PI February Issu 2014 by PropertyInsight

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1/15/14

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Property Insight Malaysia

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COVER STORY

You must have heard of the plans for Greater Kuala Lumpur/Klang Valley (KL/KV). Did you know that DBKL plays an essential role in the pursuit of this vision? by: Faiz Fadzil

The Job Scope of DBKL

enerally, Kuala Lumpur City Hall (DBKL) is the local authority which is mainly in charge of delivering urban services and is responsible for the systematic planning of the city, especially in terms of its physical development and socio-economy. DBKL puts emphasis in monitoring both the plans and execution of proposed developments in Kuala Lumpur to best provide facilities, infrastructure, and services to the public.

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COVER STORY

Greater Kuala Lumpur /Klang Valley (KL/KV) Of the total population of Malaysia today, around 20% (approximately six million people) live in the Greater KL/KV area; and the number of people is estimated to reach around 10 million by 2020. Due to the foreseen rapid population growth, the government has laid out its plans to push Kuala Lumpur as one of the most livable cities with excellent economy by year 2020. “The government is very serious in doing something for KL and for its people. Our aim for Greater KL/KV is to connect KL and its surrounding towns and transform them into a connected city, where people come and live together while enjoying the facilities, services, and scenic views of Kuala Lumpur,” says the Mayor of Kuala Lumpur City Hall, Datuk Seri Ahmad Phesal Talib. Greater KL is one of the nine Entry Point Projects (EPP), and it consists of four key dimensions, which are traction (Magnet), communication systems (Connect), identification of new places (New Places), and improvement of the services (Enhanced Services). DBKL, according to Datuk Seri, is administering four entry point projects under Greater KL, and those are the River of Life (EPP 5), Greener KL/KV (EPP 6), Iconic Places (EPP 7), and Pedestrian Network (EPP 8).

River of Life: The River of Life (RoL) project aims to revitalise the Klang River into a liveable commercial center with high economic value. The components of this project are River Cleaning, Beautification, and Land Development. Under Land Development, it is expected that the surrounding areas of the river will fetch higher appreciation. To utilise these lands, the government has to identify potential government lands, and these will be tendered out to private developers through bidding. “Now, we have about 111 government land parcels that need to be developed, perhaps after three years when the prices of land have increased in value. These upcoming developments along the corridor will support the cost of this project (RoL),” Datuk Seri Phesal comments.

Iconic Places: Through this project, it is hoped that KL can be transformed into a heritage and a global city as it upgrades existing attractions and develops new attractions for foreign tourists. In order to achieve this, Datuk Seri Phesal reveals that the Heritage Trail Project has been commenced. The project aims to link selected cultural and historical sites and the Central Market arts colony through the enhancement of the overall quality of street infrastructures, amenities, streetscapes, cleanliness, and security, among others. 20 FEBRUARY 2014 www.propertyinsight.com.my

Greener KL: Greener KL is a project with the objective of making sure that every resident of KL will be able to enjoy the greenery in the city. By 2020, it is hoped that this project will provide sufficient green space with 100,000 trees, to create a healthy and sustainable environment. “We need to think about how to transform KL into a huge garden city. Therefore, there is a need to significantly increase the availability of green space in this city,” Datuk Seri Phesal says. He reveals that DBKL has managed to plant about 34,000 trees in 2012, 37,000 trees last year, and is aiming to plant another 30,000 this year. “Each year, we are going to plant 30,000 plants, and hopefully we can make KL a must-visit place. Currently, DBKL is working with Forest Research Institute Malaysia (FRIM) to identify forest trees that can be planted in the city. We want to make sure that tourists can get certain knowledge on forest trees and appreciate these trees,” he envisions. Today, Kuala Lumpur has at least four noteworthy gardens such as Taman Metropolitan Batu, Taman Metropolitan Kepong, Taman Rimba Bukit Kerinchi, and Perdana Botanical Garden (which houses about 10,000 trees and plants).

Pedestrian Network: The objective of the eighth EPP is to create a seamless and comprehensive 42 km of sidewalks through prime locations and focal points. Datuk Seri Phesal says, “Among the roads that are involved under this project are Jalan Raja Laut, Jalan Sultan Ismail, Jalan Pudu, and Jalan P. Ramlee.”

ISSUES FACING GREATER KL Skyrocketing Land Prices When asked about the sky-high prices of properties these days, the Mayor jokingly says, “It really shows the dynamism and the rapid progress of the city.” He explains that the reason for this predicament is because of the scarcity and cost of land. Referring to the land around Pavillion KL, which has shot up to RM 1,900 psft. “To end this, we need the cooperation from the developers to deliver affordable houses to the society, instead of building too many high-end properties without looking at the real demand of the people in general. We are giving them incentives solely for this reason, one of it being a higher plot ratio,” Datuk Seri Phesal comments.

Some people have been s a y i n g t h a t a ff o r d a b l e h o u s e s are located too far away from the city centre. Datuk Seri leans back on his seat and explains that the development of such houses depend on the l o c a t i o n o f t h e d e v e l o p e r ’s l a n d banks. “When the developers come to us, they’ll come with a proposal for the development of that particular land they have. Because of this, I encourage developers to be creative in the sense that they should build b o t h h i g h - e n d a n d a ff o r d a b l e blocks at the same place, such a s t h e o n e i n K e r i n c h i . Wi t h such cooperation, we can consider giving them higher r a t i o f o r h i g h e r d e n s i t y, ” D a t u k Seri Phesal says.

The Mayor also wishes that the communities in KL can mix and communicate w i t h e a c h o t h e r, l i k e t h e ones in Manchester and Va n c o u v e r. “ We d o n o t w a n t to have the residents of highend apartments to have their own culture and their areas, while residents from low-cost apartments to have their own. This segregation will lead to d i s p a r i t y. I f w e h a v e m i x e d developments of high-end and a ff o r d a b l e h o m e s , w e m a y s o o n have a more positive culture, where people can live together i n a c o m m u n i t y. ” s t r e s s e s Datuk Seri Phesal.

Plot ratio means how much gross floor area you can build. Gross Floor Area (GFA) = Gross plot ratio x Land area. The bigger the GFA, the greater the density. (ie.. can accommodate more people) www.propertyinsight.com.my

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COVER STORY

Assessment Rate Hike Datuk Seri Phesal also explains his side of the story when asked about the recent hike of assessment rates last year. “I hope people would understand that there is an increase in the value of their properties. You must bear in mind that DBKL is allowed to revise the assessment every five years. According to the act in concern, the increase in tax shouldn’t be above 35%. The tax charged depends on the potential rental value of the property, not the actual value of the property. For example, let’s say your house yields a total rental of RM 9,000 per annum. Therefore, there will be a certain rate of tax to be charged on this amount,” Datuk Seri Phesal explains. He humbly admits that there was a miscommunication involving the whole incident, and it is their responsibility to give the right information on the rate to KLites. The Mayor also stresses that DBKL is trying their best to compensate the high cost of living in KL. Datuk Seri Phesal smiles and says, “We need to highlight the

Traffic Congestion right thing next time. And perhaps enhance our PR.” “I know people expect us to perform better; to provide better services and such. People do have the right to question us on the quality of our work, and they are always welcomed to give feedback. For this reason, we are stepping up our efforts to make sure that our services and our work are up to the standard. We will prove our worth by delivering the best with the revenue we have collected. “In order to achieve such excellent services, I have written a memorandum of understanding to SIRIM (Standards & Industrial Research Institute of Malaysia), IKRAM Group Sdn. Bhd and CIDB (Construction Industry Development Board Malaysia) to make sure the facilities, infrastructures, services, and such are top-notch,” Datuk Seri Phesal claims. He further expresses that sooner or later, the assessment rate will

have to be revised, and the revenue gained is only meant for the benefit of the people in Greater KL. He says he understands the circumstances of the people, and is now pushing for vertical development, which he suggests should be coupled with good facilities and excellent infrastructure, to avoid creating any slumps. “We won’t compromise open and green space around KL. We want KL to have buildings with excellent design, which promote mixed communities. That’s why we need some CSR-attitude from the developers,” he says. He also adds that DBKL is encouraging redevelopment in Sungai Besi to retain the heritage sites, but at the same time, allowing other physical development to take place. Some redevelopments are done on shop lots, because according to him, there is a limited commercial use. He hopes that developments will mushroom in the area, and is prepared to give incentives in terms of density.

According to Datuk Seri Phesal, traffic congestions happen because of two reasons. The first one is because public transportation in KL is underused. It was usually at 20%, but now it has decreased to only 17%. The second reason is because there are obviously too many cars. These two reasons are clearly correlated with each other. Datuk Seri Phesal explains, “Bear in mind that the number of vehicles increases by about 30,000 to 40,000 every month. There is no such thing as limiting the number of cars to the city center. We need to encourage people to go to KL, but discourage the use of private cars. “That’s why we need to have seamless connectivity from building to building by putting an emphasis on walkways. Another way of reducing traffic is to also reduce 30% parking space in buildings and complexes which are in a 200 meter radius from LRT and MRT stations. DBKL is also aiming to develop peripheral areas near LRT stations to self-contained status so that the respective residents can enjoy access to the things they can get in

the KL City Centre without having to spend money on travelling. DBKL has also recently launched two multistorey parking complexes, Park ‘n’ Rides in Bandar Tasik Selatan and Sungai Besi, and two more on the way in Taman Segar and Brickfields, to encourage people to park there and take the LRT to KL. Digital signages for parking will also be installed beginning mid-year. “If we can create a connected network to inform people of empty parking lots, there would be less traffic,” he says. However, according to him, some from the private sector are reluctant to collaborate because of certain issues. Datuk Seri Phesal imagines the roads in KL as places to enjoy, where people walk rather than drive, like in New York City or Istanbul. Apart from that, KL might also be seeing the implementation of mechanical parking complexes utilising automatic lifts, and the reduction of parking spaces in buildings to not more than 20% of the buildings’ total height, in the future.

FUTURE KL and DBKL Incentives to Developers As one of the efforts to build Greater KL, DBKL is reducing the parking space requirement from 100% to 70% to encourage more people to use public transport. “Developers may only provide 70% parking space if their properties are in a radius of 200 meters from public stations (LRT and MRT),” Datuk Seri Phesal says. Apart from that, DBKL is also giving higher plot ratiof to developers in hope that they can give back to the society. “If the plot ratio is at seven, we can increase it to eight or nine. However, it must depend on the kind of CSR they are giving. It can be in terms of density, connectivity, landscaping, and such. Well, they can also propose to us 22 FEBRUARY 2014 www.propertyinsight.com.my

to improve the existing facilities in KL, because we always encourage this kind of effort,” he adds. “There is one developer to whom we gave a high plot ratio to, because they provided 300 affordable housing units abreast of their main project. That wasn’t all. They also upgraded the facilities there. DBKL is generous in giving incentives, but at the same time, we need to weigh the type of contribution first,” explains Datuk Seri Phesal. He also encourages all developers to think about how to build a better place for communities, rather than to be inclined more towards profitmaking and building too many high-end properties.

In terms of city development, Datuk Seri Phesal says that he is now focusing on city dispersal to Gombak, Setapak, and Ulu Klang—just to name a few—to make sure that there are mixed communities in KL. Currently, he is planning on how to best develop Jinjang, Wangsa Maju, Sungai Besi, and many other areas, to build Greater KL. “We can’t assume KL as a territory of its own. We have to consider KL as only a spot in Greater KL. Every part of KL (Kerinchi, Sungai Besi, Ulu Klang) is KL—ONE city area. We shouldn’t discriminate areas in KL as exclusive areas. We need to push the wave of development to outer areas so that we can have well-developed satellite cities. “We also want to make sure to that our infrastructures, facilities, benches, walkways, roadways, and other things to be of good quality. Usually, the construction is at the mercy of the contractors. Beginning this year, I would be very strict on

the standard and quality. If possible, I would provide the SOP to the public, so they can see that these are the quality levels that are supposed to be delivered by contractors or developers,” Datuk Seri Phesal says. DBKL has taken the initiative to work closely with SIRIM, IKRAM, and the team of project supervisors to look at the projects individually to make sure they meet the set standard. According to Datuk Seri Phesal, DBKL is currently finalising its research on Urban Design Guidelines for this purpose.

In terms of transparency of documentation, Datuk Seri Phesal hopes that they will have better documentation systems so that the public can refer to the documents for information. “I want people to be informed of the development that is taking place. We will execute this method to promote smooth development. At this moment, however, we are still waiting for the decision from the parliament,” he says.

Datuk Seri Phesal also says that he will always be ready for submission of proposals with excellent architecture, design, and density; and this requires the initiative from the developers. To further encourage them, DBKL is in the process of preparing an Excellent Building Competition in KL, whereby the winner will be awarded the Mayor’s Award of Excellence for Excellent Building.

In terms of its services, people may expect faster services from DBKL soon, because he understands that people naturally prefer quick feedback. With these determination and visions; and strong support from the public, Greater KL is definitely on track! www.propertyinsight.com.my

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CELEBRITY CORNER

The Lighter

“Sometimes property investment is like a marriage,” claims Wong Chui Ling. Her passion in real estate was sparked in her teenage years. Property Insight talks to her about her experiences in acquiring her portfolio. Born and bred in Hong Kong, Chui Ling, or also known as Angel Wong, is well-known for her talents. Graduating from Hong Kong University of Science and Technology, this charming Melody FM’s DJ has spent about 16 years in Malaysia and is now married to a Malaysian! Her first intention was to gain experience and work in Malaysia, but she unexpectedly fell in love with the Malaysian property market and eventually got married to a businessman, Peter Yew just a couple of years ago. That was exactly the moment when she knew that Malaysia was truly her first home. Apart from running her own business starting four years ago, Chui Ling is indeed an avid investor. This TV producer and presenter bought her first property in Malaysia in 2007, which she is now staying in. By: Faiz Fadzil 74 FEBRUARY 2014 www.propertyinsight.com.my

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Side Of Investment

which sits in a country side area cost me HK$ 1.5 million. It was an area I was familiar with because it was only 5 minutes away from my university. It was the only property that I could afford and am still holding on to until this day. Now it is worth 6 million Hong Kong dollars which is about RM 2.8million! I was waiting for my scholarship to go to the US for my master’s degree when coincidently my friend who worked in the field of entertainment asked me to join as a freelancer. In 1997, they paid you very well. Even if you were a newcomer, they would pay you HK$ 12,000 per day, which also means, if you work straight for 10 days, you’ll get HK$ 120,000. I worked really hard during that period of time; and saved as much money as I could and eventually turned the savings into capital for investments. That was more than HK$ 300,000.

H O W D I D Y O U F I R S T S TA R T I N PROPERTY INVESTMENT? As you know, the prices of properties in Hong Kong are sky-high. The current situation there is the rich get richer; and the poor couldn’t even afford their first property. I can tell you that out of top 5 richest men in Hong Kong, 4 are property tycoons. So it is quite obvious that property investment is a serious matter there. I can safely say that it runs in the blood of Hong Kong people to invest in property because it can simply make you rich. Back in the old days, I grew up in a very small apartment of only 450 sq. ft. which is located right in the middle of downtown. I remember asking for a piano from my mom, but she would say, “No space!” When I asked for a guitar, I would get the same response. So, I thought to myself one day, “If I can make money, I want to buy a huge house for myself and my parents, with a lot of rooms,” which is why I loved checking out properties even when I was much younger. Right after I graduated, I went into property investment. Therefore I started early-when I was 21 years old. My first property in Hong Kong

A lot of my friends would spend their money on frivolous things, unlike me, I was set on growing my capital as capital is the most important part of financial planning. If I wanted to be rich, I needed to have the capital! I’ll be stuck forever if I don’t have it. Besides, there wasn’t any financing up to 90% in Hong Kong back then, it was only 70%! In Malaysia I bought this house at RM 800,000, a few years back this has now almost doubled! After the purchase, I bought a few more in this area; and good news is all are tenanted. The best among these is the one two-block away from here, a landed property, which has also doubled in appreciation. I was lucky because I bought it cheap. But now, if you buy landed now and want to rent it for 6%, it’s impossible. That’s why I stay in a landed property now, because there’s no point of renting it out. www.propertyinsight.com.my

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A R E T H E R E A N Y M I S TA K E S T H AT Y O U M A D E W H E N Y O U F I R S T S TA R T E D O U T ? The first mistake was to blindly follow and listen to the people and speculators when deciding on buying properties. Second mistake was when I overcommitted with my properties. When you have one house unrented, it’s still going to be okay–you can afford it. But if you have three unrented houses, you’ll be incurring a huge debt. There must be a point where you just have to cut the losses. I almost touched that point once, but luckily I sold my property in time. It’s a big loss to lose a house when you sell it off, but it’s even worse when you don’t, especially when you know the market is going down. I remember my sister who came home one day looking devastated. I asked her, “Why do you look so different?” She said, “I just sold my stock. I had been holding it for two years. Now I feel so empty.” She already got her profit, but she said if only she could get more! (Laughs) There are people like this. I feel the same way about properties!

It is like a relationship– sometimes you hang on to a guy for too long, you do not dare to be single, even if you can see that the relationship is not going to work out. But the thing is if you don’t let go, you’ll be forever like that. I can say I was quite daring then! When buyers came to me and offered me good deals, I always found it tough. At night I would find myself awake and thinking, “Should I let go of my property? I’m sure I’m going to miss it!” So, I have this theory that my sister’s behavior actually runs in the family! I guess the only way to heal that feeling is to find a new ‘lover’, but it rarely happens due to the time of transactions and such.

HOW DID YOU LEARN ABOUT PROPERTY INVESTMENT? I had no mentor. In Hong Kong, we have a lot of programs relating to property investment and stock market. Even now, they have one whole channel particularly on investment and stock market, 24 hours, every day. This is most probably because in Hong Kong, the market is highly competitive. Yes, the employees there are well-paid. If we talk about daily necessities, I would say Malaysia is more costly. But when it comes to real estate, you can’t even afford a nice house, even if you make HK$ 2 million per annum. People have to find other ways to multiply their wealth apart from keeping their job and hoping the money would work for them. They can have a big chunk of money every month but they have to be smart to generate their income. You don’t want to be old and only have handbags and watches (laughs). Again, Hong Kong has a lot of TV shows and programs relating to the field of property, but be reminded that the analysts in the programs are only giving you the idea of the condition of the market, which you can’t follow blindly. Hence, I don’t have any mentor. Apart from that I do read some magazines and books.

76 FEBRUARY 2014 www.propertyinsight.com.my

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W H AT I S YO U R S T R AT E G Y ? I have several properties currently, quite a mixed portfolio. I have a 900 sq. ft unit in Shanghai which was bought in 2005, because again, Hong Kong’s properties are too expensive. This kind of unit is called as practical unit which is usually a 6-storey lowrise development. It is a walk –up apartment, but is in high demand currently. That unit has now appreciated more than 10%, which is pretty good. Basically my properties are mostly concentrated in Malaysia-lah. But I’m branching out. Maybe next month I’ll fly to Melbourne to have a look at this particular property I admire there. The property is a semi-D, which is close to a university and will only be completed in 2016. It will be my first investment in Australia. They even have a pretty good deal, which is 6% return in two years (2016-2018). So now I have 4 years, I’m thinking, why not? I visited Melbourne twice and each time I went there, I would spend quite some time there. I think that place is a good place! Since there’s a university nearby, the demand is there. You have a lot of students there and a lot of Chinese developers too. They have

this policy, which states that one property can only be sold not more than 30% to foreigners, which I reckon as a well-balanced deal. I really wanted to venture in Iskandar, but now that it has reached over RM1000 per sq. ft, how do I go in? To be honest, if I can get a decent unit for roughly a million, I’ll take it. If we’re looking at Iskandar as a longterm investment, it’s fine. But a lot of people want to flip. So if the properties there are completed, then everybody would flip at the same time. Maybe I’ll take the chance to snap from the sub sale then!

WHO MANAGES YOUR PROPERTIES? My portfolio is small-scale; I don’t need someone else to manage them. It’s just that when you’re renting out your units, you have to do a lot of running around! Unlike me, my friends who have like 50 to 100 properties may need someone to do all the paperwork. As for the maintenance part, you just have to have good handymen. Or just a handyman, who basically connects you with other handymen such as the plumber, painter and such. It’s good to have the same person who handles your tenancy. If the current tenants want to move out, he would know; and find new tenants for you. Not to mention the commission he’ll get over a few years for the same property that he is already comfortable with. He’ll definitely be happy.

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W H AT I S T H E I N V E S T I N G T R E N D A M O N G C E L E B R I T I E S I N M A L AY S I A? To be honest I don’t think it’s that popular. Some of them are quite ac tive, but that’s it. Maybe it’s because they’re not familiar with proper ty investment. The easiest way to learn some thing is to hang around with those who are doing that something. T hat means, if you want to be a lawyer, you befriend lawyers and soon you’ll become a lawyer, because you think, you act, you speak and behave like one of them. Hence, for celebrities who don’t invest, they probably spend their time in a group in which the members are not into proper ty investing. It’s quite a loss. I h ave f r i en ds who have ab out fou r m aj o r accounts f or s avin gs . L e t’s s ay an ac c o u n t c onta i ns

RM 300,000. That means four accounts accumulate to more than a million ringgit! But they let the money S TAY i n t h e b a n k ! S o m e o f t h e m b e l i e v e that if the economy is not so good, then their jobs will be lessened this translates to their incomes dropping. And to commit into property investment during these times is definitely going to cause great pressure. I hang out with a lot of entrepreneurs and SME crowd, like Joey Yap, who is one of my good friends, not to mention my husband who is a businessman. So my mind-se t is quite different. I used to tell them that I didn’t want to just talk about it; I wanted to create my wealth by doing it.

DO YOU LIKE INTERIOR DESIGNING? I was quite lucky; this house’s interior design was sponsored! I left the interior design all to the expert. You know why? Sometimes when you buy something, like a chair and bring it home, you would only realize that it isn’t so nice under the lighting and all that. What my interior designer did was he had to understand who and what I am, and then proposed the designs to me. Our early communication was mostly through e-mails, discussing on the design. He chose most of the stuff for me. I only chose that staircase lamp! 78 FEBRUARY 2014 www.propertyinsight.com.my

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D O YO U BA S E YO U R D E C I S I O N TO B U Y P R O P E RT I E S O N F E NG S H UI ? One of the reasons I bought this house is because of the natural light (sunlight). I used to have frangipani plant from the ground floor to the first floor, but it died because of the water system. Unlike my neighbor who does it very well. My Feng Shui master asked me not to plant anything in the courtyard, because a wood in a box is not good. Therefore if you plant a tree (wood) in a house (box), the tree will be stuck; and it’s not a good thing. I do base my decisions in terms of property investment on Feng Shui. Since I’ve been producing a lot of Feng Shui shows, I have to study it–the basics. At least I can avoid the “don’ts”. When facing complicated matters, I’ll talk to my Feng Shui master. If I’m planning to buy properties for investment, I would only look at the developers – if they are credible, that’s enough. If I’m looking for a place to stay in, then I’ll check the Feng Shui.

This is because, if you do not stay in your properties, the Feng Shui won’t affect you. Just to share, briefly, long term Feng Shui is about interaction between the external elements and your home, such as the mountains and the river of qi will flow into the house. Once you move in, your daily interaction with your house is the internal element. How you use your room and the doors and all that. For the door, this year I’m using this particular door because the other door is the ‘sadness’ door. So you can’t move it too frequently. That changes yearly. So this year it’s this door, last year it was that door. My husband is not so much into Feng Shui, so he asked me one day sarcastically, “So, next year which door do we use?” I just apply these few concepts that can easily be adopted and changed. But I’m not that crazy-lah to sleep in t h e store room for a year!

ARE YOU WAITING FOR ANY GOOD DEALS TO SNAP? This is just my gut feeling. I think the first half of the year will see slower transactions because people are reluctant to spend. But for the second half, things will probably get back to normal. I can’t tell if it’s good to buy in the first half or second, because it really depends. I sometimes buy properties together with my friends, so I take one unit and my friends will take another and so on. So you would know the neighbor. It is easier to rent to people when you know the landlord. Another reason is also because if a company wants to rent the whole row and wishes to take down the walls, it would be great to know that your unit is shared with someone you know. I also tried bulk-purchase once or twice. After that, I stopped because it gave me the “panic” attacks – because everyone is buying and you’re not. If you think about it, if you have money, anytime anywhere you also can buy.

W H AT ’ S Y O U R M O T I VAT I O N I N I N V E S T I N G ? When it comes to property investment, it really isn’t about the money. It’s the satisfaction you get out of it. You see, you’ll spend your money the most in your 30’s, because you have worked hard in your 20’s but you couldn’t (you usually don’t earn that much in your 20’s). Then you got promoted and became more professional in your 30’s so you start spending. You buy one handbag from every designer, you’re happy. And then you buy all the shoes you have always wanted then you have 200 pairs of shoes but in the long run how many pairs do you really need after that? Once you have gone through buying everything you ever wanted, then you start to go into property investment. Sometimes you make money though the investment, you feel happy. And instead of spending the money from the profit, you will probably reinvest it. It’s the scorecard that matters –like in a GAME! www.propertyinsight.com.my

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Q &A

PropertyTalk & Lifestyle Malaysia

ropertyTalk & Lifestyle Malaysia (“PTLM”) is a Malaysian-founded social media networking platform for young like-minded Gen-Ys and general members of the public who discuss Malaysian real estate investments, financial management, socio-economic issues, entrepreneurships and start-up ideas, civic infrastructure, lifestyle trends and shopping habits. At PTLM, ideas, opinions and personal experiences of fellow members are shared and communicated through the Facebook group. PTLM also provides snippets of the latest property development and lifestyle proposition news on a daily basis and strives on innovation to educate and report from different perspectives.

1 We have h e ard th at up c oming or

n e w l y- l au n c h e d M RT proje c t s n e ar prop er ti e s c om m an d s a h i g h er pri c e prem iu m. In your opi n i on , w h at is t h e i mp a c t of M RT i n f r a str u c tu re towards prop er ty pr i c e s w h en t h e y are re ady ? Once the MRT is ready, it will further enhance the connectivity between townships and cities and in our opinion, this will change the lifestyle of Malaysians as they can now go to work, meetings, leisure, and run errands via public transports instead of driving. Predictions are made that, tolls and parking rates will further increase once the MRT is ready to encourage commuters to use public transport instead of driving. In our opinion, MRT will bring both positive and negative impact towards its surrounding properties depending on the types of property. MRT will have more positive impacts towards lower to medium end properties surrounding the MRT stations as this will make it a more convenient way for the residents who depends on public transport to travel and also it provides a very good alternative to those who drive to work as well as they don’t have to stuck in traffic jams, don’t have to worry so much on the increase of petrol price, increase of toll rates and parking rates if they travel via MRT. Therefore, more of the low to medium end people would want to stay close to MRT stations for the convenience and thus will increase the price of property due to surge in demand. Meanwhile, it will bring more negative than positive impact for high end properties that are located close to MRT Stations. High end residents prefer to travel with the comfort of their luxury cars instead of taking public transport as their mode of transportation. The MRT stations will attract more of those who rely more on public transports and thus will cause traffic congestion towards the surrounding properties together with the noise of the MRT will make the exclusive properties not “so exclusive” anymore. The affected property owners might think of moving to another property which is more exclusive and not affected by the MRT. However, I don’t foresee the prices of the affected properties will drop a lot as the owners of those properties are in the affluent category and they have strong holding power on to their properties until they find a suitable buyer with the right price.

“Mr. X” is a foreigner and his wife is a local Malaysian and he has been working in Malaysia for the past 7 years. He and his wife would like to make a joint purchase of a property in Malaysia with the price around RM550K. Is the rule for foreigner to purchase property above RM1 Million applicable in this case? If it is so, how can they purchase the property that is selling for RM550k?

According to Budget 2014, the minimum purchase price of the property that a foreigner can purchase had been increased from RM500K to RM1 Million and this rule is applicable in Mr.X’s case although he is copurchasing the property with his wife who is a local Malaysian. The conclusion is, they can still purchase the property of RM550K. The Sales & Purchase Agreement to be put under Mr.X’s wife name only which is a local Malaysian and then they can co-join names to apply for mortgage financing to finance the purchase of the property. To protect Mr.X’s interest in the property, they can have a separate agreement such as to assign Power of Attorney in regards of the property to Mr.X.

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Q &A

Please send it to questions@propertyinsight.com.my

3 At present I’ve sufficient amount in my EPF and savings for the 10% deposit but

I’m uncertain on whether I should use my EPF or savings. Alternatively is taking a personal loan a better recommendation?

Generally, one will need to work an average of 3-5 years to have sufficient savings of 10% down payment for a property. We would recommend you to use your own saving instead of EPF for 10% down payment. In order to leverage your savings, you can choose to invest in property but for EPF (account 1) you may want to choose other choice of investment instruments such as unit trust. This will enable you to diversify your investment portfolio. Also, it is not recommended to take personal loan for down payment due to various reasons such as high interest rate and shorter repayment tenure (max. up to 10 years).

4 Hi I’m about to receive the key from my developer, what are the key areas that I

should be aware of as the property is still under developer warranty and defects?

Getting the key for your new property is indeed an exciting moment. Perhaps it might even be a little overwhelming and daunting. Your home or property is your dream made true but at times defects can make it to a real nightmare. Hence it is pivotal that, a good inspection is done before you accept the key from the developer. Some of the tools you may want to bring along are masking tape to indicate defect type and mark location, pen or marker to write on masking tape, a levelling ruler, torch light, camera and ladder. It is recommended to start your inspection from the inner most part of the unit to the main door. Prepare a checklist by separate rooms as you go along recording and photographing the defects. Essentially here are several main areas that you should look out: 1. Wall/ceiling: Check to ensure that the walls are not cracked, and are smooth without chips, holes, fungus and water marks. The walls and ceiling should be cleaned and as per building up specification on measurements. 2. Tiles and flooring: Check for any cracks on your tiles, missing gaps, chips and uneven tiling. The floor should be smooth with sufficient gaps in between tiles. The gaps must be adequately filled with plasters. 3. Door/windows/hinges: Check that the doors, hinges and window are able to open and shut smoothly. 4. Fixtures: Ensure all fixtures are functioning well such as the a/c outlets, power points, water outlets and kitchen cabinet are functioning with obstruction. 5. Check for leaking pipes especially on roof and ceiling area that are non-visible. 6. Check on the measurements of the ceiling height, floor space, and rooms are as per agreement build up plan.

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INVESTOR NEXT DOOR

Thinking

Ahead in

Investing By: Zulhilmi Ghouse

Forc e d by fa te to ta ke a di fferent pa t h from t he one he ha d always wante d, N ic k Ta n m a d e u s e of hi s pot ent ia l t o grow out of his d i l e m m as.

ick Tan was in the Science-stream class when he was in school. Due to his budgeoning interest in art, he took art classes, sat for art exam during SPM and even represented his school for a painting competition. He later thought of taking art and design as his degree, but was disappointed because the fees for related courses were too expensive. “My parents brought up our family very well, despite their low income. But I couldn’t rely on them to pay for my fees,” says the eldest of three siblings. Instead the best he could do under the circumstances was to spend most of his time observing houses and imagining himself as a designer of such beautiful homes which he deemed as art. Since taking art and design classes was no longer an avenue, he took banking and finance path instead; and moved on. Today, instead of painting pictures on a canvas, Nick Tan paints his life with his unique outlook on properties. “During my childhood, I didn’t have the luxury of having my own room to enjoy privacy when I lived with my family. Because of this, I would regularly go

to property showrooms after work or during weekends and just capture the images of the interior of the rooms in my head, so that one day, I could apply these concepts in a future place I would like to call a home.” Equipped with financial, marketing as well as both local and international banking background, Nick Tan was determined to enhance his quality of life by providing financial security for himself in the long term - through investing. “Shelter is one of the three most basic needs; and to live in a shelter is to have a house,” Nick opines. Having a property for investment, from his perspective, will also generate more money, cushion up inflation, and help provide sound retirement years. “I won’t rely on EPF, because if you really look at it, it will only give you 5 to 6% per annum. If I could live up to 90 years; and happen to retire at 60 years old, how I would possibly be able to survive on EPF alone?” he rhetorically asks. He also adds that putting money in a bank won’t help you as much as investment would do. “Bank, is a safer version of putting money under your pillows. If I were to own a bullet, bomb and time-proof safe box at home, I might as well keep it at home,” opines Nick, who believes that money kept in banks is not as fruitful as investing.

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INVESTOR NEXT DOOR

“I used to work for a local pharmaceutical company for two years and a half before I ventured out. During my tenure with the pharmaceutical company, I worked my way up from a Medical Rep to Area Sales Manager in-charge of Africa region market. I was based in Addis Ababa, Ethiopia, which was a captivating and wonderful place. Since there were no shopping malls or any other kind of entertainment for me to spend my money on, I began investing as a way to keep myself occupied!” says Nick.

In 2003, he bought his first landed property (double-storey) with a built-up of 22x75 for RM 192,000 in Bandar Putra Permai, Seri Kembangan. Upon completion and successfully obtained the VP (Vacant Posession), he sold that property, for RM 240,000 which he thought was very cheap. “I didn’t maximize the profit, because during that time, I felt that the market in 2003 (to 2008) was quite stagnant,” he says.

During that period of time, properties were much more affordable. Nick’s first medium low-cost apartment in Taman Seri Gombak was bought in 2001 at RM 72,000 (the original price was RM 80,000). The unit with 3 equally spacious rooms was bought with the help of his brother who was working with the developer. “It was a good deal because the location was pretty good, apart from the fact that I got 10% off,” Nick confesses. He stayed in the house for about two years and eventually sold it for RM 110,000 — which was the highest selling price in that area — to a newlywed couple.

Nick Tan’s views on property investment only grew serious in 2008. To enhance his knowledge, he began attending seminars and forums on property investment occasionally. He also spent his money on more books on related fields.

“A lot of people were busy, so they didn’t have much time to sell their properties by themselves. I was not preoccupied with work back then, so I became my own property agent by doing my own marketing to sell the property myself. I saved the agency fees and got the whole profit to myself,” Nick says, almost giggling. He adds that he did want the profit but he wasn’t thinking about it at the time. He basically sold his property because apparently his office was too far away.

Today, this business-minded gentleman has a few properties in hand, 2 of them being studio apartments in Damansara Perdana, Petaling Jaya. “Agents kept calling since Chinese New Year last year asking me whether I want to rent out or sell my studio apartments or not. I am thinking of moving my office in either of these two units, so that my company would rent for (or from) me instead of renting from somebody else. Each of these units can easily fetch between 7 to 8% and 10 to 12% rental yield respectively,” he says with a hint of hope. His properties are dispersed in the Klang Valley area mainly in Petaling Jaya, Subang Jaya, and Dutamas KL, which he believes could yield close to 10% rental, and have high potential for capital appreciation.

To Nick, the Rule of the Thumb is to always buy the ‘LIFE’ which comes with the proper ty. “Life here denotes the hive of activ ities in that area. It will take a ver y long time for a proper ty without life to appreciate. Therefore, if a proper ty doesn’t’ have a life, I would not invest or buy it,” clarif ies Nick. Nick also recalls the stor y of a proper ty bought by his uncle, in Bukit B er untung, “ They said, it was going to be a booming town, so he just followed the crowd and bought an apar tment. But what happened then? The only “people” who are living in his apar tment are Spiderman and Batman,” he chuckles.

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There should be to a certain extend a motivation to do something. For Nick, days after retirement are definitely going to be dull and harsh without a strong financial support. His desire is to invest for a long time for a better future. Among his missions to achieve this aim is to invest mostly in mediumcost, mass market and eventually commercial properties. “Medium-cost units are in demand, and rather easy to rent out. I do believe that if you invest in residential, you will be financially independent (because somebody is paying your instalment.) If you invest in commercial, you’ll be

As far as he can remember, he has not made that many mistakes in investment yet. Taking extra initiatives, he first studies the consequences of investing, and learns from others’ mistakes before he makes a decision. “I have to be cautious to avoid making mistakes which I might regret later. I couldn’t afford losing thousands of ringgits from making one mistake,” he exerts. At the moment, Nick is still actively learning about the market, especially from the comments he gets from any forums he attends. Based on his spanking portfolio, people had been telling him how lucky he has been in

For the primary market, Nick advises to not buy a high-end property as a start. The most important part in investing is the potential of location where the property is. “Seriously, would you buy a small apartment in the heart of Bangsar, or the cheapest landed house in Bukit Beruntung?” he jokingly asks. “Don’t spend beyond your means. Of course if you can get your parents to support your installment fee for a high-end unit that’s great, but they won’t be able to help you all the way,” Nick opines. Referring to Faizul Ridzuan, an author and a property expert, Nick reminds beginners to prioritise. “Faizul used to ride a bike to work for many years. As a car is the second biggest purchase after property in life, one should delay his desire to own an expensive car to in order to accumulate his seed capital for property investment.” For investors, he recommends to look out for what Gen Y wants. “The next wave of the market will be mostly for Gen Y. You’re not going to stay in all your units, isn’t it? Obviously you have to rent them out. A lot of youngsters who come to KL,

financially free (because the rental amount you’re getting is much higher than the amount of your installment),” he opines. One of his immediate future plans is to invest in commercial units in his playground of Petaling Jaya. “If you’re looking for a place to stay, look for non- congested traffic areas. If you’re looking for a commercial unit to invest, look for congested areas where all the cars are, especially in commercial areas — which conveys that people are waiting,” he quips with a smile.

property investment. To Nick, however, it is not mere luck. “Knowledge is a very powerful instrument, a weapon that one can use to make the best out of anything. I define the word LUCK, as L-Labor, U-Under, C-Correct, K-Knowledge. If you can labor the correct knowledge into what you’re practicing, you will most likely get the results you want. That is luck to me,” Nick explains. He also feels that education is essential in one’s life, “I believe that education is the key to lead you somewhere. A scroll of degree might not play the most essential role these days, but it is definitely the key to get you to certain places.”“

stay in KL. Even my wife who is from Seremban would like to stay near KL, because the pulse is here, not to mention the working opportunities, entertainment and infrastructures that are available. Because of the prices of properties here (KL), however, seems unaffordable, these Gen Y’s are looking for places to rent. Therefore, anything below RM 500,000 can be easily rented out, in strategic location” he further suggests. When asked about his preference, he states that he is more inclined towards strata for rental and capital gain investment, while landed for his own stay. He believes that it is almost impossible to get positive rental yield from landed units these days. He would not look at high-end units such as those in Mont’ Kiara and KLCC too, as his target price has always been below RM 500,000. For secondary market, he proposes beginners to check these places for investment: Old Klang Road, Kuchai Lama, Subang Jaya, Setapak and other good locations within 25 km from the city center, because these are the high growth area with rapid urbanization.

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INVESTOR NEXT DOOR

“Inspired by Robert Kiyosaki, I want to retire young and rich. I hope I could retire before 50, so that I can still have the energy and the desire to enjoy and travel,” comments Nick on his future endeavours. Apart from that, he also wishes to invest in other business to expand his investment portfolio in order to generate positive cash flow. He believes that opportunities are everywhere, and we just have to be prepared and to keep an eye out for them.

Project: Empire Damansara, D’sara Perdana Property Type: Studio apartment Year of Purchase: March 2010 Year of Completion: April 2013 Launching Price: RM 143,800 (RM 396 psf) Current Price: RM 280,000 Rental: RM 1,200 (10% rental yield) Loan Margin: 90% Loan Repayment: RM 724/month Loan Tenure: 30 years

Project: NEO D’sara Residence, D’sara Perdana Property Type: Studio apartment Year of Purchase: June 2011 Year of Completion: December 2013 Launching Price: RM 252,800 (RM 600 psf) Current Price: RM 340,000 Rental: RM 1,500 (7.1% rental yield) Loan Margin: 90% Loan Repayment: RM 1,050/month Loan Tenure: 30 years

Project: Tropicana Metropark, Subang Jaya (Phase 1 – Pandora Residence) Property Type: Studio apartment Year of Purchase: June 2013 Year of Completion: Under construction Launching Price: RM 376,800 (RM 600 psf) Current Price: Phase 2 – Paloma Residence launched at RM 850 psf in Q4, 2013 Rental: Expected rental of at least RM 2,000+ per month upon completion Loan Margin: 90% Loan Repayment: RM 1,450/month Loan Tenure: 35 years

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CONTRIBUTOR

STRATA

M A N AG E M E N T

ACT 2013:

WHAT TO EXPECT

WHAT IS THE STRATA TITLES ACT 1985? Strata property has always been a problematic issue for housing developers. ‘Strata’ in linguistic term refers to ‘In the Air’. The term comes from the origin of most strata properties being in high rise and not having an individual title when it is sold. Strata Titles Act 1985 (Act 318) is the sole statute handling the issues with regard to strata properties up until 2007. In 2007, a statute to streamline the management of strata properties called Building and Common Property (Maintenance and Management) Act 2007 was implemented. Based on this act, strata property was not like what it was before. The housing developers which sold strata properties managed the strata properties they sold before they transferred the management to

the Management Corporation. The complaints received by Ministry of Housing about strata properties were the high-handedness of housing developers managing the strata properties. Residents were also faulted for not paying on time. Before the Building and Common Property (Maintenance and Management) Act 2007 was enacted, those who lived in stratified properties followed an agreement they entered with housing developers who sold them the properties called Deed of Mutual Covenant. Deed of Mutual Covenant contained house rules, terms and conditions of management and maintenance of common property and accessory parcel, the payment of service

charges and sinking fund, and the conduct of residents and management within the strata property areas. With the enactment of Building and Common Property (Maintenance and Management) Act 2007, strata properties are supposed to be managed properly and residents now have a statute to fall back to if any dispute arises between the residents and the management. An office of Commissioner for Buildings was created by the Building and Common Property (Maintenance and Management) Act 2007 and a Joint Management Body consisting of the housing developer which sold the property and the residents living in the strata property.

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CONTRIBUTOR

Housing developers were given one year to hand over the strata propertyâ&#x20AC;&#x2122;s management from the date the property is given vacant possession. Penalties are imposed on any non-compliance and the Joint Management Body is given

the power to sue and be sued with various other powers and duties. Strata Titles Act 1985, Housing Developers (Control and Licensing) Act 1966, Housing Developers (Control and Licensing) Regulations 1989, Street,

Drainage and Building Act 1974, Architect Act 1967 and Registration of Engineers Act 1967 were all amended to accommodate the introduction of Building and Common Property (Maintenance and Management) Act 2007.

THE NEW STRATA MANAGEMENT ACT 2013 A s we move for ward, af ter various researches and disc ussions with all s takeholders, including housing de velopers, managers of s trata proper ties, residents and the enforcers of the s tatutes, the government decided in 2013 to pass the s tatute named as Strata Management Ac t 2013. It was gaze tted on 8th Februar y 2013 but is not ye t in e ffec t. Strata Management Ac t 2013 which will supersede the Building and Common Proper ty (Maintenance and

Management) Ac t 2007 is s till awaiting all s tates in Malaysia to endorse it in order for it to be implemented. Strata Management Ac t 2013 will s treamline the issuance of s trata title by making it fas ter for an owner to ge t it from the housing de veloper. By asking housing de veloper to file with the Commissioner of Buildings the s trata titles be fore any sale is made, the government wants to ensure the individual titles to the s trata proper ty

will be issued fas ter. T his phase is called the Cer tificate of Proposed Strata Plan which will need to be filed much earlier be fore a time frame of a month is given for the housing de veloper to apply to the L and Adminis trator for individual titles for the s trata proper ties to be issued. It is hoped that with these two phases, issuance of s trata titles will be much fas ter. Both the Strata Management Ac t 2013 and Strata Titles Ac t 1985 were amended to ensure this is possible.

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CONTRIBUTOR

CHANGES IN THE NEW ACT Impositi on of higher penalties for non-compliances is increased from 10 sec tions to 35 sec tions in the Strata Manageme nt Ac t 2013. T he office of Commissioner of Buildings will have the power to:1. 2. 3. 4. 5.

inves tigate, seize and seizure with and wi thout warrant, require person to come and give e vidence, compound and prosec ute, help joint management body to recover areas and is protec ted by the Public Authorities Protec tion Ac t 1948, 6. the fine for non-payment of ser vice charge by owners of the s trata proper ties is increased from RM500 to RM5,000.

SEIZE &

SEIZURE WITH &

WITHOUT WARRANT

FINE FOR NON-PAYMENT OF SERVICE CHARGE

I N C R E A S E D F RO M R M 5 0 0

TO R M 5 , 0 0 0

T he management of the s trata proper ty will s till be in three phases. Initially, housing de velopers will manage the s trata proper ties be fore passing it to the joint management body and then finally to the management corporation. Management Corporation is now mentioned in Strata Management Ac t 2013 with the duties of the housing de velopers properly spelt out to hand over accounts and es tablish the Management Corporation. T hree th ings are introduced by the Strata Management Ac t 2013 which was not in e xis tence be fore in s tatutes dealing with s trata proper ties:1. one is the introduc tion of limited common proper ty, 2. the introduc tion of subsidiar y management corporation, and 3. the es tablishment of Strata Management Tribunal Limited common proper ty mus t be clearly de fined and marked in special plans filed with direc tor of sur ve y. Limited common proper ty is common proper ty used, enjoyed and managed by par tic ular group of parcel owners. A Subsidiar y Management Corporation manages cer tain areas within the s trata proper ty in order for the management corporation to be more e fficient. If the de velopment has mixed areas of residential proper ties and offices, each subsidiar y corporation can manage one par tic ular type of proper ty within the same de velopment.

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CONTRIBUTOR

The Strata Management Tribunal Strata Management Tribunal is an extension of Strata Titles Board, found in Strata Titles Act 1985 which was never properly implemented. Strata Management Tribunal can award up to RM250, 000-00. It is like the Tribunal for Homebuyers Claims Tribunal and the Consumer Tribunals. Lawyers are dispensed with and no matters already brought to court should be heard by the Strata Management Tribunal. The housing developer, the purchaser, the proprietor, the joint management body, the management corporation, the managing agent and any person allowed by the Strata Management Tribunal can bring their matters related to the strata property they live in to the Strata Management Tribunal.

Roles and Functions of Managing Agents The roles and functions of managing agents are also touched by the Strata Management Act 2013 as they are allowed to manage the strata property as long as they have entered into a proper agreement with the management of the strata property. The Board of Valuers, Appraisers and Estate Agents did want to get the government to ensure only professional bodies registered with them to be allowed to manage strata property but for now as long as the managing agent is registered with the Commissioner of Buildings, they are allowed to do so under the Strata Management Act 2013. The lifestyle of those living in residential strata properties, especially high rises will now need to be more inclusive with the coming of the Strata Management Act 2013 as the residents in these properties need to be aware of the power given to the management to collect arrears and the penalty which the management can impose on them. It is no doubt a change in how strata properties are viewed in Malaysia with the coming of the statute soon.

About The Contributor

KHAIRUL ANUAR BIN SHAHARUDIN, is the founding partner of Khairul, Suhaila & Hazlina, a legal firm specializing

in property, banking and corporate matters. He also has experienced in doing criminal matters, civil matters and syariah matters within his 14-year career as a lawyer. He has written books on property in Malaysia entitled ’40 Questions You Should Ask Your Lawyer Before Buying a Residential Property in Malaysia’ and ‘40 More Questions You Should Ask Your Lawyer Before Buying a Residential Property in Malaysia’, served in the Selangor Bar Committee and Malaysia Bar Council. He blogs at Legal Cat-astrophe and is active in social media under the name of @kruel74. He is an Independent Non-Executive Director for Resintech Berhad.

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LEGAL

The r e a r e m a ny way s of a c quir ing p r o p er t i es nowa day s am o n g t h em inve s t ing in p r o p er t i es t hr ough a c om p a ny i s ga ining m om en t u m a n d in t he long r u n m ay b e a s olut ion t o i nves t o r s w he t he r big o r s m a l l . Le t â&#x20AC;&#x2122;s look at t h e be ne fit s of do i n g s o.

Type of Instrument

Descriptions

Stamp Duty on Share Transfer

RM3.00 for every RM1,000.00 or part thereof;

Stamp Duty on Memorandum of Transfer (S&P)

RM1.00 per RM100.00 or part thereof on the first RM100,000.00; RM2.00 per RM100.00 or part thereof on the next RM400,000.00; and RM3.00 per RM100.00 or part thereof on any amount in excess of RM500, 000.00.

Rate 0.30% 1.00% 2.00% 3.00%

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LEGAL

How much can you save in Stamp Duty when you sell a property at RM800, 000.00? Scenario 1: The property is registered as an asset of the Company and the shares of Company are sold to the buyer. Scenario 2: The property is sold directly to the buyer.

Scenario 1 Value Whole value Scenario 2 Value On the first RM100,000.00 On the next RM400,000.00 On excess of RM500,000.00

Rate RM3.00 per RM1,000.00 or part thereof (RM800, 000.00 assessed at 0.3%)

Duty Payable RM 2,400.00

Rate RM1.00 per RM100.00 or part thereof (RM100, 000.00 assessed at 1%) RM2.00 per RM100.00 or part thereof (RM400, 000.00 assessed at 2%) RM3.00 per RM100.00 or part thereof (RM300, 000.00 assessed at 3%)

Duty Payable RM 1,000.00

Savings on Stamp Duty

RM 8,000.00 RM 9,000.00 RM 18,000.00 RM 15,600.00

By investing using a Company, you can segregate the investment income from other incomes. This is especially important for the individual investor that has a high personal income or with a potential to earn a high income. By segregating this investment, you will be able to ensure that your personal income tax bracket will not be affected by this new income.

Investing using a Company makes administration of portfolios easier. Investors can get assistance to actively manage their portfolio. This will ensure proper and organized records are kept, without worries or involvement of personal and confidential information. For example: Mokhtar who has investments in different types of properties with different intentions can assign his portfolio to his assistants. None of the assistants will know his total wealth and his net worth remains confidential. Segregating the investment into respective companies allows him to hire experts to help him achieve his goal.

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LEGAL

You will be able to save at least 6% from your annual income if you invest using a small and medium enterprise* (“SME”) as a SME is currently being taxed at 20% for the first RM500, 000.00 chargeable income. Example: John’s current yearly chargeable income is RM100, 000.00. John invests in properties that generate net rental income of RM100, 000.00. Scenario 1: The Property is bought using a Company. Scenario 2: The Property is bought in his personal name.

Scenario 1 Income Rental income RM100,000.00 Scenario 2 Value Existing income Rental income RM100,000.00

Rate Tax rate 20% for SME (RM100, 000.00 taxes at 20%)

Rate Tax at scale rate Tax rate 26% (RM100, 000.00 taxes at 26%)

Savings

Tax Payable 20,000.00

Tax Payable 13,850.00 26,000.00 39,850.00 6,000.00

A tax saving of up to RM30, 000.00 and 1% subsequently can be achieved depending on the status and level of income of an individual. *SME is a resident company with a paid up capital of RM2.5 million and below, at the beginning of the tax basis period.

Like the old saying goes, “always start something right”. If investments in properties are going to be your long term activities, it will be more advantageous to invest using companies. Why do some want long term investments? This could be to accumulate wealth for their children. The wealth you have created can be given to your children easily, by transfer of shares in that company. This can be put in the will. Company shares can be divided to the exact percentage and the sharing can be

segregated according to your wish. It will be easier to assign/appoint someone if the investments are put into a company and the costs can be shared accordingly. It will be more organized as every investment is accounted for. Distribution of profit through dividends can be done and this will not jeopardize the tax position of your children or grandchildren. You can use shareholders’ agreement or any other forms of document to state what action needs to be taken.

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LEGAL

About the contributor: Mee Ling is a Chartered Accountant and Licensed Tax Agent who has more than 19 years of experience in helping individuals and companies develop good accounting and save on tax. She can be contacted at h.meeling@yahoo.com. The contents of this article represent the views of the contributor. Before relying on any of them, readers are advised to take competent professional advice.

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peter yee OnE of the First As one of the earliest people to teach a property course in Malaysia back in 2001/2002, Peter Yee will not strike you as a typical property expert. None of the flair, the bling, nor the over-the-top charisma. If youâ&#x20AC;&#x2122;ve never heard of him, get to know him more in this special interview. By: Zulhilmi Ghouse

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eter Yee’s humbleness immediately comes across when he speaks and addresses you. As an ex-remisier in 1995, he was earning RM 50,000–60,000 per month. Five years into his career, he ditched the job and became a property investor. Somewhere along the way, he began teaching property investment at a time when he only had a few properties. Wanting to learn more, he found out that the best way of learning is to teach. When his expert students ask him questions, he will research it and find the answers for them. His previous career as a secondary schoolteacher of six years in Kuala Terengganu and management training consultant somewhat helped him in the aspect of educating.

secondary market, due to my friend’s recommendation. They cost RM 80,000+. At their launching, they were actually priced RM 125,000, so the price had dropped. They were cheap lor, so I bought two lah (smiles). One cost RM 85,000, and the other one cost RM 80,000. Then the price gradually dropped to RM 70,000–RM 60,000. Every time it dropped, I bought some more. Now I’ve got so many units there (laughs). For those apartments, they had a maintenance problem. They only have two lifts, and one broke down. That’s why the price dropped over time. I still have the two units in my possession. Still holding them (smiles). I have 6–8 units there, I think. Now the price has gone back up to RM 100,000+ (chuckles).

The 56-year-old was quite aggressive in teaching in the year 2008, but sometime in mid2012, he stopped after noticing that the quality of his students were going down. Halls that were once filled with businessmen like himself started filling up with overenthusiastic varsity students and inquisitive housewives. With property prices at the level that it was, the helpless Peter Yee found it impossible to continue teaching and quit, selling off his properties, and focusing on writing property books about the shifting market.

What’s your investment strategy?

The Selayang-based investor is now biding his time as the property market cycle turns in his favour, during which he plans to accumulate properties again. From his magnificent bungalow atop a hill, he gazes down on his properties below like an eagle in his eyrie, waiting for the right moment to strike. What was the first property that you bought for investment? Peter Yee: I bought two apartments in Selayang simultaneously from the

Peter Yee: My strategy is very simple: I don’t focus so much on timing, but more on the personal aspect. My decisions are based on how much money I have in hand. If I have a certain amount of money, then I will look for a certain kind of property. If I have RM 10,000, I will look for an apartment. If I have RM 100,000, I will look for a commercial property. And I don’t care about the market. Whether it’s up or down, I don’t care. I hold on to my properties for rental income. If the price goes up, I’ll sell. If it doesn’t go up, I‘ll hold. But these past few years, the price has suddenly gone up so much, so I sold some of my old stocks. When the price of the property goes up, the value comes down. For property, there’s only two things to look at: The yield and capital gain. If the price goes up, that means the capital gain goes up. Rental does not go up much, so the yield comes down.

Let’s say your rental yield initially is about 9%. When the price of your property goes up but the rental does not go up, the yield comes down to, say, 4%. If it’s less than the bank interest, the financing cost of about 5%, you’d better sell it and put the money in the bank, or invest in a fixed deposit! You’ll get more returns than holding on to the property. So in short, my property strategy is very simple: It depends on how much money I have, and

my goals. Then I start looking for a property and don’t ask too many questions. With too many theoretical questions, you cannot move forward. I was like that too, but I changed. Last time I was meticulous in calculating, but now I don’t anymore—I estimate, and then I quickly go in and get it, because if I don’t move fast enough, somebody else will get it, as the price is low. Then I borrow until the banks say, “No, no more loans for you.” In fact, from 2008–2010, I bought until I had no money anymore. I even refinanced my house. Initially, I bought properties from developers, but www.propertyinsight.com.my

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I didn’t have a good experience financial-wise, so now all my purchases are from the secondary market. That is where I know how to make money. I make very little money from the primary market. I don’t know why lah. Most people—myself included—make money there not because they are smart, but because they got lucky. Would you like to share some of your ‘mistakes’ in business and property investing? Peter Yee: After teaching property investment for two years, I bought a small restaurant. I thought I could be a business owner mah. I hired a manager and about 10 staff. But every month I was losing money. After six months, my manager, who handles the accounts, cannot sleep (chuckles). I told him, “I’m the one who

finances everything. Why do you worry?” Then he resigned, so I had to step in. We had customers, but we didn’t know where the money’s going. I made a loss for about 12 months. The learning curve was steep. Every night I cannot sleep well. Only after that did I start making money. After two years, I managed to make the account look good and sold it off to someone who is in that line of business. That is just not for me (laughs). But again, that is another one of the best experiences in my life. It made me stronger. I fought and didn’t quit. At least I got back my capital and a little bit of profit. After letting the restaurant go, I focused more on property. Property is the best among the investment vehicles. It’s low-risk, and if you know how, the profit is almost guaranteed.

I bought a bungalow in Taman Bukit Hijau, Rawang, sometime back. At that time, the market price was RM 300,000+. I bought it at RM 200,000+, so it’s below market value. It was a freehold property, which was one of the important criteria for me back then. It had a lot of land, and my purpose of buying it was for capital gain. But it didn’t happen. After it was completed, I held on to it for quite a long time, for four to five years. The price never went up. Instead, it went down. Why? Because on the neighbouring plot of land, a developer had developed another project. That’s why, you have to buy property in an area where there is limited land. If it has too much land surrounding it, other developers will build newer and cheaper properties. The second issue is the distance. If I had stayed in Rawang, it wouldn’t be a problem, but I was staying in Selayang. Every two to three months, if there were no tenants, I had to go and inspect the property, whether the door and windows are still there or not. The rental yield was also not good: RM 600–800. It was not enough to pay the bank. Finally, I sold it for RM 200,000+, just enough to get back my capital. That was also one of my best learning experiences—not a mistake. Don’t buy properties too far away that you cannot manage. What do you think is in store for the property market this year? Peter Yee: Now the property cycle is already entering the season of ‘autumn’, because of Budget 2014. Every season will last for a few years. ‘Summer’, which is very ‘hot’, is over. ‘Autumn’ will be followed by ‘winter’, because of the oversupply of properties and the skyrocketing price. ‘Winter’ will be a very quiet market. I

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predict in three to five years, the Malaysian property market will be slow. For example, a property which has gone up in price by 100% will probably drop by 10– 30%. Correction will definitely happen by the end of this year. When the bad time comes, we will be affected, but by knowing that, we can reverse it. During bad times, I go all out; good times, I get out. It’s just like the stock market. The property market is slower to change, so it gives me time to think (smiles). High-end high-rise property prices are already correcting. Now, high-end landed properties are following suit. Because the buyers’ income is not enough to sustain the loan. If you buy a RM 1 million bungalow, you will have to pay back to the bank about RM 7,000–8,000 per month. The rental is not much, about RM 2,000–3,000. It’s not enough. The capital appreciation of landed properties from now on will be slow, and it will come down,

because people cannot pay the banks anymore.

Would you like to impart some advice to our readers?

For under-construction properties, the future does not look good, because three years from now, the season might change into ‘winter’, as the RPGT has gone up and there are so many projects being developed. For every project, there will easily be 20–30% speculators buying.

Peter Yee: Some of my young students who’ve made money cannot seem to stop overleveraging. They will buy around 5–10 units in a short period of time. I think some of them are going to get into trouble. Young people might not have gone through the economic ups and downs, so they don’t know. Even if you tell them, they won’t listen. But I’m not saying that they cannot buy properties. There will still be some good deals—either middle or end of next year—some motivated seller willing to cut losses. But if you’ve maximised your leverage, how will you pick these deals up? You can’t even get a loan.

In the Bible, it says, there will be seven fat years following seven lean years. I’ve consistently since 2012 written articles asking people to exit the market and mitigate their risks. Even I myself am reducing my portfolio, to reduce my loans. My house has a very minimal loan now. If I go overboard, when the market comes down, the whole house will be gone (laughs). Now I’m not in the market. I’ve sold off some my properties and am enjoying my life. When the prices come down, I’ll go in again.

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FEATURE

Chinese Metaphysics in the Year of the Horse With Dato’ Joey Yap How does the position of your furniture affect your life? Does p u tt i n g a m a g i c a l n e c k l a c e o n y o u r t a b l e e n h a n c e t h e Fe n g S h u i o f y o u r h o u s e ? W i t h a c h u c k l e , D a t o ’ J o e y Ya p , t h e f o u n d e r o f Ma s t e r y A c a d e m y o f C h i n e s e Me t a p h y s i c s e x c l a i m s , “ I t ’s d e f i n i t e l y not about putting a three-legged frog under your bed!”

By: Faiz Fadzil

ato’ Joey Yap has always been interested with every aspect of life. Some of the things that made him ponder when he was a young 15-year old boy were the questions of who we really are, what we are meant to do and whether we can be better people, which were also the reasons why he started reading on metaphysics, which he deems as “one of the few things that seem to have most of the answers.”

“I wasn’t very serious at first. I was just reading on these issues, regardless of the language, and then eventually picked it up as a habit,” he says. His experience in Feng Shui consultancy began when he offered a group of interested Australians some advice on Feng Shui, who later appointed him as a consultant. “It was a training ground for me as I was young and eager to learn. I was at the right place at the right time. I avoid providing theoretical aspects alone. I was and still am driven by the need to create the results. Had I started in Malaysia, or any Asian countries, I probably wouldn’t be here today because the expectation is higher here. Since they have the background knowledge, they might expect immediate results, unlike Australians, who gave me that space to relax, learn and follow-up,” he recalls.

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Along the line, Joey also realised that education is an important thing. “Some people had been asking me how to control people using Feng Shui. I can’t control other people, but I can help you learn how to control yourself. That’s why this study is about how you can become a better person, utilising your potential and the environment. That’s what metaphysics is about, roughly. There’s nothing magical about it. It’s also the reason why the motivation to educate kicked in,” he says.

Brief Historical Fact! During the Cultural Revolution in China under the leadership idealist, Mao Zedong, the prominence of traditional Chinese culture, such as paper art, calendar, and classical literature was eradicated. Metaphysics, such as fortune telling and Feng Shui too, were suppressed–which is the reason why you may find the masters of such fields dispersed across the world.

He then started his foray into teaching and empowering in Los Angeles in the year 1999. Then he went to Germany. Referring to the experience in these foreign countries, Joey comments, “It’s practical there, because you couldn’t advise these people to put odd things around your house, or you’ll get scolded. They do not discriminate your age either.” “During the period of early consultation, I saved a lot of money. With my savings, I bought more books and attended courses with different practitioners in a few countries. That’s why I went to Hong Kong or Taiwan: To meet metaphysics masters. To learn,” recounts Joey. Travelling was not an issue to this curious man. The only problem he had was money, because these masters required expensive fees! Joey shares that if you want to learn metaphysics with these experts, you have to be their indoor student, or at least, you have to prove your worth. “To do that, I spent thousands of ringgit, amounting to at least a few millions,” Joey recounts. “From some of them, you may learn a LESSON. That’s why I can write so many books, because with these experiences and access to information, I know what is workable and what is not!”

MODERNISED CLASSICAL CHINESE FENG SHUI “In this industry, anyone can call themselves a master whether you are skilled or not. I don’t’ call myself a master. I am a consultant,” opines Joey. Joey has established two main companies, namely Joey Yap Research International and Joey Yap Consulting Group. The former arm is in charge of education, and offers programmes where people can save their time by getting the right information. The latter assumes the role of an advisor, which offers coaching services to help people make the transformation in life, either through their self or properties.

For a clearer picture, Joey explains that Feng Shui acts like a tool to help you discover your inner strength. “If you don’t know who you are, you don’t know what you possess in terms of strengths of character etc. If you don’t know what you have, you wouldn’t, therefore, know what to give. That’s why a lot of people are takers. Once you’ve discovered what you have, you can then give. When you want to make more of the same thing, you can multiply. You want to add value to your life and others’, so when people see you, they’ll be happy. That’s selftransformation,” Joey describes.

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He also explains that for those who want to invest, the toughest part for them is the decisionmaking process. “We don’t tell them whether to invest or not, we only advise them on the consequences of doing them, according to research and empirical data (pattern on investment activities) done on them. In the end, they will decide whether they would or wouldn’t.” Joey’s approach in Feng Shui is quite distinctive in the sense that it is more practical and real. “One day, I was told that if I want to make my children obey me, I have to put an elephant statue under my bed. That’s ridiculous,” he laughs. Joey explains that real Feng Shui, will enable you to understand your children better, and you’ll be a better parent. Putting things around the house, according to him, is also not Feng Shui. Feng Shui is all about the flow of energy (Yin & Yang), which comes from nature. “You have to understand the principles of energy and utilise them to support you,” explains Joey.

FENG SHUI TIPS An example of Feng Shui is the positioning of your door, which involves the question of which door should be the door of your ROOM. It is a more important decision to make rather than deciding on the placement of your furniture at home, because you can basically put your furniture according to your preference. The most essential aspect of Feng Shui is to capture the Qi through systematic ways. Joey discloses that if you’re looking for properties, you could adopt a simple Feng Shui step of finding a location near water. There are two types of water: one being the real water that flows; and the other being virtual water, an example of which is roads. Both of these types of water carry energy. “If you look at Mid Valley, which is located near a flowing river, the prices keep going up. If you can’t find properties around a body of water, such as lake or a river, find ones near the junctions of main roads. KLCC and Sungei Wang are two examples of places where major roads interconnect,” he reveals. It shows

that unobstructed, easy access to main areas is one of the most crucial elements when deciding where to buy your properties. Joey further explains: “So if you have a place where the flow is excellent, the properties there will be sold fast, the business will do well, and the prices will simply go up.” To developers, the main objective is to sell off their units, therefore, “Feng Shui would be able to identify the most fitting type of properties that they should build in that area, types which appeal to most of the people there.” From this perspective, Feng Shui is used to assist them to sell. The data provided by his consultation group is completely different from market research as they will only conduct research on what kind of Feng Shui would work for different projects, which suits the current market. Among other decisions that can be assisted by utilising Feng Shui is the decision of which direction the proposed properties should be facing, as well as the connectivity of the roads (landscape) to and from the projects.

FE NG S H UI I N I N VE S TM E N T “I remember one day, the owner of the college I studied in advised me to pursue my dreams (even though he knew my father wouldn’t be so pleased back in the day). Today, this friend is a very wealthy man, who has given me business advice and was the one who helped me be involved into property investment,” recalls Joey.

Joey’s first attempt in dealing with property was in Australia, when he was 22 years old. However, it was, according to him, a bad deal. Nonetheless he kept trying and is still actively looking for properties these days. Leaning towards commercial units for good rentals, his current portfolio covers properties in Malaysia and Australia.

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Apparently, Joey doesn’t have a cash-flow strategy, where one looks for properties by looking at rental yields alone. For him, if the location and Feng Shui are good, then it’ll have long-term potential, which is the criteria he would weigh the most when purchasing. “People thought that St. Regis KL was too expensive back then (RM 1,900 per sqft). I took a different stance; I knew that the location and Feng Shui were good, apart from it being cheaper from the other international St. Regises. So I encouraged my friends to buy. Today, one square foot costs more than RM 3,000,” shares Joey.

Joey advises that people in general should apply some logic into their work. “If you think before you act, you can be reasonably successful. I usually hold my properties, but if there’s a need to sell it, I will sell. I will also have a targeted price. If it reaches the targeted price, I’ll let it go. If you keep trying to go to the peak, you won’t leave much room for other people to make money. So once you get what you want, you exit.” “I think if you’re serious, it’s a good time for anyone to start investing! If you do some homework and know the basics of Feng Shui, it will help you identify which area will boom in the next three to four years. So what’s stopping you now? Unless of course, you want to flip, which I won’t advise you to, because you obviously won’t get that much profit because of the RPGT. But if you really need to do that, be mindful that you will still have to pay tax, so it’s not a big deal,” he offers further. Joey also shares his personal view on the cooling measures that the government has put in place, saying that “it is good because it takes away all the speculators and ultimately protects the country by avoiding property bubbles. Now you can keep the real players in the field.”

OUTLOOK ON THE YEAR OF HORSE Are you an investor or a speculator? If you’re a speculator, obviously, this is not the year for you to play. For investors, this is a great year to invest! If we look at the Feng Shui energy map, there are certain areas that you should look out for, such as Johor, Penang, and Bangi, as most people’s attention is there. These areas have that energy. This year, the stars are in these directions, so you’ll see a lot of news about these areas. You may use this additional information (booming news) to catch the wave. Some developers are also moving towards these locations. There’s no use of only talking about it. You have to go there and explore; see it for yourself!

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Fun Facts About Dato’ Joey yap 1) Tell us one thing that people don’t know about you. I like to eat Marie biscuits every night before I sleep! 2) Describe yourself in one word. Interesting. 3) What’s the craziest thing that you’ve ever done? I did a parachute jump in Australia! That was crazy. 4) What are your hobbies? Snowboarding (that includes shopping for the equipment). 5) What’s the latest book that you’ve read? Name some of your favourite books. The Icarus Deception by Seth Godin. I have so many favourite books! But I can tell you that Seth Godin is a good author, and I like him. 6) What’s your favourite food and drink (local and non-local)? Aside from local food, I really enjoy eating Japanese food. I like green tea, but I also like teh tarik! 7) Best movie ever? The Lord of the Rings (LOTR). Not The Hobbit! It’s not bad, but it’s so long (laughs). There are adults in LOTR, unlike the people in The Hobbit movies, who look very small. 8) What’s your favourite place in the whole wide world? I like to go to Japan to relax.

11) What was your ambition as a child? Has that changed? I didn’t have any ambition, to be frank. I just wanted to be happy! There was too much stress when I was a kid–have to study for exams lah… Especially SPM. 12) Growing up, who influenced you the most? My dad and my friend whom I mentioned before. 13) What’s the stupidest thing you’ve ever done? There are too many silly things to talk about! 14) If you had RM 10,000 and you had to spend it by midnight, what would you do, apart from giving it away to charity? If I had RM 10,000, I wouldn’t give it to charity. My way of doing it is to educate people. I remember the amount of time my friend had spent teaching me the things I know today; it was priceless, definitely more than RM 30,000. That made me promise to myself, “If I ever made it, I will also light more candles.” 15) If you could have a dream house anywhere in the world, where would it be and what would it look like? I will stick to Malaysia. I love this country! It has a lot of opportunities for everyone, and I’ve seen them. A lot of people who haven’t gone out there haven’t seen these opportunities, so they stay in Malaysia and complain. But if you go out there and look at other countries, we have many opportunities that many others don’t have.

9) Name 1 famous person (dead or al ive) whom you’d love to meet and have a chat with. Nelson Mandela, whom I had met and chatted with in 1999. I was introduced to him by a student, but I didn’t really know him at that time. I saw him many times on TV, though! After I met him, I did some research and thought, “Wow, this guy is good.” If given the chance, I would’ve talked to him in a much different way. At the age of 22, we don’t know the value of sacrifice. 10) Do you have any regrets in life? I would’ve spent less of my money on fancy things. It’s not good to flaunt because you’ll lose your friends along the way.

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Kajang East – New Class of Suburbia

By: Zulhilmi Ghouse

Kajang and Semenyih are one of the final bastions of expansion for Greater Kuala Lumpur, with plenty of land still left untouched. Developers have started moving their bulldozers and cement trucks there. Should you move in suit?

BACKGROUND AND LOCATION

nyone who’s been to the part of town east of Kajang will know that the area is developing fast. The burgeoning middle-income earners are literally begging developers to take their money in exchange for n e w e r, m o r e c o m f o r t a b l e homes, while the affluent are looking for developments that come with added security and lifestyle packages.

As it is, investors are spoilt for choice, so let’s zone in on one particularly unique development called Kajang East, developed by Aliran Perkasa Sdn. Bhd., a subsidiary of MKH. The newly launched township is perched comfortably at the borders of Kajang and Semenyih, right on the peripheries of the KajangSeremban (LEKAS) Highway.

Due to the relatively abundant supply of land in Kajang and Semenyih, gated and/or guarded communities have sporadically mushroomed of late, by names such as Setia Eco Hill, T TDI Grove, Saujana Villa, Jade Hills, Nadayu 92, and Taman Pelangi Semenyih and Hill Park; not to mention other townships which are not gated and/or guarded.

“From Precint 4 of Kajang East, you will be able to see the LEKAS Highway. Kajang East is actually just opposite the road from Sunway Semenyih. There are a lot existing housing areas surrounding it, so the general area is quite established in terms of population and basic amenities,” describes Loke Yong Yaw, Sales and Marketing Manager at MKH Bhd.

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Concept A gated and guarded community with perimeter fencing and round-the-clock patrols, once completed, Kajang East will be among the most prestigious addresses in the eastern corner of Kajang. MKH has ensured that plenty of green space is provided for recreation, park, and gardens, so its residents can wake up and come home to a peaceful sanctuary every day. Kajang East is a freehold integrated development comprising of several types of houses: two- and three-storey terraced houses, two- and threestorey semi-detached houses, and shop offices. “Kajang East is divided into four precints. Precints 1 & 2 will be gated and guarded. Not only will we have two clubhouses, but we will also have a few jogging paths. Precints 3 & 4 will be guarded communities with perimeter fencing—There’s a bit of a

difference,” says Loke. “We have actually just launched the first phase, Precint 3, in midJanuar y. That phase will be completed in December 2015. Ver y soon, we are going to launch Precint 2, most probably in March.” With all units of Precint 3 facing the nor th or south, the developer has really gone all the way to ensure good Feng Shui for homebuyers. The low-density development will feature recreational facilities and aesthetics like a clubhouse, a pool, a grand oval park, reflexolog y and stone gardens, meditation cour tyards, children’s playgrounds, artistic sc ulptures, reflection ponds, dedicated back lane walkways lined with greener y, and the grandest of them all, a 50-foot wide entrance with an grand arch. The MKH is going all-out to make a statement.

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9KM (CBD) 15KM B.B BANGI 23KM PUTRAJAYA KL CITY CENTRE 40KM SEREMBAN

36KM

1 HOUR KLIA

Amenities Apart from its strategic location at the intersection of both the LEKAS and Kajang SILK Highways, Kajang East is also within reach of other highways such as the North-South (PLUS) Expressway and the CherasKajang (Grand Saga) Expressway. The township is 9 km away from the Kajang Central Business District (CBD), 15 km away from Bandar Baru Bangi, 23 km away from Putrajaya, 36 km away from the KL City Centre, and 40 km away from Seremban. The KL International Airport (KLIA) and KLIA2 is just an hour’s drive away. Businessmen and avid golfers will appreciate its proximity to Bangi Golf Club and Sungai Long Golf and Country Club; a bit farther away is IOI Resort in Seri Kembangan. Hikers, on the other hand, will love Bukit Broga, the centre for adventure seekers and noob hikers. It is practically in Kajang East’s backyard. A sports complex for futsal is also nearby, over in Bandar Teknologi Kajang. Banks, clinics, and a mosque are all nearby as well.

There are several schools nearby Kajang East, but MKH is planning on building schools inside the township in the future. The one and only university in the area is Nottingham University Malaysia Campus (UNMC) in Broga, which is just 5 km away. Nearby markets include a Billion Supermarket 1.5 km down the Jalan Semenyih road, an Econsave Hypermarket 2.3 km away down the same road but towards Semenyih Town, and two Tesco Hypermarkets (in Sungai Kantan, Kajang and Semenyih Town). Hospitals are aplenty in the Kajang CBD, namely the Kajang Plaza Medical Centre, Kajang Hospital, and Kajang Specialist Hospital (KPJ). The soon-to-be-completed Kajang MRT Station is also a viable alternative to get to KL, if you’re not too keen on braving the traffic jam. It is just next to the Kajang KTM Station on Jalan Bukit, Kajang Town, which is just 9 km away from Kajang East if you take the Kajang SILK Expressway.

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Fact File • Name: Kajang East • Developer: Aliran Perkasa Sdn. Bhd., a subsidiary of MKH • GDV: RM 600 million • Land Area: 137 acres • Land Type: Freehold • Current Project: Kajang East, Precint 3 • Launching Date: 18 - 19 January 2014 • Development Type: Mixed • Price: From RM 627,750 (Bumiputra price, 2-storey Terraced Houses) • Price Per Square Feet: RM 300–350 psft • Built-up Area: 2,101–2,341 sqft • Expected Year of Completion: December 2015 • Existing Infrastructure: LEKAS, Kajang SILK, North-South (PLUS) Expressway and the CherasKajang (Grand Saga) Expressway

TARGETING

MINIMUM

15% APPRECIATION

WI THI N

2 YEARS

Price and Appreciation Kajang East’s Precint 3 double-storey terraced units, which range from 2,101–2,341 sqft (22’ x 70’ and 22’ x 85’) are currently priced from RM 600,000 onwards. The four-bedroom-and-threebathroom units are 60% sold so far, with about 50 units left. “For Kajang East, we are targeting a minimum of 15% price appreciation within two years. If you look at properties in the surrounding areas, their prices have already increased by 20% in the past two years,” points out Loke. “For example, our semi-Ds in Taman Pelangi Semenyih, which was launched last year at RM 600,000, is currently being sold at RM 800,000. That’s a 25% increase in the span of just one and a half years. Taman Pelangi Semenyih is just down the road from Kajang East.” “Shop houses there have actually reached RM 1 million. Last time, we were selling them at RM 450,000. They’re near Tesco Semenyih. The latest transacted values are more than RM 1 million, but the cheapest one we know is still at RM 900,000+. That’s double the launching price. In Semenyih!” he adds dramatically.

Four years back, if you check the articles written about Semenyih and this side of Kajang, they were mostly sceptical of the potential of the area. And who wouldn’t be? But the prices have shown that the town has proved its mettle.

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AREA FOCUS

AGENT’S SAY RESIDENTIAL

GOOD Jimmy C. Y. Lee GS Realty

GO FOR SHOP HOUSES

TERRACED

Bryan Wong Affirm Properties

Zul Gani Prime Properties

HOUSES

ARE GOOD

The price of landed properties in Kajang and Semenyih is not too high when you compare to other places. The terraced houses range from RM 600,000–700,000. There are a lot of new developments in the area, like Pelangi Semenyih 2, Setia EcoHill, The Garden, and Tiara South. There are no supermarkets in the immediate vacinity of Kajang East, so it’s not that convenient in terms of grocery shopping. The nearest one is Billion Supermarket, in the direction of Kajang. For investment, you should maybe invest in shop houses and terraced houses, because they have factored in the future price already. The rental for two-storey terraced houses is not too high, at about RM 1,000–1,500. If you price it at more than RM 2,000, people will not be able to afford it. Invest for capital appreciation.

Kajang East is a good place to invest in, as it has easy access to KL and Seremban, through the Kajang SILK Highway and the LEKAS Highway. The population of Kajang is big; Semenyih’s may not be as big, but in 5–10 years, it will probably catch up. I think residential properties are a good option, as there are already many shop houses in the area. Compared to other places in Greater KL, the rental rate in Kajang & Semenyih is still low. Double-storey terraces are in particularly high demand in the area.

As an investment, I think Kajang East is good, as it is a development project located on the outskirts of Greater Kuala Lumpur. I would say that terraced houses make good investments, as most of their buyers are of middle income. Older developments near the area, like the ones in Bandar Sunway Semenyih, cost between RM 340,000– 680,000. But those are smaller in size and are not gated and guarded. Rents can reach anywhere between RM 900–1,500.

Prices of MKH’s Existing Double-Storey Terraces Near Kajang East PROJECT

LOCATION

LAUNCHING YEAR

DEVELOPER SELLING PRICE (FROM RM)

DEVELOPMENT COMPLETED

CURRENT MARKET

PRICE (RM)

PRICE APPRECIATION

Hillpark Home

Semenyih

2010

248,800

2012

420,000

69%

Sentosa Villas

Kajang

2008

341,210

2011

600,000

76%

Desa Mewah

Semenyih

2000

138,888

2010

450,000

220%

Kajang 2

Kajang

2010

469,000

In progress

680,000

45%

Hillpark 2

Semenyih

2011

393,000

2013

460,000

17%

Pelangi Semenyih

Semenyih

2003

135,000

2010

400,000

196%

Pelangi Semenyih 2

Semenyih

2010

250,000

2013

420,000

68%

Pelangi Semenyih

Semenyih

2003

135,000

2010

400,000

196%

Pelangi Semenyih 2

Semenyih

2010

250,000

2013

420,000

68%

Source : MKH Berhad 48 FEBRUARY 2014 www.propertyinsight.com.my

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AREA FOCUS

Current & Future Developments in Kajang East PRECINT

PHASE

Phase 1

Phase 2 1

Phase 3

Phase 4

TYPE OF BUILDING

SIZE / NO. OF UNITS

Clubhouse + Pool + Management Office Guard House Semi-D Type A Terraced Type D Terraced Type D Cul De Sac Terraced Type E Terraced Type A Terraced Type A Terraced Type B Terraced Type B Cul De Sac Terraced Type E Terraced Type E Semi-D Type B Semi-D Type C Terraced Type C Terraced Type C Cul De Sac Terraced Type A Terraced Type A Cul De Sac Terraced Type B Terraced Type B Terraced Type H Terraced Type J Clubhouse Terraced Type F1 Terraced Type F2 Terraced Type G1 Terraced Type G2

40’X80’ / 248 Units

LAUNCHING DATE

22’X70’ / 82 Units 24’X80’ 22’X70’ 22’X70’ 22’X80’ 22’X80’ 24’X80’ 24’X80’ 40’X80’ 40’X80’ 24’X80’ 24’X80’ 22’X70’ 22’X70’ 22’X80’ 22’X80’

Mid-2015

22’X80’ / 231 Units 22’X75’ 22’X80’ 20’X70’ 20’X75’

/ 58 / 58 / 45 / 44

Units Units Units Untis

Mid-2014 Jan 2014 End-2014

Source : MKH Berhad

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- How a Portal Can Help would think that shopping around for a good loan package is among your basic rights, but that isnâ&#x20AC;&#x2122;t exactly how things are. Cherie Chong Wendy Goh

id you know that when it comes to loans, you cannot simply apply for one at every single bank there is and then choose the one which gives you the best deal? Not only is it unproductive for you and the bankers to do that, as it requires a lot of time and effort to apply and to process; the banks will also deem that you are fooling around and reduce your credit score, as they are aware of the other banks you have applied to through your CCRIS (Central Credit Reference Information System) record. As consumers, you

In the last few years, with the creation of online loan comparison sites like LoanPro.com. my, consumers are able to effectively compare loan products side-by-side in terms of interest rates, interest incurred, and the amount they would need to pay the banks back monthly. Such convenience has given more power to consumers in deciding which bankâ&#x20AC;&#x2122;s services they will engage. In the case of LoanPro.com.my, the online portal was launched in 2012. The brainchild of a group of mortgage consultants, the loan comparison website is complemented by a strong consultation service, backed by its 50 strong staff in the Klang Valley. It was specifically set up with the aim of easing the process and reducing the time customers spent on applying for their financing via banks. To use LoanPro.com.my, all you need to do is go to the portal, type in how much you wish to borrow from the banks, and specify how many years you want your loan tenure to be. After that, a whole

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range of loan packages will be listed, and you can then click a button to get advice from LoanPro.com.my’s qualified mortgage consultants, who will get in contact with you within 1 hour. “Other online comparison sites guarantee to call you immediately after you apply. They will call you and ask several questions: what property are you buying, where it is, and have you paid your booking fee? After that, they will pass you to the sales staff, who are the mortgage consultants.

But for LoanPro.com.my, we don’t have any customer service department. Once you apply for a loan or for advice, you will immediately be contacted by our own mortgage consultants,” says Cherie Chong, Manager of LoanPro.com.my. Unlike other such services, LoanPro.com.my banks on its strength: experience. With senior executives having between 5-15 years’ experience working in the banking industry, their pride is in offering sound and trusted advice to their clients, based on experience. “We will not submit your application to 9 or 13 banks. What we do is we filter. After meeting up with you, based on your financial circumstances, we will suggest which banks to apply to, where the chances of getting the loans approved are on the higher side. It will save you time–you will not need to wait for 13 bankers,” says Wendy Goh, Manager of LoanPro.com.my. “In fact, some of the 13 banks may not suit you well.” In this issue, LoanPro.com.my’s Strategic Partner, Jerry Tang has contributed an article on the differences between an MRTA and an MLTA, which are two main types of mortgage insurances that buyers are advised to take to insure their housing loans.

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l if e prote ction what is the right choice? Mortg age

MRTA or MLTA? Home loans are not only a huge investment but also a long term commitment for people so it’s understandable that they have concerns before taking it up. One of these worries that is forefront in their minds is “What will I do if anything happens to me and I’m unable to repay the loan?” Although this is an unfortunate thought, life is indeed unpredictable; anything unpredictable such as death or total permanent disability (TPD) can befall anyone of us at anytime. And if such tragedy were to happen before you are able to finish your repayment, it will cause serious financial liability to your loved ones. No one would want that to happen as it is neither beneficial to the lender or to the borrower. Hence, mortgage life insurance is created. This is a policy that will prevent your beloved from incurring the financial burden from the loan if circumstances such as death or TPD were to befall you. For borrower or even the lender, to have a well planned loan protection for this long term and huge commitment is a wise decision which also brings some peace of mind to both parties. In the market, there are currently two mortgage life insurances: MRTA & MLTA.

Therefore, the question is MRTA & MLTA; which is actually the right choice of a loan protection? Let’s look at both and see how each differ from the other and what protections they actually provide.

M R TA Mortgage Reducing Te r m A s s u r a n c e MRTA otherwise known as Mortgage Decreasing Term Assurance (MDTA), is a reducing term life insurance which serves to protect the borrowers from death or TPD. In this policy, the sum assured will slowly reduce annually until it reaches zero at the end of the tenure. If anything were to happen during your mortgage period, the insurance company will only pay the claim according to that year’s coverage. Generally, it is commonly recommended by the lender as it is a relatively low cost policy that requires only a single premium payment. Furthermore, the premium would be able included into the loan. Hence, MRTA is the more affordable protection. Do note that the sum assured tenure of coverage and other relevant

factors such as age and gender will influence the premium to be made. Although MRTA is lower cost for the borrower, a few points need to be taken into consideration. As it is only a basic reducing coverage plan, it does not have any cash value at the end of the tenure. In another words, you will get nothing back at the end of the coverage tenure. Another setback for MRTA is that the borrower may be at the risk of a higher mortgage outstanding balance than the MRTA sum assured at that point of time. This is due to the floating based lending rate in Malaysia. If this were to really occur, the difference between the loan and sum assured amount need to be topped up by the borrower (in the event of TPD claim) or your loved ones who inherit (in the event of death claim). In this event, the borrower need to make sure the MRTA sum assured is always sufficient to cover the loan amount that is outstanding from time to time. An unfortunate but very common scenario for Malaysian loan takers is they would take a shorter period of MRTA than the loan tenure. For example, the

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borrower takes RM300, 000 loan with a 30 years loan tenure but only take up five years of MRTA policy. The reason always given is that they will settle the loan within five years or earlier. However, the real reason for many is that they are mainly hoping to save on the premium by opting for a shorter MRTA tenure. What happens in this scenario? If they have taken a five years MRTA, their sum assured will be reduced from 300, 000 on the 1st year, to RM 240,000 on the 2ND year, and RM 180,000 in 3RD year and RM 130,000 in the 4th year.

M LTA Mortgage Level Te r m A s s u r a n c e MLTA is mortgage level term assurance is another option of loan protection in the market. It is created along with the guidelines of various types of life insurance products. The major feature that makes MLTA different from MRTA is that the sum assured will not reduce as the time goes by. The amount assured will remain fixed for the whole tenure. It means that you are not going to have to worry whether the outstanding principal loan amount as the coverage is always level while the loan reduces throughout the tenure. In the event of a claim, the insurance proceeds to pay out to the nominee (usually the family member) and is well protected under Insurance Act of Malaysia 1996. Of course the total premium payment is relatively

Let’s say, if something unfor tunate happens in the 4th year, the borrower would only get RM130,000 sum assured but the principal loan outstanding would be RM285, 000. Who is going to bear the difference? The family would have to bear the difference or lose the house. It’s a sad situation as the family not only loses a member but also the house. For MRTA, people would say that it is a simple and affordable protection. It is suitable for those who intend

higher as the premium is on an ongoing basis. In addition to that, you can also have a saving feature in your MLTA policy. This feature enables a portion of the premium paid to accumulate as a cash surrender value. What is so special about having cash value? It is because with cash value policy, the borrower can surrender the policy earlier than the loan tenure then make use of the money to do an early settlement to the loan. For example, the borrower takes up a RM300, 000 loan with a 30 year tenure and also takes up MLTA with cash value. The MLTA policy may have sufficient cash value in the 25th year to fully cover the balance loan outstanding of about RM110, 000. In this scenario, the MLTA policy’s cash value will be able to help the borrower to enjoy five years early loan settlement. The best part is saving on tonnes

to have one house and be the sole lender for their entire life. MRTA is a kind of inflexible policy that does not allow the insured to reassign or transfer to another bank. When you plan to refinance your mortgage for various reasons such as better services or interest saving, MRTA is not transferrable; you may need to take up a new policy with higher premium due to older age factor or in the worst case scenario, you might face difficulty on taking a new life protection due to health reasons.

of interest from the loan. This is in fact a good financial planning concept. MLTA policies can be transferred in the event the insurer decides to refinance or sell his property. This flexibility to transfer allows the borrower to still use the existing MLTA for a new loan or a new house. Furthermore, he can continue paying the same premiums and has less to worry about new coverage application difficulties. For the property investor, MLTA perhaps is an effective protection tool to enhance your wealth protection plans.

RM300K loan

(30 year tenure+MLTA cash value)

Sufficient 25th

cash value YEAR

COVER RM110,000

balance loan outstanding

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For example, the borrower takes up a RM300, 000 loan with a 30 year tenure and also takes up MLTA with cash value. The MLTA policy may have sufficient cash value in the 25th year to fully cover the balance loan outstanding of about RM110, 000. In this scenario, the MLTA policy’s cash value will be able to help the borrower to enjoy five years early loan settlement. The best part is saving on tonnes of interest from the loan. This is in fact a good financial planning concept.

MLTA policies can be transferred in the event the insurer decides to refinance or sell his property. This flexibility to transfer allows the borrower to still use the existing MLTA for a new loan or a new house. Furthermore, he can continue paying the same premiums and has less to worry about new coverage application difficulties. For the property investor, MLTA perhaps is an effective protection tool to enhance your wealth protection plans.

ssary? e c e n A T L M r o Is M R TA ra nc e is to

e lif e in su rp os e of m or tg ag pu y ar ve d on es im pr e Th en s th at yo ur lo rd bu al ci an fin of re du ce th e ri sk er e to ha pp en to an yt hi ng ba d w if re du en to lo an s. Ei th er w ill ha ve yi ng yo ur ho m e pa re ill st re u’ pr ev en t yo ur yo u w hi le yo rm of se cu ri ty to fo od go a is A of un ti m el y M R TA or M LT bt s in th e ev en t de g in ir qu ac de pe nd an ts fr om ss . ev en cr it ic al ill ne de at h or TP D or d fo r ho m e te n re co m m en de of is it e, on al n bu yi ng Fo r th at re as on e in su ra nc e w he lif e ag tg or m & pr ot ec ti ng yo u bu ye rs to ta ke up is a gr ea t w ay of is th as ty er op a ne w pr be rs . yo ur fa m ily m em

LOAN PROTECTION

MRTA

MLTA

MODE OF PAYMENT

LUMP SUM or financed by lender

Periodically to the tenor of loan (e.g.: annually or monthly)

Types

Protection

Protection with savings & cash value

Protection types

Reducing term life insurance

Level term protection

Protection choices

Death /TPD

Death /TPD or Critical illness

Nomination

bank (the lender)

The borrower choices

Features

• • • •

Reduced coverage Single premium payment only Inflexibility of transfer No cash value at the end of tenure

Level coverage Payment throughout loan tenure Flexibility of transfer With Cash value

Contributor:- Mr. Jerry Tang - Strategic partner of LoanPro.com.my cum founder of De Banc Co Group (DBC) whom venture in mortgage and financial services industry since 2006. Up to date, DBC Group has completed over thousand of mortgage applications besides trained over thousand of bankers and real estate agents about strategies and experiences upon mortgage knowledge and property investment. Currently, there are more than 60 full time mortgage bankers lies under DBC Group. He can be reached at debancco@yahoo.com

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CONTRIBUTOR

he Strategic Property Investor today needs to drill through the fallacies or myth of property investment. Sometimes we hear too much of a common adage or common wisdom and just accept it without really understanding if they are true or just a misconception. You get senior investors passing such wisdom to junior investors. You hear an investor passing such wisdom to another fellow investor in networking sessions. And sometimes, we do not take the trouble to really investigate if they are indeed wisdom or just misconceptions. Letâ&#x20AC;&#x2122;s visit some of my top 5 great fallacies in property investment of all time! 32 FEBRUARY 2014 www.propertyinsight.com.my

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CONTRIBUTOR

How many of you have been told this great fallacy when you were growing up? It’s as though everyone had parents that went for the same property investment class and was told, “Property is an asset”. Are properties always an asset? The answer is NO! And when something is not an asset, what is it? It becomes a liability! In simple terms, an asset is like the superhero that helps you win in the battle to create wealth and liability is like the villain that exists to ruin your world! So when does a property NOT become your asset? Well for starters, let’s understand how properties ARE your asset. For me, I only invest in IGA’s or income generating assets. If that property does not give me an income, I don’t consider it investment-grade and not an asset that helps me create more wealth. So if my asset is not tenantable and not easily sold at a premium, it is the worst asset to hold; basically, it is your perfect villain or liability. So the next time someone tells you a property is an asset, you know that that is not true all the time. Your goal as a strategic property investor is to understand when a property is an asset or a liability!

I’ve spent thousands of hours arguing this fallacy with my students and fellow investors. I’m beginning to get tired of this! I am simply baffled at how some investors feel that there is somehow a magical way that they can continue to buy property without increasing their income! And the funny thing is that there are some people in the market, who claims that they can help you do this! Amazing actually. I call these people miracle workers or magicians! The reality is that there is no way that you will be able to without growing your income. If there were, magicians would be the richest people in the world, snapping millions from thin air! The truth is this, imagine the income you have is the same size as the property you buy. If you desired to buy one property, the size of your income has to be the size of 1 property. If you desire to buy 10 properties, the size of your income has to be the size of 10 properties! There are no shortcuts to this and certainly no magic! Some people share tricks where you can simulate income from borrowed credit to make it look like you earn more so that you can get your next loan approved. Let me tell you this, bankers are not as dumb as you think; they can smell this from a mile away. Perhaps you can get that loan approved but I doubt that you can for the next and the next. Remember, just as fundamental as the law of gravity, you can only grow your portfolio when your income grows. So make a decision to grow yourself and your income first, and this will automatically mean that you will be able to buy more properties!

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CONTRIBUTOR

This is another one of those fallacies that I have to debunk almost on a daily basis! NO! You do not want to be a full-time investor! Many investors, especially youth investors below the age of 30, tell me, ‘Ahyat, I’m tired of my job’, or ‘Ahyat, I hate my boss’ and ‘I want to quit and become a full-time investor!’ Well, there are many who are full time investors, but if you want to be a full-time property investor, things are going to become difficult very quickly! If you are talking about stocks, forex and such investors, it may be possible, but let me tell you why it is not so for property investors. The name of the game in property investment is leveraging, and who else do we borrow from, if not from our wonderful financial institutions; the banks. I’ll be as blunt as I can right now, banks are not going to lend you money if you do not have a primary source of income! And this I explained in my book, “The Strategic Property Investor”, where the real wealth formula is the PSI + MSI. And this is read as Primary Source of Income ‘plus’ Multiple Sources of Income’! In property investment, you cannot have a standalone MSI, without the PSI, at least in the beginning stage that is. Make a decision today to have a super PSI so that you have a super MSI. And maybe, when the time comes, your MSI will be massive enough to totally replace your PSI and then you can decide if you want to continue to work!

Ooh, this is going to be a sensitive one! Everybody wants their property prices to increase in value, correct? At least I do! Nobody wants their properties to decline in value! But how many of you have actually heard this one before, property prices will ‘always’ increase in value? I would think all of us. In more mature property markets like in developed countries, this so called wisdom is the one that many buyers and investors find to be a joke and the scariest of all because they have felt the pain of massive crashes. And during such crashes, they have seen it with their own eyes, when property prices do not actually just go up, but it can go down. So a misconception that property prices will always go up is like believing that everything you touch will always turn to gold! Here’s the thing, because of this misconception, people will always continue to buy property even if they felt that it is already very expensive. I would think that this belief is the only thing that justifies this to happen. If the belief is strong, markets would seem to push through to dizzying heights and when the belief is gone, due to many market events that will challenge this belief, then markets are suppressed and the motivation to buy and to make quick gains is quickly dissipated. While real estate would generally increase in value over the long term, booms and busts do exist. I present to you this fallacy not to incite fear but to instigate a deeper thought process to allow you to think more strategically when making investment decisions! 34 FEBRUARY 2014 www.propertyinsight.com.my

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CONTRIBUTOR

To some, just by calling it a ‘game’ is wrong. But truly it is just a game. If you are not having fun in the game, don’t do it at all. And most importantly is that we play to win. Losing in the game of property investment is not an option. And mind you that there’s a fundamental mistake made by many investors who ‘plays not to lose’. It is not similar to ‘playing to win’.

Now the moment you want to play the game for the short term play, you are ultimately limiting your thought process to consider all the benefits and risks. Often times, the risk part of the equation is often neglected. You go through a shorter thought process when playing any game for that matter for the short term. The truth about property investment is that it was never designed to be a short term play, it is a medium term to long term play. Property investment is a marathon and not a sprint. I also shared this investment value of mine early in my book and it remains a core value of my teachings. Make a decision today to be a strategic property investor and always plan for the long term, but always be ready to make short term decisions!

Contributor: AhyatIshak is the author of the book “The Strategic Property Investor” and the founder of “The Strategic Property Investment Model & Program”. You can learn more at his website www.ahyat.com, his YouTube channel: AhyatPropertyTV and his other social media resources. www.propertyinsight.com.my

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CONTRIBUTOR

WHEN IS THE RIGHT TIME TO LET YOUR TENANT GO?

or a lan dlord, their ro le is t o f in d a q u alif ied t en an t t o m o ve i n. I f o nl y thin gs are that s imp le. On e w ay o r an o t h er, like it o r n o t , all lan d l o r d s w i l l e ven tually fac e a p roblem at ic t en an t . In Malays ia, t h e t en an t s u s u a l l y h av e the law on their s ide. T h e f irs t t h in g an inves t o r s h o u ld d o is t o de ci d e wh e n is the time to le t y ou r t en an t go . On ly t h en , t h e h o w c an t ake p l a ce . T h e r e a r e a c tua lly a fe w s ituation s in w h ic h t h e b es t t h in g is t o le t t h e t en an t go .

YOUR TENANT DOESN’T PAY D u h … I t d o e s n’ t t a k e a g e n i u s t o k n o w t h a t b u t y o u w i l l b e s u r p r i s e d i f t h i s h a p p e n e d t o y o u , a n d a t h o w y o u w o u l d r e a c t . W h a t w i l l b e t h e m o s t l i k e l y s i t u a t i o n ? Yo u r t e n a n t i s o n e m o n t h b e h i n d t h e r e n t a l p ay m e n t , h e /s h e b e g g e d , a s s u r e d , p r o m i s e d y o u t h a t b y n e x t w e e k h e /s h e w i l l p ay. G u e s s w h a t ? T h e n e x t w e e k d o e s n’ t c o m e , n o r d o e s i t c o m e t h e n e x t m o n t h . T h e n e x t t h i n g y o u k n o w, y o u r t e n a n t i s f o u r m o n t h s b e h i n d . No w, y o u r s t a k e i s b i g g e r t h a n b e f o r e a s t h e r e n t a l o w e d h a s s n o w b a l l e d . A n d your tenant as usual will tell you trust him for the last time, the money will come in b y m o n t h e n d . No w, y o u c a n c h o o s e t o k e e p b e l i e v i n g y o u r t e n a n t o r c u t y o u r l o s s . I f y o u r t e n a n t c a n’ t p ay f o r o n e m o n t h , w h a t m a k e s y o u t h i n k h e c a n p a y t h e o u t s t a n d i n g f o u r m o n t h s r e n t a l ? Ev e n i f h e d o e s p ay, h e p ay s o n e m o n t h a n d c a r r y forward three months outstanding. Life is too short for you to get tangled in this n e v e r e n d i n g v i c i o u s c y c l e . Yo u m u s t d e c i d e t o h i m g o !

YOU DON’T GET ALONG WITH YOUR TENANT Your tenan t m igh t b e ru de, do es n’t really res p ec t yo u r t i m e a nd the wors t p ar t c o n s is t en t ly irrit at es yo u e ver y t im e t he y r e q u e s t for a repair. B u t , t h e y p ay o n t im e, t ake c are o f t h e pr o pe r ty an d e ven p ays a go o d ren t . T h is is n o t t h e t im e t o le t t h e m go . T hes e te n an t s are b y d e f in it io n a go o d t en an t , like i t o r no t . So keep yo u r em o t io n s in c h ec k an d b e h ap p y yo u h av e go o d p ay ing te n an t s !

YOUR TENANT IS LATE IN PAYING RENTAL

About the Contributor KK Chua is the publisher

of Property Insight magazine. He is also a registered real estate agent and an investor with more than 10 years of experience in the industry. He can be contacted at

kkchua@propertyinsight.com.my

Your tenan t is lat e b u t w ill alw ays p ay a f e w w eek s l at e r. T h e y don’t really t ake c are o f t h e p ro p er ty an d h ardly n o t i ce o r d o n’ t c are s hou ld t h ere any m aj o r d e f ec t / p ro b lem w it h t h e h o u s e . Verdi c t: L e t t hem g o

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CONTRIBUTOR

Y OU R L ONG- TE R M TE NAN T IS NO W P AY I NG S UB - M AR KE T R E NTAL Your tenant has been with you for years, and all these while been paying the rental on time. Either you like them or don’t want to burden them by hiking the rent even though the market is up. They might also be very ‘manja’ with you by telling you they will move out every time you mention to them you need to increase the rental. This is an investment, we need to be objective. If you can’t match the market rental at least it should be close to it. Maybe give them appropriate notice for the rental adjustment. And if they decide to leave, be confident enough to find a new tenant at market rental. Finally, by doing a good screening you will increase your chances of getting a good tenant. But then again, nothing is foolproof. Should you come to the juncture whereby the tenant crossed that boundary, you must make an honest decision whether to let them go or not. Don’t let the tenant abuse your kindness.

TOP

SUREFIRE

SIGNS

of the Problematic Tenant

No. 5 Come late for viewing or appointment. Late as in more than 20 minutes and didn’t bother to call in advance to notify.

No. 4

Not honest. The tenant is not forthcoming when you asked them how many people staying, does he have a pet, is he subletting etc

No. 3 Very secretive. When you asked them what they do for a living, they find it hard to

explain or refuse to tell. Every time you ask them for a name card, they always tell you they didn’t bring. You must run a background check on them and verify their workplace and position.

No. 2 Urgently need to move in. Normally a tenant that knows how to plan, they will scout for new place weeks or if not months ahead. If a tenant tells you he has to move in tomorrow or in three days’ time because their current landlord just sold his house and forced them out. Don’t believe the story. No owner will sell a house and chase the tenant out in 24 hours. There must be a story within a story. It could be that they have not been paying therefore so they have to vacate or are evicted from the house.

No. 1 Having difficulty to come out with the full rental deposit. If he has problem coming out with rental deposit, very high chances are he will also have problem paying you the rent.

Conclusion: It’s better to be safe than sorry!

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DEVELOPER OF THE MONTH

MAGNA

PRIMA

BERHAD -Niche Developer

of Mixed

Developments

By: Faiz Fadzil

t is a norm for every developer in the property development industry to face challenges in their pursuit to be the best. Magna Prima too has gone through the rigors of developing real estate not just in Malaysia but also abroad. From affordable properties to award winning 6-star assets, Magna Prima Berhad have constantly strived to feed the needs and expectations of prospect buyers and investors with their fresh and innovative designs yet affordable. 24 FEBRUARY 2014 www.propertyinsight.com.my

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DEVELOPER OF THE MONTH

Magna Prima- the beginnings Magna Prima was incorporated in 1995, and in early 1997 was listed in the local bourse. This niche developer of integrated lifestyle themed projects is an investment holding company with several subsidiaries which provide management, trading, property development and building services.

However, around 2010, Magna Prima shifted its construction’s focus to developing small parcels of land in high-density areas of Klang Valley. “Our main preference is to develop five to ten acres of land; and the maximum we would do is 20 acres,” comments Dato’ Rahadian Mahmud, the CEO of Magna Prima Berhad.

It was better known as a construction company, undertaking external construction and civil engineering jobs aside from their in-house projects. Some of the projects include earthworks, dredging and construction, for instance, among them the first man made wetlands in the country, the Putrajaya Wetlands.

Dato’ Rahadian’s role as a leader is reflected in his bold and outstanding performances. He embarked on the journey with Magna Prima Berhad in 2007 as an Independent Non-Executive Director. However, due to his active involvement in the industry and strong perseverance, Dato’ Rahadian was later on elected as the Chief Executive Officer of Magna Prima Berhad, a role which he upholds to date.

The Wind of Change Under the wings of Dato’ Rahadian, Magna Prima Berhad have seen various change in the management system. In 2011, Magna Prima Berhad underwent an internal restructuring to create and facilitate a more refined management system. In the aim of creating a new vibe and resolution for the company, Dato’ comments, “Rebranding is a process that will rejuvenate the company’s frontage with the right amount of time and effort and that’s where our focus lies for the time being. We begin with better accountability, management system and the overall ways of doing things.” Dato’ also exerts that the company follows strickly the guideliness of the tendering process

before awarding the work to the contractors. “There’s always a system in place that we should follow. For example, there are usually multiple parties who sign-off relevant documents before reaching my consensus and so far, this has worked well for us. It is a way of ensuring transparency at work.” Dato’ Rahadian who practices an “open door policy”, believes that everything that is done has to be efficient and well-thought of. He rejects the idea of doing a particular task twice! “I’m trying to make things more efficient. If we can automate most things, then we will simply automate them,” explains Dato’ on their effort of streaming and automating the sys tems.

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DEVELOPER OF THE MONTH

Challenges of their Own “One of the challenge has always been the issues relating to the various authorities in Malaysia. It is not anyone’s fault that sometimes the criteria are a little tough to fulfil within stipulated time,” comments Dato’. Dato’ expresses that his best intention is to comply with the authorities and to deliver the best of the properties to their purchasers who are mostly owners who occupy it. As Magna Prima Berhad has been in the industry for many years, they are well equipped to face the challenges ahead and usually does not encounter too many issues locally. Venturing into

the foreign market however, poses a whole different set of challenges mainly with the Australian practice of build-then-sell concept. According to Dato’, “We are only able to collect our revenue once the project is completed and the keys are given to the purchasers, which means that you have to manage for three years or so (depending on the time of completion) with your own revenue. In short, he advises others to manage their cash-flow and the timing of project completion well, in order to sustain it throughout the years especially for projects abroad.

Build-Then-Sell (BTS) BTS concept is expected to be implemented in

2015

Under this scheme, It’s a modal practised in certain buyers will only pay countries such as

Australia

and Singapore

10%

instalment fee

The balance is paid after the house of your dream is completed!

The government is to implement the build-and-sell concept to stem the problem of abandoned housing projects, according to the 2012 annual report of the Special Task Force to Facilitate Business (Pemudah).

“Nowadays, everything has become international and that is why we have started venturing outside Malaysia. We have to look at opportunities that lies across the sea as well in order to become a brand that is not only recognised locally but internationally. Apart from that, there is also a need to challenge the staff, hence we decided to rock the boat just a little bit,” comments Dato’ when asked on the prospects of venturing internationally. 26 FEBRUARY 2014 www.propertyinsight.com.my

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DEVELOPER OF THE MONTH

Projects in store Magna Prima’s forte is to develop medium cost properties. “We do have high-end properties, such as The Avare’ at KLCC which was completed a few years ago. We have a mixture of medium and high-end developments too, but our focus is to build medium,” says Dato’ Rahadian. Magna Prima Berhad has many projects in the pipeline. Currently, progress is on-going with the Boulevard Business Park which lies along Jalan Kuching, less than two kilometres from the Jalan Duta roundabout. Worth approximately RM625million in GDV, the project consists of 9 blocks spanning across a 10 acre parcel. The land would see a 33-storey tower of 345 serviced apartments units priced at approximately RM500 sq. ft. and 4-storey of 102 units of shop office blocks and a boulevard theme mall which would ultimately serve the desires of the young and old alike. Pushing the envelope further, Magna Prima has set aside 100,000 sq. ft at the lower ground floor to be leased to a major hypermarket operator. Currently, more than 80% of the shop lots have been sold, while 90% is the take-up rate for residential units. The shop office blocks are expected to complete by the third quarter this year, while the apartments, at the end of 2015.

Magna Prima Berhad will also be constructing an iconic property on a prime piece of plot through an exchange of land with Lai Meng Chinese School last year. “We’re giving them our piece of land in Bukit Jalil for the redevelopment of the school; and they can safely move out to their new place by the end of this month.” On the current Lai Meng School premises a high-end 60-storey state-of-the-art project will be built, a twin tower consisting of residential and office spaces with a hotel standing proud on top. These soaring towers are situated next to Maya Hotel. The project with an estimated gross development value of around RM 2 billion is set to begin construction at the end of this year and will be completed within 5 years. Among other projects under Magna Prima that have been successfully completed include Alam d’16, One Sierra, Seri Jalil, Avare’ and a township, Metro Prima - just to name a few.

Apart from that, this year will also witness the construction of Magna Prima’s project in Sunway Mentari, Petaling Jaya comprising of 36 shop lots. The project would sit on a parcel that measures up to 70,000 sqft which is worth approximately RM60million. The expected time of completion would be within 18 months.

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DEVELOPER OF THE MONTH

Land Acquisition When acquiring lands, Magna Prima’s strategy is to choose those in densely populated areas with existing infrastructure. They will then conduct a feasibility study before they decide on purchasing the land. Another strategy under their sleeve is to invest only on projects that will bear 20% profit return. Dato’ comments, “We want to sell our properties within a short span of time. Hence, we take all aspects into consideration before we even consider moving forward with any projects. We want to ensure that our buyers experience capital appreciation as well, so we choose everything carefully. So far most of our buyers made a good profit on their projects.” “We never really hold too many land bank. Our style is usually to acquire land; and study them immediately because I don’t really like the holding cost of the land. We price our properties at an attractive cost, which is not too high and is affordable to genuine buyers,” explains Dato’. Currently the company’s focus is on completing all their projects at hand and delivering quality products to their buyers.

Future Undertakings Dato’ Rahadian foresees the growth of Magna Prima Berhad around the Klang Valley region. However, given the time and opportunity he would love to expand the name in Penang and Malacca. He also aims to groom this Damansara-based company in its efficiency. “We will try to be moderate; concentrating on small-scale but volume projects after the twin tower development is completed.” 28 FEBRUARY 2014 www.propertyinsight.com.my

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DEVELOPER OF THE MONTH

Outlook for 2014 In my personal opinion, landed properties will always have its demand. Apartments and condominiums will have some tough time this year, probably due to the reduced number of approved loans by banks for purchasers, as a result of Bank Negara’s new rulings. Inflation is going to be quite high. That means, if you have money, there’s no point of keeping it in the bank, because the value of money is definitely going down. Transactions might or might not be slow. It really depends. Perhaps, because of the inflation, people will invest in property more, resulting in more transactions! That’s why it’s always better to invest. I strongly believe that property investment is the best way to keep you running. It’s a good way of creating recurring income. Remember, there’s equity. It’s a tangible asset.

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COVER STORY

You must have heard of the plans for Greater Kuala Lumpur/Klang Valley (KL/KV). Did you know that DBKL plays an essential role in the pursuit of this vision? by: Faiz Fadzil

The Job Scope of DBKL

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COVER STORY

Great er Kuala Lumpur /Klang Valley (KL/KV) Of the total population of Malaysia today, around 20% (approximately six million people) live in the Greater KL/KV area; and the number of people is estimated to reach around 10 million by 2020. Due to the foreseen rapid population growth, the government has laid out its plans to push Kuala Lumpur as one of the most livable cities with excellent economy by year 2020. “The government is very serious in doing something for KL and for its people. Our aim for Greater KL/KV is to connect KL and its surrounding towns and transform them into a connected city, where people come and live together while enjoying the facilities, services, and scenic views of Kuala Lumpur,” says the Mayor of Kuala Lumpur City Hall, Datuk Seri Ahmad Phesal Talib. Greater KL is one of the nine Entry Point Projects (EPP), and it consists of four key dimensions, which are traction (Magnet), communication systems (Connect), identification of new places (New Places), and improvement of the services (Enhanced Services). DBKL, according to Datuk Seri, is administering four entry point projects under Greater KL, and those are the River of Life (EPP 5), Greener KL/KV (EPP 6), Iconic Places (EPP 7), and Pedestrian Network (EPP 8).

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COVER STORY

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COVER STORY

right thing next time. And perhaps enhance our PR.” “I know people expect us to perform better; to provide better services and such. People do have the right to question us on the quality of our work, and they are always welcomed to give feedback. For this reason, we are stepping up our efforts to make sure that our services and our work are up to the standard. We will prove our worth by delivering the best with the revenue we have collected. “In order to achieve such excellent services, I have written a memorandum of understanding to SIRIM (Standards & Industrial Research Institute of Malaysia), IKRAM Group Sdn. Bhd and CIDB (Construction Industry Development Board Malaysia) to make sure the facilities, infrastructures, services, and such are top-notch,” Datuk Seri Phesal claims. He further expresses that sooner or later, the assessment rate will

Incentives to Developers As one of the efforts to build Greater KL, DBKL is reducing the parking space requirement from 100% to 70% to encourage more people to use public transport. “Developers may only provide 70% parking space if their properties are in a radius of 200 meters from public stations (LRT and MRT),” Datuk Seri Phesal says. Apart from that, DBKL is also giving higher plot ratiof to developers in hope that they can give back to the society. “If the plot ratio is at seven, we can increase it to eight or nine. However, it must depend on the kind of CSR they are giving. It can be in terms of density, connectivity, landscaping, and such. Well, they can also propose to us

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COVER STORY

Traffic Congestion According to Datuk Seri Phesal, traffic congestions happen because of two reasons. The first one is because public transportation in KL is underused. It was usually at 20%, but now it has decreased to only 17%. The second reason is because there are obviously too many cars. These two reasons are clearly correlated with each other. Datuk Seri Phesal explains, “Bear in mind that the number of vehicles increases by about 30,000 to 40,000 every month. There is no such thing as limiting the number of cars to the city center. We need to encourage people to go to KL, but discourage the use of private cars. “That’s why we need to have seamless connectivity from building to building by putting an emphasis on walkways. Another way of reducing traffic is to also reduce 30% parking space in buildings and complexes which are in a 200 meter radius from LRT and MRT stations. DBKL is also aiming to develop peripheral areas near LRT stations to self-contained status so that the respective residents can enjoy access to the things they can get in

FUTURE KL and DBKL In terms of city development, Datuk Seri Phesal says that he is now focusing on city dispersal to Gombak, Setapak, and Ulu Klang—just to name a few—to make sure that there are mixed communities in KL. Currently, he is planning on how to best develop Jinjang, Wangsa Maju, Sungai Besi, and many other areas, to build Greater KL. “We can’t assume KL as a territory of its own. We have to consider KL as only a spot in Greater KL. Every part of KL (Kerinchi, Sungai Besi, Ulu Klang) is KL—ONE city area. We shouldn’t discriminate areas in KL as exclusive areas. We need to push the wave of development to outer areas so that we can have well-developed satellite cities. “We also want to make sure to that our infrastructures, facilities, benches, walkways, roadways, and other things to be of good quality. Usually, the construction is at the mercy of the contractors. Beginning this year, I would be very strict on

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FEATURE

The Next Level

–

Factories By: Zulhilmi Ghouse

Stephen Tiew

Dr. Lee Ville

veryone’s familiar with residential properties because they live in one. Commercial properties, we aren’t as familiar with, but we’ve all been to shop houses and shop offices, and some of us are probably working in one. Industrial properties remain alien to most. How on earth do you invest in one? Stephen Tew, Director of Axis REIT and Dr. Lee Ville, Director of New Bob Group offers Property Insight some insights.

Making the giant leap into investing in industrial properties may prove to be difficult for some. Making a leap from the comfort zone of residential and commercial properties, to jumping in the great black Chasm of Unknowns and Unfamiliarity which gapes menacingly in the face of the average investor. Wherefore lies the bridge across? They say the best way to learn is to immerse oneself in the environment. But to climb down the chasm into the darkness is hardly a smart move. You can die of falling into the Abyss of Bankruptcy. The smartest option is to build a Bridge of Knowledge, so let’s begin construction, brick by brick.

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FEATURE

BACK TO BASICS – START SMALL

To make things simple, industrial properties can be classified into five categories: terraced units, semi-detached units, flatted units, and industrial complexes. All these range in size and tenant variety—and more importantly, price. Unlike residential properties, industrial properties can cost anywhere from a low of RM 200,000 to a high of RM 30 million. For starters, it would probably be best to start with the lower end of the spectrum—light industrial properties or factories.

“Light industrial factories are split into two categories: They are either small manufacturing plants or warehouses for trading and stocking,” explains Stephen Tew, who is credited by some as the Father of Industrial Properties, having built numerous factories and industrial complexes with Axis REIT. “I would say that most people don’t understand how the industrial market works. If you don’t understand, it’s better to not go into it, because you can get burnt,” he further warns.

CHOOSE THE RIGHT TYPE Go to Jalan Kemajuan, Petaling Jaya, and you will be able to see PJ Industrial Park, one of the earliest strata industrial parks there is. In those days, a unit might cost you RM 200,000. And even today, you might still just be able to get even in terms of pricing, as it’s somewhat not seen that much of appreciation. Then look at the Highway Centre on Jalan 51/205, PJ. You will see a lot of strata industrial units there, which are also not doing that well. Why so, you ask? Says Tew, “If you are in the light manufacturing sector, normally, you would want to be on the ground, not in a flat. You will have very heavy machines, which a flat will not be able to handle. If you are a printer, the floors will vibrate when you print, so it’s actually not suitable. There’s also the fumes and other emissions—the noise and odour. Your neighbours will be complaining. Very often, the user will discover that they cannot use that type of building. But the buyers who buy it for investment don’t know and understand that.” Apart from location and price, the type of property is just as important in getting a return of investment. Unlike residential properties, stratified industrial units does not always make better investments.

Traditionally for the industrial sector, the ports are a magnet. Everybody needs to be not too far away from the port. – Stephen Tew www.propertyinsight.com.my

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FEATURE

IMPORTANT NEEDS OF TENANTS “Since the early ‘90s, on Penang Island, not many developers have gone to develop industrial factories,” explains Dr. Lee Ville, Director of New Bob Group, who has just launched their first light industrial park in Batu Maung, Penang, last year. “An industrial park adjacent to ours has always gotten feedback from renters that its size is too small. So for our development, we decided to build bigger, semi-detached units, which nobody else is doing.” Just as old flatted units are not suitable for some industries, small terraced units are limiting your choices of tenants. Exactly what are the components that make up a good industrial property depends on your future tenant’s needs, but generally, says Tew, you should keep in mind that the needs of businesses which rent industrial buildings are totally different than those that rent shop houses. “They will consider container movement, distribution, haulage, the highway system, and how the roads connect. They’re not bothered by whether there’s a public transportation system nearby. Depending on what business they are in, they might also consider the security, because if they don’t secure their warehouse, things will go missing,” Tew adds. If you can recall, in December last year, microchips worth RM 800,000 was stolen from a lorry near the Free Industrial Zone (FIZ) in Bayan Lepas. That’s the sort of thing that your tenants might want to avoid. “One important thing industrial tenants look for is good infrastructure. Industrial tenants will be transporting their goods all over, so the road system must be good and wide. Parking space must be available for their own lorries and workers. Next is the labour availability,” says Dr. Lee. “For example, Batu Maung, where our development is, is located in the south of Penang Island, where there is a huge population of workers. The workforce is there.” “Traditionally for the industrial sector, the ports are a magnet. Everybody needs to be not too far away from the port. In Penang, the area where the airport is— Bayan Lepas, is very ‘hot’. There are at least three ways to ship: You either use the airport, the seaport, or for local distributors who ship nationwide, the roads and highways,” explains Tew. Another aspect to look at when choosing an industrial property is the design. A well designed property should have high ceilings for storage, wide roads and back roads for manoeuvring large vehicles, with a large compound for unloading goods or products. You would do well to avoid units designed like a shop house, as that is not what proper industrial tenants are looking for.

If you’ve chosen the wrong tenants, you’re going to be stuck with them for a long time.

They will consider container movement, distribution, haulage, the highway system, how the roads connect.

– Dr. Lee

– Stephen Tew

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FEATURE

FINDING TENANTS,

MANAGING PROPERTIES,

AND PROBLEMS

Industrial tenants are a different breed from commercial tenants. But to find one, it is still advisable to go through property agents, as it is much more convenient for you. In fact, it can be much safer. Tew relates the story of a man who once showed his industrial building to a prospective tenant: He was kidnapped by him and was demanded ransom. Actually, the story has been toned down, but bear in mind that there are real dangers associated with this hands-on approach. In regards to tenant type, both Tew and Dr. Lee admits that industrial tenants are as varied as they come. “We have a mix of tenants for our industrial project. There are pharmaceutical companies, chemical-based manufacturers, engineering companies, and so on,” says Dr. Lee. “Industrial properties are much easier to handle. You just rent it as it is—bare. As an investor, you will have less headaches, because you won’t have to call your electrician to fix the airconditioning unit. Industrial tenants also tend to lease long-term, at least for a few years, whereas residential tenants will rent for 2–3 years, move out, and then you’ll have to find new tenants. Big companies are more secure in terms of tenancy,” explains Dr. Lee. Comparing rental yields, residential properties have terrible yields when you talk about landed properties. Whereas for industrial properties, if you buy in the right location, you might have a good positive cash flow. Capital appreciation is also better in the long run. Having said all that, finding the right long-term tenant is not as easy-peasy as it sounds. “When a company enquires about your industrial property, they might tell you that the nature of their business is engineering, and you might have a general idea of the business that they are going to run, but it might turn out to be some other kind of business. One challenge is that you might not be able to identify the true nature of your tenant’s business,” says Dr. Lee.

Unless you’ve secured the wrong kind of tenant, managing your property will be easy and straightforward. All you need to do is appoint a local property manager, whose task is to ensure that water and electricity is running fine, and that the roof is not leaking. When changing tenants, damaged flooring from heavy machinery and vehicles would have to be repaired. The walls and foundation will also have to be checked. At the end of the day, after buying and renting out your industrial property, you might encounter difficult neighbours, who for example, might block the access road with heavy vehicles and containers. You need to be firm in getting the relevant authorities to take action, as there are cases where inaction and lax enforcement by the authorities has caused businesses to go bust. Now that we’ve covered these aspects, let’s look at the market.

“Usually, tenants will incur heavy initial up-front costs for their business. Once they’ve set up, they’re going to be there for a good 10 years. If you’ve chosen the wrong tenants, you’re going to be stuck with them for a long time. But I would say that that is actually a very rare case. Sometimes, you will have irresponsible tenants who cause a lot of damage to the property, or maybe cause pollution. As the landlord, you are responsible to a certain extent,” he adds.

www.propertyinsight.com.my

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FEATURE

I n a f o ll o w -u p a rti cl e o n Islam ic m or tgages, we inter viewed RHB Is l am i c C E O , I brah i m H assa n , to seek his view on the m isconceptions sur roundi ng I s l a m i c an d h i s ou tl oo k o n the pr oper ty m ar ket.

By: Zulhilmi Ghouse

t has been three decades since Islamic banking established itself in Malaysia. Earlier Islamic financing products based on the Bai’ Bithaman Ajil (BBA) concept has been fraught with problems, much to the detriment of consumers. The banks may have made improvements on the original product and created more product offerings based on the improved Musharakah Mutanaqisah (MM) concept. However, the perception that the Islamic mortgage is a flawed product still remains; and this misinformation is disseminated widely on the Internet and social media without care or concern. If anything, it does not help the Government and Bank Negara Malaysia’s aim to have 40% of domestic banking services to be Islamic by 2020. At present, the market share for Islamic financing hovers around 23–25%. With only 6 years left, the industry players will have to almost double their market share. It’s an uphill task indeed, but not impossible. Let’s conduct a social experiment: Ask your friends and family if they’ve ever

taken up any Islamic financing and why. Then ask them how exactly it is better than a conventional financing. In most cases, you would get a blank stare or a mumble for a reply. The reason is simple—they don’t know. For Muslims in general, the immediate response would be Islamic financing is the Halal alternative to conventional financing. Others may say that there’s no interest (Riba) involved, which follows the guidelines as set by their religion, but you’ll be hard-pressed to find anyone who can cite the benefits of Islamic financing. Perhaps, only a banker would know. Key industry players with the likes of Maybank Islamic or CIMB Islamic have a sizeable number of non-Muslim customers, especially business customers in the SME category. Their Islamic customers could account for 50–60% of their total customers. In fact, virtually all banking institutions in Malaysia—including non-Muslim owned banks where the majority of customers are non-Muslim—offer a range of Islamic banking products. Today, Islamic banking has been largely accepted in Malaysia.

Islamic banking is more ethical and humanising compared to others.

10 FEBRUARY 2014 www.propertyinsight.com.my

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FEATURE

: Some people think that the 20% discount on stamp duty offered by Islamic banks is not really attractive, considering that other charges negate the savings. Would you like to comment on this?

Ibrahim: If they think it’s not attractive, there’s something wrong with their math lah (laughs). For conventional financing, you have to pay 100% on stamp duty but for Islamic financing, you only pay 80%. This incentive is still being provided by banks. I heard that it’s going to be removed by 2015, but most likely, the Government will allow banks to continue offering the discount as a sweetener.

: Some people are of the opinion that Islamic financing is less transparent and have hidden costs. Would you like to comment on these claims? Ibrahim: While it could have been the case in the past, like everything else, it has evolved throughout the years. Therefore, that opinion or perception should be left in the past as well. If we want to make a comparison, we do need to consider that conventional banking has been in existence for thousands of years, while Islamic banking has only been around for the last 50 years. In some jurisdictions, for instance Malaysia, Islamic banking only started in 1983. You can’t get it perfect on day one or year one. Initially, the house financing were offered under the BBA concept, a sell and buy back concept which has already been phased out. Now, most banks would offer house financing under the MM concept, also known as a hybrid Musharakah, which is based on a profit sharing concept. Though it’s a hybrid product, it’s still a financing product. The contract is arranged in such a manner that the house is being financed jointly by the buyer and bank. In this financing arrangement, a customer buys the property under his name. He pays a downpayment of 10%; therefore, has a 10% share of ownership over the property. The remaining 90% share is owned by the bank as it has provided a credit facility equivalent to 90% of the purchase price. Over time, as the customer pays the instalments, the customer’s share of ownership will increase, hence, the bank’s share of ownership will reduce. Regarding hidden costs, it is a very misleading perception on Islamic banking. Islamic banking, on the contrary, is a transparent way of banking. Each Islamic product and services offered by a bank is scrutinised by the Shari’ah Committee before it hits the market. Late payment charges are allowed but must be based on actual processing and administration cost. Compounding of profit is also not allowed. So actually, Islamic banking is more ethical and humanising compared to others. In jurisdictions like Indonesia and the Middle East, BBA contracts are prohibited to take place. Things have changed and improved. If you visit a bank now, they will offer MM financing, so you won’t face problems based on the BBA contract, which has been phased out. In fact, they are developing Ijarah (leasing) financing, which will also be transparent and address the concerns of the customers.

www.propertyinsight.com.my

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FEATURE

: Are there penalty charges for when someone makes an early loan settlement or a late monthly instalment payment? Ibrahim: For the former, yes, penalty charges are imposed just like conventional banks. Because when a bank offers a credit facility, whether it’s a loan or financing, the facility could be for anywhere between 3–5 years, and it could be at a fixed rate or floating rate basis. For example, when it is at a fixed rate, the banks have to manage their profit or interest rate exposure. There’s only so much exposure that we can assume, because we are governed by risk management guidelines and policies. When you offer a 5-year financing, you might have to fund it with a 3-year deposit. So when a customer wants to pay back all of his financing after one year, there’s already a cost to it. Just that in Islamic banking, we do not charge more than what our costs are. For the latter, there’s a fee—processing fee and/or late payment fee which is calculated based on actual costs. The fee is earmarked to cover the cost incurred by the bank to manage their funding. If the cost is RM 100, we can’t charge more than that. That’s why I said Islamic banking is very transparent.

: How has RHB Islamic been coping so far with Bank Negara’s stricter lending regulations in July 2013 and its circular in November 2013? Ibrahim: Bank Negara is trying to curb speculations in the property market because household debt has gone up to above 88% of the GDP (gross domestic product), which is the highest in ASEAN. Bank Negara has to manage the household debt. When we look at the market segments, our segments are basically the mass market, those with monthly earnings equivalent to RM 2,500 and below. We’re now trying to move towards our financing portfolio into the mass affluent market, those earning between RM 5,000 and RM 10,000. We are also targeting high-growth areas, such as the Klang Valley, Penang, and Johor Bahru. We will continue to target customers who are genuine buyers, not speculators. To us, there are still many genuine buyers, including young married couples wanting to buy their first property, so these are the segments that we will focus on. Our internal statistics for November to December 2013 indicate that financing applications to buy houses are still robust.

12 FEBRUARY 2014 www.propertyinsight.com.my

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FEATURE

: What is your outlook on the property market climate as we move into 2014? Ibrahim: The RPGT increase will help contain the escalation of property prices within reasonable levels. It’s a good move, but as I said, the consumer market will continue to buy houses for their first property or even second property; with parents helping their children to buy these houses. I know of a few young people who are buying three or four properties. These are the people who would probably stop doing that now that the Government has implemented measures to overcome such scenarios.

: What is your view on the competition among banks to offer lower and more competitive interest rates? How do banks justify the low rates? Ibrahim: The low rates are usually offered only for a relatively short period of two years for a house financing with a tenure between 15–30 years. The banks that do that are what we call the loss leaders. After two years, the bank will recoup their losses during the remaining years. That’s how the market works. The first two years, they might offer a fixed profit rate of BLR−2.00% but after that, they’ll offer BLR flat or BLR+X%.

: What advice can you offer property investors on how to manoeuvre around a more rigid climate? Ibrahim: If you’re a genuine investor and if you want to buy a landed property, I don’t think property prices are going to come down. Property developers have to buy land banks. Land is expensive and the holding cost is high. When the holding cost is high, they will have to incorporate the holding cost into the property price. Cost of building materials will also not come down. I think after the measures that have been put in place by the government, the property market will probably cool off during the next two years.

: What advice would you like to offer to the Gen Y out there? Ibrahim: Just spend within your means. Coming from a banker and a parent, too—Don’t overspend. There’s a saying in Malay: Pakai baju ukur pada badan sendiri. Help the economy but don’t spend exceeding your financial means. Be prudent. Your lifestyle must commensurate with your ability to spend and propensity to save.

www.propertyinsight.com.my

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FEBRUARY 2014 13

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NEWS & EVENTS

NEWS & EVENTS MARA & PUNB Buys 618 Shophouses Nationwide Minister in the Prime Minister’s Department, Senator Datuk Seri Abdul Wahid Omar announced that the Government has bought 618 units of shophouses nationwide through Majlis Amanah Rakyat (MARA) and Perbadanan Usahawan Nasional Berhad (PUNB) from 2008 to November 2013. The purchases amounted to RM 280 million in total. In September 2013, PUNB Chairman Datuk Seri Mohd Ali Rustam has urged Government agencies to buy Bumiputera-quota commercial properties in smaller towns and strategic areas if it wants to achieve its target of 30% Bumiputera ownership in seven years. The level then stood at 5% nationwide. The shophouses will be rented out or sold to Bumiputera entrepreneurs.

Negeri Sembilan to Open New Industrial Park N e g e r i S e m b i l a n C h i e f M i n i s t e r, D a t u k S e r i M o h a m a d Ha s a n s a i d t h a t t h e s t a t e i s n o w looking into opening a bigger industrial park in the western part of the state to accommodate the rising demand from investors, at a monthly a s s e m b l y a t W i s m a N e g e r i . He d i d n o t d i s c l o s e the exact location of the new industrial park, but n o t a b l y, t h e w e s t e r n p a r t o f t h e s t a t e i n c l u d e s townships such as Bandar Sri Sendayan and Bandar Enstek. “It should not be far from any township as we do not want workers to commute t o o f a r f r o m t h e i r h o m e s ,” h e s a i d .

Jennifer Hudson’s Assistant Receives a House Jennifer Hudson, American singer and actress, handed a gift which appeared to be the deed to a house to Walter Williams, her assistant and her good friend since they were in the sixth grade. In a video which she uploaded to her Instagram account on December 31, 2013, with the caption, “My assistant Walter’s reaction when he found out I was buying him a house for Christmas!”, Williams was seen screaming with sheer joy and hugging her over the surprising gift. 6 FEBRUARY 2014 www.propertyinsight.com.my

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NEWS & EVENTS

More Properties to Be Auctioned Next Year According to Chang Kim Loong, the SecretaryGeneral of the National House Buyers Association (HBA), 2014 will witness more properties being auctioned due to the ban on Developer Interest Bearing Scheme (DIBS) and the increased rate in real property gains tax (RPGT). In an interview, Chang stated that he wouldn’t be surprised if there were more properties going under the hammer. He believed that there will be a lot of foreclosure

MAH SING FOUNDATION DISBURSED RM 400,000 TO CHARITIES

Mah Sing Foundation has donated a grand total of RM 400,000 during its Christmas Charity Cocktail event held at their newly opened sales gallerycum-show village, Southville City, at the end of last year. The bulk of the funds were used to aid East Coast flood victims through the Sultan Ahmad Shah Environment Trust (RM 200,000) and Mercy Malaysia (RM 100,000). RM 100,000 was also given to SJKC Pin Hwa 2 to help buid the school’s assembly hall.

cases since buyers are now caught out with RPGT and DIBS; and are unable to hold on to their properties when the developers couldn’t be paying instalments for them anymore. These buyers, according to him, will not be able to repay their debts even after their properties have been auctioned off. “Assuming there is a slowdown in the market, do you think the bank will finance 100 percent of DIBS at RM 600,000 for a unit that is actually priced at RM 500,000 without DIBS? The banks will also not be able to recover the RM 600,000 (after the property is auctioned off ) because they hiked it up in such a way for interest purpose,” he stated.

Iskandar’s Three Proposed New Nodes Finally Approved Prime Minister Datuk Seri Najib Tun Razak has approved the creation of three other nodes in Iskandar Malaysia in addition to the existing one, Medini in Nusajaya. The additional nodes are most likely to be located in the Eastern Gate Development Zone, the Western Gate Development Zone, and the Senai-Kulai growth corridor. According to sources, the announcement will be made this year. Referring to the Iskandar Development Authority (IRDA), sources claimed that, “The nodes will cater to different economic activities, and IRDA is contemplating oil and gas, education, tourism, health, and aviation.” These new nodes would also boost Iskandar into becoming an international metropolis by 2025, in line with its Comprehensive Development Plan from 2006 to 2025.

GLOBAL PROPERTY MARKET FORECASTED TO HIT A SEVEN-YEAR HIGH IN 2014 Cushman & Wakefield’s latest capital market research has forecasted that the global investment volume in 2014 will rise by 10–15%, back to above USD 1 trillion for the first time since 2007. Cross border activity is already growing to above 12% in Asia Pacific, spurred by foreign players with increased risk appetites. The forecasted increase is a result of increased confidence that the global economy is set for calmer waters and that financial imbalances are on the

mend, according to Head of EMEA Research at Cushman & Wakefield, David Hutchings. Trading activity in Asia Pacific is expected to rise 5–7% percent in 2014 despite only recording an increase of 1–2% in 2013. John Stinson, Head of Capital Markets in Asia Pacific at Cushman & Wakefield, noted that “Investors in core markets are accepting that lower returns are the new normal but they are also looking forward to more stability and hence are happy

to invest in core assets for the long term.” Emerging Asian markets are likely to be busier in 2014, with Manila, Jakarta, and Bengaluru offering great potential according to the research. “With China and Japan both increasing their overseas spending and second and third tiers of institutional and private capital also set to flow faster from areas such as China, South Korea, Malaysia and Singapore,” he added. www.propertyinsight.com.my

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FEBRUARY 2014 7

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CONTENTS 19

COVER STORY

GREATER KL—DBKL SETS THE WHEELS IN MOTION

ISSUE 8 | FEBRUARY 2014

The tenth and current Mayor of Kuala Lumpur, Datuk Seri Ahmad Phesal Talib welcomes Property Insight to share his vision and hopes, and enlightens wondering KLites on Greater KL.

AREA FOCUS

KAJANG EAST – A NEW CLASS OF SUBURBIA A new gated and guarded development by MKH located between Kajang and Semenyih, Kajang East promises good connectivity, greenness, and security to investors.

PERSONALITY OF THE MONTH

MAGNA PRIMA BERHAD: NICHE DEVELOPER OF MIXED DEVELOPMENTS. Magna Prima is prominent with its style of developing pocket-sized parcels of land in the Klang Valley. With Dato’ Rahadian at the helm, one might wonder what Magna Prima has in store for home-buyers and investors.

PETER YEE – ONE OF THE FIRST

DEVELOPER OF THE MONTH

Get to know the story of one of the earliest property trainers in Malaysia, Peter Yee.

4 FEBRUARY 2014 www.propertyinsight.com.my

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INVESTOR NEXT DOOR

THINKING AHEAD IN INVESTING Nick Tan is an entrepreneur and one of the admins of Property Talk & Lifestyle Malaysia (PTLM), who has managed to grow a sizeable portfolio over the years. Find out how this investor next door did it. Property Insight has a chit-chat with this ready-to-smile investor.

ISLAMIC BANKING MODERNISED

CHINESE METAPHYSICS IN THE YEAR OF HORSE WITH DATO’ JOEY YAP Recently awarded with a datukship, Joey Yap, the most prominent Malaysian Feng Shui consultant, debunks the misconceptions surrounding Feng Shui.

FEATURE

For some people, confusion abounds at the thought of Islamic loans and banking. With the help of RHB Islamic Bank’s CEO, we address the issues and dispel some preconceptions which you might have.

THE LIGHTER SIDE OF INVESTMENT THE NEXT LEVEL – FACTORIES Two industrial development experts talk about the basics and tricks of investing in industrial properties: Stephen Tew of Axis REIT and Dr. Lee Ville of New Bob Group.

Wong Chui Ling, the DJ, actress and TV personality is also a long time property investor. Energetic and humorous in nature, Chui Ling shares her interest in investment and exposes the reality of Malaysian and Hong Kong’s property market.

74 CELEBRITY CORNER www.propertyinsight.com.my

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FEBRUARY 2014 5

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Property Insight Malaysia

Property Fair

his coming March 14th to 16th, Property Insight Malaysia is going to launch its first property fair at Tropicana City Mall, Petaling Jaya. As we educate our readers in all matters related to property buying and investing, we would also like to offer them an opportunity to practice what they have read and learnt and go on to the next level, which is applying their knowledgeâ&#x20AC;&#x201C;be it their first, fifth, or hopefully their 50th property! The fair will showcase developers who were previously featured in our Developer of the Month and Area Focus sections, as well as other well-known established developers. This offers the perfect platform for developers to showcase their latest residential and commercial projects. A wide range of property developments, including high-end condominiums, luxurious bungalows, and affordable linked-houses will be showcased for the discerning buyer and investor. Prospective buyers and visitors with long-term plans have the opportunity to obtain advice on financing options from Loanpro.com.my, a mortgage specialist who will be on hand to help you with your queries regarding mortgages. We would not be Property Insight if we did not have some form of knowledge sharing sessions with our readers. Hence we will conduct book launches and talks by the stalwarts in the industry, such as Ahyat Ishak, one of our regular contributors, an investor, and now an author; Faizul Ridzuan; Ishmael Ho of Ho Chin Soon Research; and a host of other speakers. They will provide you insights into the maze of property buying, such as home ownership schemes, investments strategies, and more. Take advantage of the free talks and learn from some of the successful and experienced experts in the real estate industry. Admission is free.

Venue: Main Atrium, Ground Floor, Tropicana City Mall, Petaling Jaya Dates: 14thâ&#x20AC;&#x201C;16th March 2014 Time: 10 am to 10 pm

Some of the featured exhibitors:

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