajaya, Medini and Danga Bay. Leong is of the opinion that all three areas will thrive, and each is already attracting its own niche market.

For Mah Sing, the target is clear. Just like Southville City in Bangi, which is targeting students from the 20 educational institutions in that area, Leong is targeting the students in Educity, Nusajaya.

The educational institutions in Educity include University of Reading from the United Kingdom, the Newcastle University Medicine Malaysia, the University of Southampton Malaysia campus, the Netherlands Maritime Institute of Technology, Raffles University Iskandar and Marlborough College Malaysia.

Leong says response for his Johor properties has been immense and the company is getting serious queries from Singaporeans, South Koreans, Japanese and Indonesians.

With all such feedback, Leong is not wasting any time and will be opening his sales gallery in Singapore after the Chinese New Year celebration.

“We will be organising buses to bring over interested buyers to view our sales gallery in the Iskandar region. We want to do this in a big way,” says Leong.

Currently, Mah Sing has five projects in Johor worth RM2.29bil.

The two new projects to be launched this year are Meridin@Medini, which is an RM1.1bil integrated project in the middle of the Medini special zone in Iskandar Malaysia, and 20 minutes from Singapore via the Second Link.

The other project is Mah Sing's i-Parc, which is currently the only sizeable freehold industrial project neighbouring the Port of Tanjung Pelepas.

Mah Sing i-Parc has a free-zone status, making it a premier industrial location, says Leong.

Undemanding valuations

Wong says Mah Sing's valuations remain undemanding with forward price earnings ratios of 5 to 6 times and a dividend yield of around 5%. He has a “neutral” call and target price of RM2.14 based on unchanged 20% discount to revised net asset value, which factors in the dilutive impact from the proposed rights issue.

UBS Investment research head Chris Oh expects another record year for Mah Sing which he views as the best property stock in the sector as the company is entrepreneurially managed with ambitious plans to grow within Malaysia. Another factor is the company's aggressive sales targets which it has delivered in the past.

“We continue to like Mah Sing for its entrepreneurial management team and high asset turnover business model. The company recently announced a record sales target for 2013 of RM3bil (which is a 20% year-on-year increase) and anticipates further landbank acquisitions through financing via a proposed RM400mil rights issue to be completed by the first half of 2013. The past five-year sales and net earnings compounded growth were 23.1% and 28% respectively. Our view is that Mah Sing will deliver some 20% sales and earnings growth based on its diversified range of products,” says Oh.

Oh feels the stock's valuations look attractive as Mah Sing's shares are trading at a 12-month forward PE of 6 times with a dividend yield of over 6%. He has a “buy” call and target price of RM2.80, which is based on a 30% discount to their sum-of-the-parts revised net asset value of RM3.99. - The Star

PDC hits back over ‘false criticism’ of affordable housing plan

GEORGE TOWN: Penang Develop-ment Corporation (PDC) has slammed state Barisan Nasional chairman Teng Chang Yeow for making “false criticism” against the state’s affordable housing programme.

PDC general manager Datuk Rosli Jaafar said he was shocked on learning about Teng’s remarks about the state government.

“He claimed that the state was insincere by setting high house prices which he said could not assist the poor and middle-income earners.

“How could he say PDC’s units are overpriced when they are priced the same as the Federal Govern-ment’s affordable housing (between RM72,500 and RM400,000 in urban areas and RM72,500 to RM220,000 in rural areas)?” he said in a statement.

Rosli explained that Prime Minister Datuk Seri Najib Tun Razak had announced the top price range set at RM400,000 for urban areas in his 2013 Budget speech in September last year.

Teng was reported as saying the Pakatan Rakyat government did not have a housing policy and was unable to determine the pricing of houses.

Describing the affordable housing policy as misleading, Teng had said that the 12,000 medium- cost and LMC units in Batu Kawan priced between RM72,500 and RM220,000 each were not really affordable.

Rosli said that the Batu Kawan housing project would be of the best quality like those of Singa-pore’s Housing Development Board (HDB), dubbed as the best builder of affordable housing in the world, which was hired to consult PDC.

“It is also untrue for Teng to say that PDC is making profit from this affordable housing programme.”

Meanwhile, Chief Minister Lim Guan Eng’s press secretary Cheong Yin Fan, also in a statement, criticised Teng for defending the “Barisan (mainstream) media.”

“Lim had never used the ‘looking down’ reason as an excuse for not wanting to speak to reporters from The Star, New Straits Times, Berita Harian or Utusan Malaysia.”

On Jan 28, Lim had said that he would not give any verbal statements toThe Star but would issue written statements to the publication during the election period.

Following this, Teng had reportedly said that the state was looking down on reporters’ capabilities when Lim refused to give any verbal statements to The Star.

Preparations in full swing for launch of industrial park

KUANTAN: Preparations are in full swing for the launch of the Malaysia-China Kuantan Industrial Park (MCKIP) on Tuesday.

Workers were setting up canopies yesterday and putting the final touches to the monolithic signboard at the entrance to the park in Gebeng here.

MCKIP would be jointly launched by Prime Minister Datuk Seri Najib Tun Razak and the chairman of the Chinese People’s Political Con­sultative Conference of the People’s Republic of China, Jia Qinglin.

Najib and Jia are expected to arrive at about 10.45am and will be welcomed by the Malaysia Harmony Drum Troupe, before proceeding to deliver their speeches and launching the park.

MCKIP is the sister park to the China-Malaysia Qingzhou Industrial Park in Qingzhou, China, which was launched by Najib and Chinese Premier Wen Jiabao last April.

Covering an area of around 607ha, the park would be developed within the East Coast Economic Region Special Economic Zone in Kuantan.

It would comprise several zones such as a residential area, logistic park, waterfront business park, wetland park, medium industry and heavy industry.

Industries targeted for MCKIP include those manufacturing equipment for plastics and metal, automotive components, fibre cement board, stainless steel products, food processing, carbon fibre, electric and electronics products, information and communications technology and consumer products.

Pahang Mentri Besar Datuk Seri Adnan Yaakob had also assured local businessmen that there would be plenty of business opportunities in store for them once MCKIP begins operation.

“I have told East Coast Economic Region De­­ve­lopment Coun­­cil officials that em­­phasis and op­­por­­­­­tunities should be made available to local businessmen.

“I got representatives from the Pahang Chinese Chamber of Commerce who want to know what they are going to benefit from this project and I am sure the Prime Minister in his launching speech, will highlight this,” he said recently.

“There will be opportunities for local businessmen. A lot of business opportunities. Do not worry.” - The Star

林冠英：槟政府未来5年将落实近4万可负担房屋

（槟岛西南区31日讯）槟州首长林冠英指出，在可负担房屋5亿令吉基金的计划中，州政府将在未来5年内兴建另1万9000间的可负担屋子，并预计私人界将兴建另外的2万个单位。
“换言之，在未来5年内，槟州政府将在未来5年落实另外至少3万9000间单位的可负担屋子。”
他说，这1万9000个可负担房屋单位，将由槟州发展机构推行。
“在过去年5年槟州建了1万3000间可负担屋子，其中4000单位是州政府推行，另9000间是私人界完成。”

邓章耀：民联“可负担房屋”仅挂名 40万屋价超过居民能力范围

（槟城30日讯）槟州国阵主席邓章耀说，由民联州政府兴建的1000平方尺，售价40万令吉的“可负担房屋”只是名字“可负担”而已，房屋价格却已超过可负担的范围。

他指出，他向房产界的顾问询问兴建多层房屋的价格时，得知每平方尺的兴建价格为150令吉，而此价格不包括土地价格。若1000平方尺的房屋，单是兴建费就是15万令吉。“每平方尺150令吉已是最高的兴建费，有的兴建费才不过130令吉。”

他说，不管是属州政府或中央政府的地段，只要没有出售给发展商，土地价格都是零，因此，若由州政府兴建的房屋，土地费不需要计算在内，那么，1000平方尺的房屋要价40万令吉，对比只需要15万令吉的兴建费，就出现相当大的价格差距。

他周三颁发奖励金予在初中评估考试中考获佳绩的学生后说，政府扮演的角色是提供尽量低价的房屋给人民，但，民联州政府的可负担房屋，房价却没有反映真正价格。- 

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RM220mil road upgrading project in the works

THE concessionary operator of the second Penang bridge — Jambatan Kedua Sdn Bhd (JKSB) — will embark on a RM220mil road upgrading project, which mostly involves expanding a 4.9km stretch along the Tun Dr Lim Chong Eu Expressway (Bayan Lepas Coastal Highway).

State Public Works, Utilities and Transport Committee chairman Lim Hock Seng said the project’s preliminary work was scheduled to start tomorrow.

“The starting point is from the junction of Jalan Batu Maung (near Southbay, Batu Maung) to the Queensbay Mall. The upgrading project will see an expansion from the current four to six lanes,” he told a press conference in Komtar yesterday.

He added that the Works Ministry had approved the allocation and the project would be known as the FT3113.

“It is proposed that there will be flyovers at three traffic light junctions — Hilir Sungai Keluang, Lebuhraya Kampung Jawa and Jalan Kampung Jawa.

“The flyovers will connect straight to the Free Trade Zone. One lane will be available for road users who wish to make a U-turn,” said Lim.

“The project will take 24 months to complete and the project cost might go up to RM350mil due to the possibility of additional repairs,” he said.

It will also include a promenade, a bicycle lane, a sidewalk, a disabled-friendly facility, a pedestrian bridge, a bus stop and a roundabout at the Jalan Batu Maung junction.

The project will be based on the greenery concept with emphasis on ensuring much greenery is retained.

It will also involve minimal land reclamation, he said.

State Local Government and Traffic Management Committee chairman Chow Kon Yeow said the project was part of the traffic dispersal scheme for the second Penang bridge.

“The challenging part will be relocating the electrical cables and ensuring that there is no disruption to the factories operating there,” he said.

Batu Maung assemblyman Datuk Abdul Malik Abul Kassim, who was also present, said JKSB had briefed the state on the project and he was told that the earthworks would commence in September after the second bridge is almost completed.

“We will ensure minimum in- convenience to the road users,” he said.

JKSB had appointed UEM Builders as the project contractor while the consultants are Jurutek Consultants and SZY Consultant Sdn Bhd.

Minconsult Sdn Bhd was appointed as an independent consultant. The Star

槟城人下月7日起 可申请齐来也路峇都加湾可负担房屋

（槟城29日讯）槟城人可于2月7日起，到光大、槟州发展机构或威省市政局大厦，申请齐来也路或峇都加湾的可负担房屋。

槟州首长林冠英于周二召开记者会宣布，这项公开于全槟子民申请的可负担房屋计划，将于2月7日（周四）开启，并于农历新年期间开放，时间是上午9时至下午5时。针对记者询及外州人士是否可提出申请，他说这项计划是让槟民优先。

他指出，槟民在这段期间至光大、槟州发展机构或柏达镇威省市政局大厦处理申请手续。他也说，关于更多详情，州政府将会随后公布。无论如何，他说，申请者需准备个人文件，包括所得税。

槟 州发展机构总经理拿督罗斯里则说，齐来也路与峇都加湾的可负担房屋数量分别是1320间及2080间。齐来也路的中价屋有550间，其中包括275间面积 1000平方尺的售价为每间40万令吉、165间面积900平方尺的售价为每间30万令吉，而110间面积800平方尺的售价为每间20万令吉。- 光华

Middle-income trap makes owning homes near impossible

GEORGE TOWN, Jan 29 — The poor have government-controlled low-cost housing, the rich can have their pick of whichever property they fancy but the middle-income wage earners are left to rent or make do with a remote location when it comes to getting a home of their own.

The latest Property Market Report 2012 has revealed property prices in major cities such as Kuala Lumpur, Penang, Johor Baru and Kota Kinabalu to be well above the affordability of any middle-income wage earner with a take-home pay of less than RM4,000, prompting the federal government to come up with several affordable housing schemes.

In Kuala Lumpur, a single-storey terrace house in Taman Tun Dr Ismail or Lucky Garden is priced above RM730,000 while a similar type of house in the nearby Petaling district is priced above RM378,000.

The solution, according to real estate agent and International Real Estate Federation (Fiabci) committee member Michael Geh, is for potential home buyers to look further away to the outskirts.

“What we have now is a middle-income trap for the average wage earner where they can’t qualify for low-cost housing and yet they can’t afford a comfortable home within city limits,” he said.

Property prices have been strong in recent years with many urban areas experiencing property price increases while newly launched homes are priced above the RM500,000 mark, according to the Property Market Report statistics.

If a house buyer wants to get a home that’s within his means, he will have to either look at locations further from the city centre or get a “partner” as only a combined income will allow for easier approvals of housing loans, said Geh.

“So, either you grab a spouse to apply for a loan based on a joint income or you look further out of the city for cheaper housing and commute to work everyday,” he said.

Geh said there was also a new trend where friends partnered up to jointly purchase properties.

“Many singles prefer to partner up with a friend to jointly buy a house where they stay together as housemates instead of renting,” he said.

But many singles also prefer to rent and live like nomads where they frequently move from one place to another especially when they change jobs, he added.

“This is especially true for fresh graduates who may not have enough income to sustain a housing loan,” he said.

Property auctioneer M. Shanmughananthan echoed Geh’s opinions that it was now very difficult for the middle-income earner to purchase properties, especially newly launched projects in the city.

“There is now a growing phenomenon of investors clubs and they are snapping up these new projects even before they are launched so genuine home buyers will not have a chance to get these properties at the launch price,” he said.

In recent years, the bullish property sector in the country has turned this industry into a commodity worth investing in, spurring the growth of investors clubs.

Property researcher and property book author Ho Chin Soon had said there are now many investors clubs, each with a few hundred members, that advise members on project launches and property investments.

Property prices, while on the increase in urban areas, still remain at an affordable range in the outskirts such as on the mainland side in Penang where property prices in the state are known to be phenomenally high.

A single-storey terrace house on the island may cost upwards of RM500,000 but over on the mainland, in Seberang Perai, it could cost as low as RM90,000.

“House buyers will need to move away from high demand urban areas and look towards the more rural areas such as Juru or other parts of the mainland where property prices are not as high yet,” said Shanmughananthan.

Geh agreed and pointed out that there are still double-storey terrace houses in Johor Baru that are priced below RM250,000. However, this is not so practical for house buyers who prefer to live near where they work.

For lecturer Sandra Chia, all she wanted was to get a place near where she works for easier commuting and convenience, such as apartments in

Tanjung Bungah, Penang, but prices there are above RM400,000 a unit.

Chia earns around RM4,000 but does not have much savings, leaving her unable to buy properties in that area. “I am still staying with my family now but it would be nice to get a place of my own,” she said.

The high prices of properties in Penang have left Chia worried if she will ever be able to afford one and finally move out of the family home.

“It doesn’t look like I’ll be leaving home soon due to the current inflated property prices,” she said.

File photo of condominiums in Bangsar, Kuala Lumpur, most of which are beyond the means of middle-income wage earners.

Another potential house buyer, insurance agent Fakhrul Hizan, could not even get a bank loan for a RM150,000 medium-cost flat in Section 7, Shah Alam, Selangor.

The 27-year-old earns RM5,000 monthly but his loan application was rejected as the bank had calculated his nett income by taking 60 per cent of his salary and subtracting it with his monthly financial commitments of RM1,500.

He said the monthly loan instalments of RM650 would have been manageable, so he was “quite disappointed” that his loan application was rejected.

The loan rejection was probably due to strict guidelines on housing loan applications put in place by Bank Negara since 2012.

While there was no shortage in housing loan packages by banks, bank officer Jordan Chong said the problem was for applicants to qualify for the loans.

Under the Bank Negara ruling, housing loan applicants need to borrow based on their nett income, not on their gross income.

For example, Chong explained, a house buyer may have a salary of RM4,000 but the amount of housing loan he is able to apply for will not be based on that figure.

“We will look at the take home pay, after EPF and tax deductions, and from there, look at his other financial commitments such as car loans, study loans, credit cards and other debts,” he said.

So, in short, a person with RM4,000 gross income could end up with only RM3,000 nett income after deducting his other financial commitments.

“Based on this, he is only allowed to borrow a sum where the debt ratio is up to 70 per cent of the nett income,” Chong said, pointing out that a house buyer with a nett income of RM3,000 can only borrow up to RM270,000 to buy a RM300,000 house and he will need to service the loan at RM1,300 per month for 30 years.

But Chong  said house buyers may now apply for longer loan tenure that stretches up to 35 years, not only limited to 20 or 30 years.

“So, a 35-year-old house buyer is able to take up a loan that he will need to service until he is 70 years old,” he said.

As for whether it was true that it was now tougher for house buyers to get loans, he said this was because of the nett income ruling.

“Some may have a lot of financial commitments so after deducting the other loans they are servicing each month, they may not have much nett income left to borrow against,” he said.

All new house buyers with no existing housing loans under their names are eligible to apply for 90 per cent loans for a new house while those with existing housing loans can only apply for 70 per cent loans.

Due to this, newlyweds, fresh graduates and middle-income wage earners may not only have a hard time looking for properties within their affordability range but they will also have a hard time getting loans to buy their homes.

As Geh puts it, middle-income wage earners are stuck in a trap and perhaps the only way to get a place to stay now was to rent one or try their luck with the recently introduced 1 Malaysia Housing Programme (PR1MA).

Both Geh and Shanmughananthan lauded the federal government’s move in introducing the PR1MA affordable housing for the middle-income group and the My First Home Scheme for young adults to get 100 per cent loan financing.

All individuals or couples with an income of between RM2,500 and RM7,500 can apply for a PR1MA house, which is priced below RM400,000 each unit.

Prime Minister Datuk Seri Najib Razak had announced late last year that 123,000 PR1MA houses will be built throughout the nation including in Seremban, Shah Alam, Kuantan, Johor and Penang.

As for the My First Home Scheme, as at October 2012 only 436 applicants were successful in obtaining financing under the scheme which was introduced in 2011. - The Star

Malaysia can be real estate investment hub by 2020 - analyst

KUALA LUMPUR (Jan 23): Malaysia has the potential to transform itself into a real estate investment hub by 2020 with the completion of the mass rapid transit and the high speed railway linking Singapore.

Director of Ho Chin Soon Research Sdn Bhd, Ho Chin Soon, said while there are concerns over an oversupply situation, the free market will take care of itself.

“For example, there are some buildings that are still new and the rentals are too high. To attract rental, the landlords may need to introduce a rent-free period,” he said during the 6th Malaysian Property Summit 2013 on Jan 22.

“Infrastructure projects like the MRT system will determine market share. Infrastructure projects like highways will help townships in the outskirts,” he added.

Mega projects attracting attention include the Tun Razak Exchange, PJ Sentral, Warisan Merdeka and Bukit Bintang City Centre, he said.

“Government linked companies will take centre stage in future in terms of real estate development,” he said. – Bernama

Banks need to be transparent

STANDARDISING and simplifying housing loan documents is a step forward. Kudos to Pemudah (Special Taskforce to facilitate business),Bank Negara and the Association of Banks in Malaysia (ABM). It will be an excellent move to reign in the rogue banks, financial institutions (FIs) and development financial institutions (DFIs).

The National House Buyers Association (HBA) views the recent standardisation of loan agreements for housing loans below RM500,000 positively. For many years, HBA has been calling for greater protection for house buyers when they buy from developers and for borrowers when taking a housing loan.

As a typical housing loan ranges between 20 and 30 years, borrowers are stuck with the terms and conditions (T&Cs) of the housing loan for a long time. Unfortunately, most borrowers do not really understand the T&Cs of housing loan, as:

(i) The loan agreements are lengthy, running between 20 and 30 pages;

(ii) They are filled with legal terms and jargon that even borrowers with a law degree will still need their legal dictionary for reference.

Even for borrowers who are law-savvy, the loan agreement is a one-way traffic; the borrower must accept all the T&Cs or find another bank, as the banks will not vary any T&Cs. However, the scenario is the same for all banks and borrowers are at their mercy. (banks in this context includeFIs and DFIs).

Another grave injustice is that the cost of legal fees for the said housing loan is borne by the borrower although the lawyer is in fact, representing the banks and on its panel, and is in no position to advise the borrower. The borrower will be required to appoint his own lawyer should he require any legal advice. But this will be futile as banks will not agree to vary any T&Cs of the loan agreements.

Standardised Loan Agreement

HBA has been urging banks in Malaysia to be fair and transparent in their dealing with borrowers. Hence, credit must be given to “participating banks” for finally agreeing to adopt a standardised template for housing loans with simplified language which is easy for the layman to understand.

Based on our quick analysis of the Standardised Loan Agreement which can be downloaded from the website of the Association of Banks in Malaysia (www.abm.org.my), the agreement does appear to contain less legal jargon and is written in a manner which is easier for the borrower to understand.

The agreement also does away with unnecessary and ridiculous restrictions that certain bank previously impose on borrowers taking housing loans, such as:

● Borrowers cannot rent out the property without the consent of the banks;

● Borrowers cannot undertake any renovations without the consent of the banks; and

● Hidden clauses which impose various hidden charges and penalties such as late payment charges on borrowers

Based on our preliminary assessment, HBA views the agreement positively and we urge the banks and Bank Negara to further improve on the following areas:

Remove the RM500,000 cap

HBA calls for the RM500,000 limit for the Standardised Loan Agreement to be removed. This agreement should be applicable for all housing loans regardless of the amount, as the nature of the housing loan is the same. Already, most landed properties in areas such as Puchong and Kota Damansara are in excess of RM500,000. Even strata-properties in locations such as Bandar Utama, Ara Damansara are already in excess of RM500,000. Why not extend the coverage to all housing loans per se?

All industry players must adopt the standardised loan agreement

It would appear that the standardised loan agreement is being used by certain participating banks on a voluntarily basis and not all commercial banks which give out housing loans are adopting this agreement. Why is this the case? Bank Negara should compel all commercial banks to adopt this standardised agreement. In addition, non-banking Institutions that give out housing loans, such as DFIs, insurance companies must also be compelled to adopt the agreement. Why shouldn't the house buyers offered similar protection here?

Non-members of ABM such as DFIs include Bank Islam, Bank Muamalat, Bank Rakyat, Agro Bank, Bank Industri, Bank Simpanan Nasional and EXIM Bank which are formulated under their respective legislations.

Remove unnecessary fees and charges imposed on borrowers

Certain banks currently impose unnecessary fees and charges on borrowers when they request for bank statements which are needed when sthey want to settle/refinance their housing loans, or when making EPF withdrawals to reduce their housing loans. While the fees of up to RM50 may not seem much to some people, it still is an exorbitant amount as it cost banks next to nothing to produce such statements. Moreover, it is the borrowers' right to settle/refinance the loan and/or to make EPF withdrawals to reduce their loans. A bank statement showing the principal sum outstanding is required to facilitate such transactions.

By imposing fees of up to RM50 to prepare such simple statements, banks are blatantly taking advantage of their customers as they have no choice but to pay the charges just to ensure that the transaction goes through.

HBA is calling for banks to be prohibited from charging fees for these statement to facilitate repayment, refinancing or to make EPF withdrawals to reduce their loans. Some Banks are already charging RM10 for “reprint” of a bank statement on current accounts. Can you imagine a situation where the customer has not received his monthly bank statement for whatever reason and has to pay RM10 for a “reprint” of his own bank statement?

Banks can unilaterally vary theinterest rate

However, upon closer inspection of the standardised template, HBA noticed that a clause currently found in most housing loans has been carried forward. .

Even if the borrower had faithfully paid all his dues and installments' on time, the bank is entitled to vary the interest rate unilaterally at any time during the loan tenure. There is no such thing as sanctity of a binding contract between the borrower and the banks.

As we know, the current interest rates for housing loans are competitive, with some banks willing to go as low as BLR less 2.50%. So, what this can mean is that a few years down the road, when the banks realise that such low interest rates are no longer feasible, they can vary the interest rate from say BLR less 2.50% to BLR PLUS 2.50% and the borrower is obliged to pay the new interest rate. Furthermore, if the previous installment was only RM1,500 a month and the new installment due to the revised interest rate is RM2,500, the borrower must pay the new rate or risk the bank repossessing his house.

HBA urgently calls for Bank Negara to repeal this clause to prevent banks from having the upper hand to victimise unsuspecting borrowers. Banks must not be able to unilaterally vary the interest rate if the borrower had not defaulted on his obligations' under the loan agreement. Banks may say that they will not normally invoke/exercise the said clause. But, covenanted terms and conditions are binding upon both parties.

Lawyers have to purchase standard forms from banks

Nowadays, law firms undertaking banks' work have to purchase standardised pre-printed forms from banks. The price ranges from RM150-RM350. Would printing cost be so expensive or are banks making a profit or “mark-up” from such sales to law firms?

Such “expenses” are nevertheless passed down to customers/ borrowers as disbursements. Couldn't a “soft copy” be made available to law firms to adopt and print at their own cost and expense? Printing charges are only limited to RM50 as approved by the Bar Council.

Apportionment of payment to interest and principal shrouded in secrecy

Another grave injustice to borrowers is the allocation of monthly installments towards the settlement of principal and interest as this is not disclosed anywhere in the Loan Agreements' or even in the Standardised Template.

To illustrate a real life example, we had a complainant who took a 20-year housing loan about six years ago. After diligently paying his loan for five years, the complainant assumed that the principal amount outstanding should only be about 75% of the original amount. Unfortunately, the complainant had personally experienced, the amount was closer to 83%.

There need to be greater transparency on how the allocation of monthly repayments for interest and principal is done and this must be disclosed in the loan agreement. Moreover, the allocation must be done on a “straight line basis” so, after paying five out of a 20-year housing loan, the principal outstanding must be 75% of the original amount.

Conclusion

HBA calls for banks to continue to take cognisant of their borrowers' hardship and protect the interest of their borrowers instead of just focusing on profitability. Without the borrowers and customers, banks will not have any profits to show.

HBA also calls on Bank Negara to continue the close monitoring of banks to ensure that they do not take advantage of borrowers. The battle of borrowers against banks is akin to David vs Goliath. Timely intervention from Bank Negara is needed to balance the scale of power. - The Star

Chang Kim Loong is the honorary secretary-general of the National House Buyers Association, a non-profit, non-governmental organisation purely manned by volunteers. You can log in to www.hba.org.my

New projects for Penang

An artist’s impression of the RM320mil City Mall & City Residence project in Tanjung Tokong.

Riding on a stronger gross domestic product (GDP) forecast of 4.5% to 5.5% for 2013, Kuala Lumpur and Penang-based developers plan RM9.733bil gross development value (GDV) of residential and commercial properties on Penang island this year.

The GDP forecast from the Finance Ministry is slightly stronger than the projected 4.5% to 5% for 2012.

IJM Land Bhd (GDV of RM5.4bil), Mah Sing Group Bhd (RM248mil),Sunway Bhd (RM120mil), Ideal Property Development Sdn Bhd (RM2bil), SP Setia Bhd (RM945mil), Eastern & Oriental Bhd (RM500mil)and Ivory Properties Group Bhd (RM520mil)) are among the developers with plans for new residential and commercial schemes on the island.

Some RM5bil are commercial properties, while the remaining RM4.6bil residential properties.

The North-East district, which covers prime residential cum commercial neighbourhoods such as Tanjung Tokong, Batu Ferringhi, Pulau Tikus, and Bayan Mutiara, will see some RM6.7bil worth of projects taking off this year.

The South-West district, covering residential cum commercial neighbourhoods such as Relau, Batu Maung, Bukit Jambul, Bayan Lepas, Sungai Nibong and Teluk Kumbar, will see the development of the remaining RM3bil projects.

The South-West district still draws developers to launch high rise properties for RM400,000 to RM670,000 per unit, considered as “affordable” nowadays, although land prices in the area has risen by about 30% compared to two years ago.

Presently, the construction cost to build a condominium in the South-West district is about RM250 per sq ft to RM300 per sq ft, which is inclusive of land cost which is hovering around RM100 to RM150 per sq ft, about 30% more than two years ago.

“Thus it is still possible for developers to build homes within the RM400,000 and RM670,000 range in the South-West district and still make a decent profit despite the higher land costs and development charges,” said Ideal Property managing director Datuk Alex Ooi.

The commercial projects are IJM Land's RM5bil The Light Waterfront Penang, IPGB's RM100mil shopping mall in Tanjung Tokong, and SP Setia's RM55mil Setia Tri-Suites in Bayan Lepas.

IJM Land will start its commercial precinct project on 102 acres in mid-2013 located next to the Penang Bridge on Tun Dr Lim Chong Eu Expressway.

The precinct is designed to accommodate four hotels, a shopping centre, the Penang Waterfront Convention Centre, and an international business district, which will take seven to eight years to complete, said IJM Land general manager (North) Toh Chin Leong.

“The RM346mil Penang Waterfront Convention Centre (PWCC), scheduled for completion in 2017, will serve as an alternative to renowned convention venues in places such as Kuala Lumpur, Bangkok, Singapore, and Hong Kong,” he added.

In mid-2013, IJM Land is also launching the RM400mil Light Collection IV scheme in The Light Waterfront Penang, comprising 79 condominium units and 19 sea-fronting bungalows.

The condominiums have built-up areas of 1,990 sq ft and 3,249 sq ft, while the built-up areas of bungalows starts from 8,000 sq ft

“The selling price of the properties starts from RM1,000 per sq ft,” Toh said.

IPGB's shopping mall is part of the RM320mil City Mall & City Residence project in Tanjung Tokong, comprising an RM100mil shopping mall and two blocks of 202 condominiums with a RM220mil GDV, which will be launched during the Chinese New Year.

“The condominiums with 1,230 sq ft and 1,830 sq ft of built-up areas will be sold at RM800 per sq ft. So far we have received registrations for over 50% of the condominiums,” said IPGB executive director Murly Manokharan.

In Bayan Mutiara, the IPGB will launch 400 condominium units with built-up areas ranging from 460 sq ft to 1,300 sq ft in the second quarter.

“These properties, with RM200mil GDV, are priced at RM550 per sq ft, and are in phase one of the RM10bil Penang World City project, which will be completed in eight years,” he said.

SP Setia will be launching the RM55mil Setia Tri-Suites, comprising 72 business suites with built-up areas of 700 sq ft and 1,200 sq ft in Bayan Lepas, during the Chinese New Year.

This year, S P Setia is also undertaking the development of the recently launched RM290mil Setia Pinnacle, comprising 434 condominiums, and the RM600mil Sky Vista, comprising 800 condominiums, scheduled for launching in the second quarter.

The built-up areas of Sky Vista range from between 900 sq ft and 1,500sq ft, while the built-up areas of Setia Pinnacle range between 1,100 sq ft and 1,500 sq ft.

“All the residential and commercial properties are priced around RM450 per sq ft,” said SP Setia (Property North) general manager Khoo Teck Chong.

Mah Sing will undertake the development of the RM248mil Emaryl Condo Villas in Ferringhi Residence, a low-rise condominium scheme comprising 200 condominum units in Batu Ferringhi.

“The units, with built-up areas ranging between 1,510 sq ft and 1,752 sq ft, are priced from RM1mil, which is very competitive compared to the properties of similar range found in Hong Kong and Singapore,” said itschief operating officer Teh Hong Chong.

The Emaryl Condo Villas were launched on Jan 19 and Jan 20.

Eastern & Oriental Bhd deputy managing director Eric Chan Kok Leongsaid the group would launch the third tower of Andaman Condominiums at Tanjung Seri Pinang in Tanjung Tokong, comprising 210 condominiums with RM500mil GDV soon.

“In April 2011, we obtained the approval-in-principle from the Penang state government to reclaim the balance of the 760 acres at Seri Tanjung Pinang.

“We are in the midst of obtaining approvals from relevant authorities and which include the undertaking of environmental impact assessment and traffic impact studies with the overall concept master-plan,” Chan said.

The second largest project on the island is the RM2bil Ideal Vision Park by Ideal Property in Bayan Lepas in the South-West district.

The project, to be launched in May, comprises 1,945 condominiums that are priced from RM400,000 to RM670,000, in Bayan Lepas.

Ideal Property said that the project located on 25 acres in Bayan Lepas would comprise six phases to be launched in stages over a five-year period.

“We will start off with the launch of the first two phases this year,” he said.

Some 80% of the project comprises residential high-rises, while the remaining are commercial properties.

The condominiums, with built-up area of 900 sq ft and 1,500 sq ft, are priced at RM450 per sq ft.

“This means that a unit, depending on the size, is priced between RM400,000 and RM670,000,” he said.

Ideal Vision Park will also have the space to accommodate an international school, according to Ooi.

Sunway Bhd is launching the RM120mil Sunway Cassia in Batu Maung, which comprises 96 super-linked homes with built-up areas of 3,000 sq ft priced from RM1mil.

“The selling price is very competitive, as it is difficult to find a landed property nowadays with a RM1mil price tag.

“We also provide a two-acre park for Sunway Cassia, which is a guarded project,” Tan said.

According to Raine & Horne Malaysia director Michael Geh residential property prices in Penang are likely to rise by at least about 7% to 8% by the first half of 2013, due to the steady demand from the domestic and overseas market.

“New properties launched with a bundled-up financial package would be most popular.

“This is why this segment will perform better than those properties in the sub-sales market, where the buyer and seller have to do more paper work,” he said.

According to the latest National Property Information Centre property market report, total transactions for residential properties in Penang hit 18,316 for the first nine months of 2012, with a transacted value of RM5.2bil.

The whole of 2011 saw the state registering some 30,674 residential property transactions valued at RM7.7bil.

Geh says the total volume of property transacted for 2012 was unlikely to catch up with last year.

Meanwhile, Chan says the group maintained a cautiously positive outlook on the residential property market in Penang.

“For the first half, we anticipate that investors and buyers may adopt a wait-and-see attitude in light of the impending general election, global economic uncertainties as well as the market expectation for further measures to curb speculation.

“Notwithstanding these uncertainties, we expect the overall outlook for residential properties in a leading property destination like Penang to remain favourable, as its properties are still competitively priced in the region,” he says.

Penang Master Builders and Building Materials Dealers Associationpresident Lim Kai Seng says construction cost will likely be maintained in the first quarter of 2013.

Although sand prices have gone up, the smaller volume of construction jobs available is off-setting the impact of the rising prices.

“Due to the competition for jobs, construction cost will be maintained,” he says - The Star

Battersea project off toa powerful start

IT'S a freezing Thursday morning at the Battersea Power Station in London. A couple of hundred yards away at its show gallery, potential buyers are lining up in droves to lock in purchases of the first phase of apartments being launched that day.

By noon, over 60 units had already been booked. Prices start from £338,000 (RM1.014mil) for a studio, from £423,000 (RM1.269mil) for a one-bedroom, from £613,000 (RM1.839mil) for a two-bedroom and £894,000 for a three-bedroom apartment as well as from £6mil for the penthouse units.

“I think our buyers are smart and appreciate the project's unique strengths. Its proximity to Chelsea, Battersea Park, our new tube station and, of course, the carefully blended mix of uses we have,” saysBattersea Power Station Development Co Ltd (BPSDC) chief executive officer Robert Tincknell, adding that there was a lot of pent-up demand for these apartments, especially from Londoners.

BPSDC is the company that is managing the Battersea Power Station project. S P Setia, Sime Darby and the EPF purchased the 39.5-acre Battersea Power Station site for RM1.99bil in September last year.

Both S P Setia and Sime Darby have an equal stake of 40% each in the project, with the EPF holding the remaining 20%.

Attempts to revive the Battersea Power Station in the past unfortunately faced several problems. Tincknell is ecstatic that the Malaysian consortium has not only taken over the development but has already kick-started the project.

“I think it's fantastic. The consortium members not only have the financial strength to take on Battersea Power Station but also have the experience of working on large, multi-use projects such as this,” he says.

The first phase, which is named Circus West at Battersea Power Station, has a gross development value (GDV) of £900mil (RM4.5bil). A total of 800 units are up for sale, with 200 units being allocated to London purchasers. Being a Malaysian project, half (400 units) are allocated exclusively for Malaysian buyers.

The remaining 200 units are equally split between the Singapore and Hong Kong market. Buyers pay 20% and the remaining 80% on completion. S P Setia president and CEO Tan Sri Liew Kee Sin says he expects all units to be snapped up before the middle of the year.

“The strategy of Battersea is simple. We want to make it into an international centre for community and that's why we're selling it in London first, then Malaysia, Singapore then Hong Kong.

“We're the first property company to launch in London first. No other projects do this. They launch in Asia first but we were very confident that we could sell to the locals (Londoners first). As you can see, (with the good take-up) our faith and confidence is well paid off.”

According to the project's fact sheet, preparatory work on the first phase, located to the west of the power station, has already begun with work commencing in the second half of 2013. The first residents are expected to move in by 2016. Properties are to be sold on a 999-year lease.

Located on London's famous cultural South Bank, Battersea Power Station is just over a mile and a half from the Houses of Parliament. It sits south of the River Thames, across from Chelsea and forms the cornerstone of central London's last significant regeneration area, Nine Elms.

The British government-backed guarantee to extend the Northern Line underground through Nine Elms and Battersea Power Station is expected to boost accessibility.

“The biggest challenges are already dealt with the new tube station and planning permission. Now, our shareholders have the financial firepower to deliver,” says Tincknell.

He adds that Central London continues to go from strength to strength, fuelled by ever-increasing local and international demand.

“I can't see that changing any time soon. It's such a great city with the right blend of business, culture, heritage and entertainment. Nine Elms has been London's best kept secret. Its only one mile from Westminster and the mayor has produced a clear development framework for the entire area, which promotes socially and environmentally sustainable development.”

The Battersea Power Station development will create 16.8 acres of public open space with over 400m of river frontage, of which nearly six acres will be a new riverside park alongside a proposed river-bus facility.

The project will include 550,000 sq ft of retail facilities in both the Power Station and the High Street, which in turn will link to the new Battersea Power Station tube station resulting from the Northern Line extension.

With the development fully and financially supporting the proposed Northern Line extension, this transport upgrade obtained the backing from the Chancellor of the Exchequer in the Autumn Statements of November 2011 and December 2012, the latter of which confirmed a £1bil loan and a guarantee to extend the Northern Line to Nine Elms and the Battersea Power Station.

It is expected that upon completion, in excess of 15,000 people will work at Battersea Power Station across retail, hospitality, commercial, service community and creative sectors.

Separately, Tincknell says construction of the second phase will start soon.

“We're going to a new architectural team. Those appointments will be made in the next couple of months. Hopefully before Christmas, we'll be able to launch. Those units will be very much different (from the first phase). They will be much larger, with gardens on the roof.

“We're also bringing on very quickly the third phase, which is the building behind the power station. It's a new building similar to the first phase, so that will also launch pretty much the same time (by year-end).”

Tincknell says the entire Battersea Power Station project is expected to be developed over eight phases and should be completed within the next 14 to 15 years. - The Star