Rep: Freeze high-rise projects and draft plan to address problems

Voicing their fears: (From left) Residents You Von, Dr N. Nagappan, Hooi Wing Chuen, Tan Hong Haw and Low Lee May having a discussion before the hearing.

AN assemblyman has called for a freeze in the approval of high-rise projects in Gurney Drive, Penang.

Pulau Tikus assemblyman Yap Soo Huey said the state government and the Penang Island City Council (MBPP) should withhold approval for high-rise projects there and come up with a masterplan for the entire Gurney Drive area to address existing needs and problems.

She said further development of the area should be withheld until a comprehensive study was conducted.

“Results of the study should be given adequate recognition and used to design a masterplan that makes full use of the proposed 40.47ha to be reclaimed under the Seri Tanjung Pinang Phase Two project,” she told reporters outside the Penang Appeals Board’s conference hall in Komtar yesterday.

Yap was there to attend the hearing of an appeal filed by some residents of Tingkat Kelawei and Jalan Kelawei against the decision by MBPP’s Development Planning Department to grant planning permission for a 20-storey high-rise project in the area.

Tingkat Kelawei resident Hooi You Von, 53, said another high-rise in the area would worsen the traffic situation in the neighbourhood which was already congested with vehicles.

Hooi, who held a press conference on Thursday together with some other residents, including those from Sunrise Tower, said the development would be on a small plot measuring only 1,353sq m.

Sunrise Tower resident Kuldeep Singh, 49, said he was not even notified of the high-rise project although it was located just beside his apartment block.

Eddy Ch’ng, 65, another resident of Tingkat Kelawei, said the council had sent only a letter to notify a few residents on Sept 3 last year.

“The letter stated that planning approval was given by the council on Sept 10, 2013,” Ch’ng said.

Yap said proper planning was vital if the state planned to turn Gurney Drive into the next Central Business District.

“There are new developments even though existing serious problems in Gurney Drive have yet to be resolved,” she said.

“Many restaurants and hawker centres along Gurney Drive are actually operating from residential plots,” she added.

She said the area suffered from severe traffic congestion including the service road leading to Sunrise Tower and a lack of parking space.

Yap said an increase of population and density in the area would further burden the drainage system as flashfloods were already occurring there.

She also said residents living near longtime establishment Corner Club had received notice about an impending project involving relocation of the club and subsequent development of a 41-storey hotel on the site.

She added that the residents were against the project. - The Star

Positive side of property slowdown

Cooling measures implemented by Govt taking effect

WHILE 2015 is a challenging year for property developers, the slowdown in the industry can be a good thing as it can prevent a crisis driven by speculative buying.

Since 2009, the Government has introduced a slew of cooling measures which have slowed down property transactions.

These measures have moderated residential property growth from more than 30% down to about 20%, PublicInvest Research analyst Tan Siang Hing said in a report.

On top of that, he said tighter lending from the banks had also restricted demand, resulting in fewer applications for loans. “The cooling measures have successfully stemmed unhealthy speculative buying and introduced more discipline in lending,” he said, adding that on top of that, the post-goods and services tax (GST) hangover on consumer demand would flatten property sales guided by developers.

“But the targets still seem healthy with most targeting RM2bil-RM3bil levels,” he said.

The report showed that downtrend in the fourth quarter of 2014 (4Q’14) after transaction value declined 14.2% year-on-year to RM38.6bil and volume slumped 4.5% year-on-year to 94,523 transactions.

It reversed the cumulative increment in the first three quarters when value rose by 15.8% and volume climbed 2.6% to 289,537.

“If anything, it signals that the deliberate measures to cool the market so far have effectively contained property prices from spiralling out of control,” he said.

High-end condominium market suffers

Overall average prices in the residential segment decreased by 3.2% in 1Q’15 quarter-on-quarter to RM749 psf from RM774 psf in the last quarter of last year as cooling measures took effect. 

DTZ Research, the research arm of property consultant DTZ Nawawi Tie Leung Property Consultants Sdn Bhd, urged developers to rethink strategies to attract demand, forecasting that many would be turning to more affordable housing if their land banks were suitable.

“We are watching very carefully certain segments that display signs of oversupply. That’s why landbanking is very important to us. There’s a peak and downturn in every property cycle, so we must be prepared to weather the downturn. That is why for this year’s launches, we feature a good mix of high-end products as well as affordable ones,” UEM Sunrise Bhd managing director and chief executive officer Anwar Syahrin Abdul Ajib told StarBizWeek in an earlier interview.

According to DTZ Research, average rents of high-end condominiums in Kuala Lumpur have gone down 2% to RM3.42 per sq ft (psf) per month, from RM3.49 psf per month in the previous quarter.

An additional 6,562 condominium units are expected to enter the market in the remaining quarters, with some 7,939 units expected to be completed by this year end, DTZ Research said, adding that the higher new supply would put some pressure on rental values, especially in the city centre. 

Among major developments expected to be completed this year are 441 units at Banyan Tree Residences in Jalan Conlay and M City Residential Suites in Jalan Ampang, which has 1,118 units.

DTZ Research reported 1,377 condominium units were completed in Q1, more than 10 times than that of the same period last year.

Office spaces and mall developments to continue 

DTZ Research reports some 6 million sq ft of office units are expected this year. 

At the end of last year, office space in Greater Kuala Lumpur stood at 96.6 million sq ft, a 2.9% increase from 2013’s total stock, according to Savills Research Malaysia’s first half of 2015 Kuala Lumpur Investment report.

The report alludes to three office buildings that were completed in Kuala Lumpur in the second half of last year – Menara Hap Seng 2, Menara MBMR and Sunway Velocity V Office – all three of which represent about 720,000 sq ft of office space.

It’s less than the 5.1 million sq ft completed in 2015, most of which were located in KL Sentral. 

So far, office rental rates have not fallen and are not expected yet due to the inflation sentiment in the country.

“Despite a rapidly growing supply and intensifying competition in a tenant’s market where opportunities to shop around are plenty, good offices in central locations will continue to do well,” Savills Research Malaysia said.

It said demand for office space in Kuala Lumpur was traditionally driven by the oil and gas, banking as well as finance sectors.

“But with oil prices going down, oil and gas players would be cautious about expanding or relocating in 2015,” it added. Meanwhile, the Goods and Services Tax and weaker consumer sentiment do not seem to affect the development of new malls, DTZ said.

It alluded to developments such as Bukit Bintang City Centre, a joint venture between UDA Holdings Bhd and Eco World Development Group Bhd as well as the former Pudu Jail site, which will comprise strata offices, office towers, a hotel , serviced residences as well as a lifestyle mall of about 1.2 million sq ft.

UDA Holdings would also turn Bukit Bintang Plaza into a 60-storey luxury condominium with a three-level mall podium through a joint venture with Tradewinds International Sdn Bhd, a subsidiary of Tradewinds Corp. 

Property market under control 

In 2014, the Malaysia House Price Index (HPI) rose 7% year-on-year.

“The HPI has moderated and we believe it should, given the cooling measures,” Tan said.

“KL, Selangor and Penang saw the rise in house prices moderating to 5%, 6% and 8% on-year. Surprisingly, Johor’s house prices rose above the average price growth after registering a 11% growth. Ultimately, the “smooth” decline in demand will be good for the sector in the long term to ensure a steady and sound growth. 

That is essential, given the elevated household debt to gross domestic product (GDP) ratio currently, Tan said. 

While the pace of the ratio increase appears to have moderated, much still needs to be done. Secondly, there continues to be expectations for healthy economic growth of 4.5%-5.5% interest rates to stay low for now. 

That is another positive from the cooling measures – household indebtedness can be controlled. 

Unless the country faces external shock, the property sector should continue to see healthy demand, Tan said. - The Star

Five tips for selling your home in a tough market

When the market is soft, it’s time to accept reality and not expect to sell your property at prices that were projected two or three years earlier.

Property transactions seen declining, prices to remain flattish

THE property market has been in a grind this year and according to projections, it’s not about to free up any time soon.

According to a report early this year by research house JF Apex Research, property transactions are expected to decline by about 10%, with house prices remaining flattish or rising slightly by 3% to 5% upon the implementation of the goods and services tax (GST) on building materials.

Lo and behold, you need to part with that house of yours now. Bad timing? Definitely! Zero chances of selling? Well, not necessarily. 

The following are some tips to help you dispose of your property in a slow market.

Be realistic with the selling price

When the market is soft, it’s time to accept reality and not expect to sell your property at prices that were projected two or three years earlier, advises PPC International Sdn Bhd chief executive officer Siva Shanker.

“Don’t be unreasonable with your asking price. Many buyers, especially the flippers (those who buy with the intention of selling it later a higher price once the properties have been built) will try selling it at the price they were promised a couple of years back.

Chan: Get (your property) occupied, even if at lower-than-usual rental rates.

“But because the market is soft, they end up waiting months and months but nothing happens. Better to accept reality, save yourself the headache of waiting and lower the price,” he tells StarBizWeek.

Erik Folgate, in his article Four Tips For Selling Your Home In a Fallen Housing Market on financial education website, moneycrashers.com, says undercutting the market is the one thing that most sellers will do last.

“Sometimes we all need to face reality, and the prices of two years ago are definitely no longer the prices of today. List your house 10% to 15% lower than the other houses on the market in your area, and you’ll get a lot of attention from buyers.

Spruce it up

A house that’s in good condition will sell better than one that’s in dire need of repair, says Siva.

“A secondary property, even if it looks like a dumpster, will still sell when the market is good. But when it’s not, you might have a problem.

“Spruce it up. Repair what needs fixing and it will be more attractive to potential buyers.”

Folgate says the first places you can start is the kitchen and the bathrooms.

Siva: ‘Don’t be unreasonable with your asking price.’

“These are the most expensive rooms to update, but they stand out the most to potential buyers. And if you’re going to update your home, do it right. There are ways to save money remodeling your house, but just because you’re putting in new materials doesn’t mean it looks good.”

When it comes to the kitchen, Folgate advices buyers to get stainless steel appliances.

“It has the most modern look, and the prices really aren’t that much more than black and white. Buyers also love to see granite countertops.

“Your budget may not have enough money for a slab of granite, so look into using granite tiles. 

“They are inexpensive, and they look great. You don’t have to replace your cabinets, unless they are in really bad shape, so look into refacing or painting them.”

Proper marketing

Marketing is crucial - and could either make or break the sale, says Siva.

“The best person to help you market your property is a certified estate agent. Be sure to appoint one that’s registered with the Board of Valuers, Appraisers and Estate Agents Malaysia. They also have a special tag to verify this.

“These days, many people are involved in property, so plenty of sellers will go to some broker or their favourite nephew. 

“But what these guys will end up doing is place an ad in the papers for you and wait. This, anyone can do.”

Other than placing ads, alternatively, Siva says the seller could try conducting “open house” events to allow buyers to inspect the property.

“Have an open house, say from 9am to 5pm for people to have a look at your property. 

“Clean it up to make it look more appealing. It’s essentially like how developers hold a property launch with a show unit, but on a smaller scale.”

Siva says that having “a number of people” on the premises at one time will also help give off that psychological feeling that there is a demand for that property.

“When you’re there and you see a lot of other people displaying similar interest in the property, there’s the perception that someone else might buy it before you. It’s the herd mentality.”

More buyer incentives

With buyers a little hard to come by when the market is slow, providing incentives that can sweeten the deal is a good way to help push your property.

Buyers love to feel like they are receiving something for free, says Folgate.

“With the sale of your house, include a free home inspection, pay a portion of the closing costs. You can be as creative as you want with this tip,” he says.

Siva concurs: “Give your buyer more favourable terms to the deal. 

“Perhaps, a lower downpayment or a longer period to complete the sale. If you’re not willing to compromise, you might lose a potential buyer.”

Rent it out

If, after everything, you’re still having problems disposing of your property, then consider renting, says SK Brothers Realty Sdn Bhd general manager Chan Ai Cheng.

“Rent it out anyway. Get it occupied, even if at lower-than-usual rental rates. If you’re still paying off your mortgage, the money coming in will still help you service the loan,” she says. - The Star

Legality of Tanjung Bungah land reclamation questioned

GEORGE TOWN: Tanjung Bungah assemblyman Teh Yee Cheu has questioned the legality of a Request for Proposal (RFP) by the Penang Development Corporation (PDC) to allow reclamation of land along the Tanjung Bungah coastline.

"The RFP, issued on April 15, which will close on May 15, calls for interested bidders to develop a marina and supporting coastal and marine tourism facilities with the marina having at least 200 to 400 berths for yachts.

"They will be allowed to reclaim not more than 8.94ha of land for commercial purposes. The ecosystem and coastlines in the surrounding area could be affected," he said after a protest against reclamation in Tanjung Bungah Sunday.

Teh claimed the gazetted Penang Structure Plan only acknowledged the existing reclaimed 1.21ha plot of land dubbed the "sore thumb" and does not allow any new reclamation.

He added the "sore thumb" had been a long-standing issue since 1999.

"Non-governmental organisations managed to stop further reclamation by the developer in 2006 as it was illegal."

Teh said residents in the area had always wanted the reclaimed land to be turned into a coastal park.

"In June 2007 when the former government gazetted the Penang Structure Plan, the piece of reclaimed land was included with a plan to build a marina.

"After 2008, we requested the state government to de-gazette it to become a coastal park. Subsequently, in 2009, 2010, and 2011, during the state assembly, I requested for a coastal park and the then environmental exco agreed to it and a couple of press statements stating that it would be a coastal park was released," he said.

Teh added that the residents were waiting for it to be gazetted as a park, but there had been no news nor a concrete reply in subsequent state assemblies when asked.

"We do not want anymore reclamation on this part of the island. We want to urge the authorities not to be lobbied by developers for commercial interests," he said. - The Star

Seberang Prai fast rising

THE Penang state government is working on expanding the development of Batu Kawan, so that it can tap into the new infrastructure of South Seberang Prai.

According to investPenang director Datuk Lee Kah Choon, there were 6,000 acres of land available for development in Batu Kawan with the second bridge and new roads in the area servicing the needs of new development projects there.

Lee said the state government had earmarked a 1,500-acre site south of the second Penang Bridge for industrial development.

“North of the industrial site, another 2,000 acres is set for mixed-development projects, and residential and eco-tourism developments will take up two adjoining 1,000-acre sites.

“About 60% of the site earmarked for industrial estate has been taken up by local and foreign companies. The Aspen Vision City (AVC), which includes the Ikea store project, the Penang International Technology Park (PITP) and the RM1bil Penang Designer Village, will be located in the mixed-development site. 

“Meanwhile, a golf course and a theme park are being planned for the eco-tourism site,” he revealed, adding that some 12,000 affordable high-rise units would be developed on a 200-acre site for the residential component.

With all this, Sebarang Prai is expected to become the choice investment destination for mega-scale commercial projects in the northern region. 

As it is, the mainland has for the past one year, attracted investments from Aspen Group Holdings Sdn Bhd, PE Land Sdn Bhd’s and Temasek.

All set: investPenang director Datuk Lee Kah Choon showing the location of the industrial sites in Batu Kawan, Penang. 

The Aspen Group is investing RM8bil into the AVC mixed-development scheme, while PE Land is planning its RM1bil Penang Designer Village.

The AVC, located on a 99.1ha site, comprises hotels, a mini-banking district, residential properties, healthcare facilities, and international schools, while the Penang Designer Village will accommodate a RM200mil premier shopping outlet, a 300-room international hotel, and F&B outlets on a 16.2ha site.

Last year, Temasek signed an agreement with the Penang Development Corporation to develop the Penang International Technology Park (PITP) in Batu Kawan. More recently, the Belleview Group announced plans for a RM2.5bil mixed-development project, which will include the largest shopping mall in the northern region.

Certainly, the new second bridge connecting Batu Kawan in South Seberang Prai to Batu Maung on the island has helped channel interest from investors to Seberang Prai. In addition, a steady hike in commercial property prices since 2011 has captured the attention of investors.

Henry Butcher Seberang Prai senior manager Fook Tone Huat said the sub-sale price of commercial property had increased between 50% and 100% since 2011, depending on the location.

All upside: Aspen CEO Murly says the value of the AVC project will be enhanced by the Ikea shopping mall that is being planned next to it.

“The three-storey shop offices in Bandar Sunway in Seberang Jaya has increased to RM600psf from RM300psf in 2011. Similar properties in Bandar Perda are now priced at RM330psf compared to RM200 in 2011, while in Jalan Raja Uda, the price is RM380psf compared to RM260 four years ago. In Bukit Mertajam, the three-storey shop offices are now priced at RM300psf compared to RM200 in 2011.

“The price of new commercial properties in good locations of Seberang Prai are around RM3,800psf compared to the subsale price of about RM300 to RM380psf,” Fook said.

According to Fook, about 80% of shop offices in Seberang Prai are occupied, leaving the overhang figure insignificant. He said prices of shop offices might increase by about 5% this year due to the GST. This could cause a slight drop in commercial property transaction volume in Seberang Prai.

The transaction for commercial properties in Seberang Prai in 2014 is projected to have been between 1,100 and 1,200 units at a value of RM560mil, according to Fook. Up to the third quarter of 2014, there were 923 units transacted at RM426mil.

Strong demand for three-storey shop offices is reflected by good bookings seen at the Verve project by Aspen.

“Since February 2015, the Verve project, comprising 441 units, is already 75% booked. The units are priced between RM380psf to RM520psf,” Fook said.

Aspen chief executive officer Datuk M. Murly says the Verve, on a 35-acre freehold land, is the largest gated and guarded commercial precinct developed in Penang. 

On AVC, Murly says the value of the project will be enhanced by the Ikea shopping mall that is being planned next to it. The first phase of AVC is scheduled for completion in 2018, and the whole project in 2025.

“Our strategy for AVC is to build the commercial components first to create a demand for the residential properties that will be attractively priced. There will be workers who would want to stay close to where they work. The objective is to develop Batu Kawan in such a manner that it mirrors the vibrancy of the island,” Murly said.

On its RM2.5bil integrated development project, Belleview Group managing director Datuk Sonny Ho says the scheme would be located on a 8ha site.

“The shopping mall, the largest in the north, will have a 1.2mil sq ft of built-up area. There will also be a four-star hotel, an Olympic-sized skating rink, a 20-screen cineplex and a high-rise residential lifestyle condominium component with 978 units,” he added. - The Star

Residents’ wish for Malay village in development plan comes true

Targeted for change: An aerial view of Kampung Tanjung Tokong in Penang.

THE crusade by Kampung Tanjung Tokong Residents’ Association to develop a Malay living heritage village in their area has finally borne fruit.

Association chairman Mohd Salleh Yahaya, 60, said UDA Holdings Bhd had agreed to build 14 traditional Penang Malay houses in the redevelopment of Tanjung Tokong, Penang.

He said the association had been calling for 20 years for a heritage village to be built in Kampung Tanjung Tokong.

In a letter to the association signed by UDA Holdings group managing director Ahmad Abu Bakar, UDA agreed to provide the Phase 4B site for the proposed Malay heritage village.

“We thank the association for their proposed concept of a Malay heritage village zone.

“UDA will consider and refine the component, building design and architectural features proposed by the association to achieve the heritage village concept.

“The overall layout plan for the development of the heritage village has been approved by the state executive council and State Planning Committee that is chaired by Chief Minister Lim Guan Eng,” Ahmad said.

His letter also gave the commitment that Masjid Tuan Guru and Masjid Karwa would be upgraded and a two-storey religious school near Masjid Tuan Guru would be built.

It also stated that a public market and a hawkers’ site next to Masjid Tuan Guru would be incorporated under Phase 4C. 

“We also commit ourselves to building comfortable apartments for residents who were relocated to make way for Phase 4A,” said Ahmad.

Since 2008, 288 out of the 294 families in the village had to make way for the redevelopment’s Phase 4A project.

They are now staying in transit homes provided by UDA.

“Construction works at Phase 4A are going smoothly and the phase is expected to be completed in 24 months,” Ahmad said.

Mohd Salleh hoped that the rights to the 14 traditional units would be assigned to the Kampung Tanjung Tokong Residents’ Asso-ciation and Tanjung Tokong Village Security and Development Committee (JKKK).

“We also proposed that the traditional houses be managed by a committee chaired by the association chairman,” he told a press conference at the Madrasah Al Taqwa in Tanjung Tokong yesterday.

“The committee members should comprise of the Tanjung Bungah assemblyman as the patron, Tanjung Tokong JKKK chairman, Kelab Setia Tanjung Tokong chairman, Tanjung Tokong mosque imam, and a representative from UDA, among others.”

Mohd Salleh said the association also wanted a memorandum of understanding to be signed between the association and UDA to ensure the smooth construction of the traditional houses. 

Also present were the villagers’ counsel Jason Ong Khan Lee and former Balik Pulau MP Yusmadi Yusoff. - The Star

All the benefits of resort living

Attractive facilities: Yeoh (left) pointing out the features of Southbay Plaza to roadshow visitors.

PROPERTY developer Mah Sing Group Bhd has redefined luxurious living by coming up with another topnotch development in Batu Ferringhi.

Ferringhi Residence 2 is perched on the highest plateau along the Batu Ferringhi cove in Penang.

The resort-themed project offers 632 freehold units, each crafted for maximum tropical charm.

The two condominium blocks of 10 and 32 storeys offer 124 and 478 units respectively, while there are only 30 frontage condo units in a four-storey block.

The condo units with built-up areas of 1,197sq ft to 1,534sq ft each command breathtaking views of the ocean and hills.

Mah Sing Group general manager Yeoh Chee Beng said the gated and guarded project was now open for registration with indicative price of RM850 per sq ft.

“Besides enjoying beautifully landscaped grounds and natural greenery, residents will also find signature resort amenities such as an infinity pool, tennis court, playground, gym and BBQ area.

“Every home will come with a wide balcony and sea-facing dining and living areas.

“The development also boasts the first water pebbles landscape design in Penang,” he said when met at Mah Sing’s booth in Gurney Plaza on Thursday.

The developer is taking part in a four-day property roadshow at the mall that ends tomorrow. It is open from 10am to 10pm.

Besides Ferringhi Residence 2, Mah Sing is also showcasing its Southbay Plaza in Batu Maung and Ferringhi Residence Precinct 1 condo villas and there are limited units available during the fair.

Yeoh said those who prefer property in the Klang Valley could check out Lakeville Residence in Taman Wahyu, Kuala Lumpur, and Icon City in Petaling Jaya. 

He said Lakeville Residence, with a lakeside living theme in mind, would feature one of Kuala Lumpur’s largest facility podium measuring 1.25ha.

“Rising above a lush green area, every unit in Lakeville will seem like an elevated boutique semi-detached home.

“Besides benefiting from the security that a gated and guarded community brings, residents can also enjoy shopping at nearby lifestyle shops,” he said.

As for Icon City, Yeoh said the mixed development project, comprising Phase 1 and Phase 2, was located at the intersection of Federal Highway and Lebuhraya Damansara-Puchong. 

It is also close to several notable institutions of higher learning.

“The offices will have high-speed broadband and meeting rooms that are perfect for conference calls while retailers will benefit from the high visibility of Icon City,” he said. - The Star

Compensation taken away by Housing Controller

AT the stroke of a pen, monies payable to a group of aggrieved house buyers are taken away by the Controller of Housing (Housing Controller). 

We are talking about a group of house buyers who had suffered losses due to a delay in completion of their homes by their developer and the very ministry that is supposed to protect them signed away their rights and remedies. We are talking about such rights and remedies being taken away from them for the benefit of the very culprit developer who caused them the loss and suffering. 

What is happening to the Housing Ministry? The ministry many an aggrieved house buyer turns to in times of developer defiance of the law, the ministry house buyers rely on for protection and for all the desperately needed interventions and assistance when a housing project is delayed or abandoned?

Under the terms of the sale & purchase agreement (SPA) between a housing developer and the house buyer, the developer has to complete and hand over the house within 24 months (for landed properties) or 36 months (for stratified properties). If the developer fails to deliver within this period, the developer has to compensate the house buyer by paying liquidated damages (LAD) for late delivery. 

This compensation is calculated at 10% per annum on the purchase price for the period of delay. It is no rocket science that delay by one party leads to losses for the other party, hence the compensation; and by the same token, if the house buyer is late in making payment to the developer, the house buyer has to compensate the developer for the delay at the same rate of 10% per annum on the delayed payment. 

These are obligations imposed by law and LAD claims for late delivery is a well-recognised remedy for house buyers.

Now I hear, however, that the Housing Controller has granted a six-month extension of time to developers in several housing projects. 

Does the Housing Controller know the ramification and repercussion of his action? 

Extension of time

What does it mean when an extension of time for delivery of vacant possession is given by the Housing Controller? 

Effectively it means breaking the developer’s contract and delay in completing construction is excused and the house buyers cannot claim compensation for late delivery. 

Rights and protection given by Parliament is extinguished by the Housing Controller with a stroke of his pen, that is what it means. 

The developer who committed the breach stands to benefit hundreds of thousands or even millions of ringgit at the pain and suffering of the house buyers, that is what it means. 

Let’s take a look at a modest development of just 200 condominium units at the purchase price of RM700,000 each. In the event of a 6 months’ delay the developer is liable under the SPA to pay the following compensation or LAD to the house buyers:-

LAD per unit : RM700,000 x 10% per annum x 6 months = RM35,000 

LAD on common facilities : RM700,000 x 20% x 10% per annum x 6 months = RM7,000

Total LAD per unit = RM42,000

Total LAD for 200 units = RM42,000 x 200 units = RM8,400,000

Yes, a saving of RM8.4mil for the guilty party at the cost of the innocent parties. And that is just 200 units at RM700,000 each.

Rights to LAD

The Federal Court in the landmark case of SEA Housing Corp Sdn Bhd v Lee Poh Choo decided that attempts by housing developers to get round the housing rules so as to remove the protection of house buyers would not be allowed. This principle has been consistently followed in cases where the developers attempted to avoid payment. 

In Tang Kam Thai v Langkah Cergas Sdn Bhd & Ors, the developer attempted to avoid payment of LAD on the grounds that the planning authorities had imposed new demands. 

The High Court decided that it was a matter for the developer to deal with and “The responsibility cannot be passed onto the purchasers as an excuse for not paying liquidated damages”. And, in Sentul Raya Sdn Bhd v Hariram Jayaram & Ors, the developer’s attempt to avoid payment of LAD because the 1997 financial crisis made it impossible to complete the houses in time also failed.

That the housing legislations are for the protection of house buyers in general was made crystal clear in 2007 when Parliament amended the Preamble to the Housing Act to read “An Act to provide for ... the protection of the interest of purchasers ...”. Even before this amendment, the Federal Court already decided in City Investment Sdn Bhd V Koperasi Serbaguna Cuepacs Tanggungan Bhd that:

“Having regard to the policy and objective of Housing Developers Act 1966 and the 1970 Rules … the protection afforded by this legislation to house buyers is not merely a private right but a matter of public interest that cannot be bargained away or renounced in advance by an individual purchaser”

In conclusion, house buyers’ rights under the SPA are not private rights, they are created by Parliament as a matter of public interest for the protection of the rakyat. They can neither be taken away by the developer nor given away by any house buyer individually. 

What about Regulation 11(3) of the Housing Development (Control & Licensing) Regulations 1989?

It is well established that provisions of the SPA are statutory provisions which must be strictly complied with and cannot be changed other than with the sanction of the Housing Controller.

The Housing Controller’s power to allow changes to the SPA is contained in Regulation 11(3) which reads:

“Where the Controller is satisfied that owing to special circumstances or hardship or necessity compliance with any of the provisions in the contract of sale is impracticable or unnecessary, he may, by a certificate in writing waive or modify such provisions: Provided that no such waiver or modification shall be approved if such application is made after the expiry of the time stipulated for the handing over of vacant possession under the contract of sale or after the validity of any extension of time, if any, granted by the Controller.”

Hence, only the Housing Controller has the power to waive or modify the provisions of the SPA. 

So what is wrong with the Housing Controller giving an extension of time? Is he not entitled to exercise his power under this Regulation 11(3)? 

Has “granting of extension” been exercised in a just manner?

First and foremost, the power given under Regulation 11(3), like other discretionary powers, must not be misused. 

Secondly, the Housing Controller must be mindful of the purpose of the housing legislations so as not to affect such purpose or take away accrued rights and make a mockery of Parliament. By granting the extension of time and depriving the house buyers of compensation under the SPA, has the Housing Controller not used powers given to him by Parliament only to take away rights conferred by Parliament?

As was pointed out by the learned judge in Wong Thai Kuai & Anor v Kansas Corporation Sdn Bhd:

“It would be against public policy if the ordinary house buyers, having paid the entire purchase price were to be effectively deprived of their rights under the sale and purchase agreement.”

Has the Housing Controller not just acted against public policy when he sanctioned the extension of time thus effectively depriving the house buyers of their rights under the SPA to be compensated? 

What were the grounds for granting the extension? Were the house buyers informed of the developer’s application and the reasons therefor? 

Did the Housing Controller hear and consider the house buyers’ views before taking away their rights?

Thirdly, besides what is reasonably expected of a prudent Housing Controller, it must be borne in mind that the power given under Regulation 11(3) is not an absolute one; it can only be exercised where there are “special circumstances or hardship or necessity which make it impracticable or unnecessary for the relevant provision in the SPA to be complied with”. 

A good example for exercise of this power will be where the housing project is approved before year 2007 but the SPA is post 2007. Modification can be done to avoid confusion between CFO and CCC.

No reasonable minded person, let alone the Housing Minister and those under his charge, can possibly imagine that the powers given under Regulation 11(3) is meant to be used against house buyers let alone blatantly and unilaterally take away rights which are expressly given to them by Parliament, rights which are expressly stated to be for their protection and created to serve and protect public interest.

If discretionary powers are not exercised with prudence, perhaps it is time for these powers to be removed or the minister replaced.

Chang Kim Loong is the honorary secretary-general of the National House Buyers Association (HBA): www.hba.org.my, a non-profit, non-governmental organisation manned purely by volunteers. - The Star

The legacy issue – passing the baton to the right person

AT the spanking new Eco World International Centre in the Gardens office block in Kuala Lumpur recently, a photo session was in progress. There was a light-hearted camaraderie in the air. 

Tan Sri Liew Kee Sin and his top management were present, all of them in their white Nehru-collared shirt with green trimmings.

The photo session was as much symbolic as telling. It was as if to say: “These are the people I will need to grow Eco World Development Group Bhd (EWB).” 

With a staff strength of about 800, about 300 of them were from Liew’s previous company S P Setia Bhd. Despite the market conditions working against the property sector and crushing issues confronting him, Liew was his usual warm, confident self.

A lot of this has to do with the people around him. Liew was named chairman in March and his right-hand man Datuk Voon Tin Yow, previously from S P Setia, joined the group officially as executive director.

A notable addition was newbie Liew Tian Xiong, 24, bright-eyed and smiling. He first surfaced in 2013 and has been seen as a proxy of his father. The presence of that young man has changed the landscape for Liew.

Passing the baton

It is a legacy issue. As one considers the property sector, a number of the country’s developers have in one way or another paved their sons and daughters to join Dad.

There is Datuk N.K. Tong, 47, group managing director of Bukit Kiara Properties Sdn Bhd who joined Datuk Alan Tong, who is known as Condo King for his work in Sunrise Bhd’s Mont’Kiara.

It was the elder Tong who saw the potential of the area, then Segambut and bought 100 acres there. Over the years, Mont’Kiara has progressed to become a thriving suburb and is currently considered as “an aspirational location” among the young.

Ken Holdings Bhd group managing director Sam Tan, 35, joined his father Datuk Kenny Tan. That was 2004, and he was 24. 

Over at the Sunway group, Sarena Cheah, 40, the daughter of Sunway Bhd founder Tan Sri Dr Jeffrey Cheah and anointed successor, will assume full control of the group’s key property unit effective May 1. She may well have been the youngest to join Dad, when she was just 20, in 1995. She started out in the corporate finance and group internal audit divisions.

Passing the baton cannot be done overnight. There is a lot of planning to do. There is also the task of moulding and nurturing the right person for the job and looking over the shoulder of the young person to ensure they are constantly on the straight and narrow. If there are more than one, then there is the selection process of who will take up the position of annointed successor.

After the painful lesson of having lost S P Setia, Liew would clearly circumspect legacy and stewardship issues.

Which takes this story to next level.

Who is working for who?

The years of passing the baton may be painful, for both parties. This explains why the years of preparation are so crucial before the final moment of actually handing over the reins. In each of the three cases – N.K., Sam and Sarena – the children joined Dad and allowed themselves to be moulded.

Which takes us to the next question.

Is Tian Xiong working for Dad, or is Dad working for Tian Xiong?

Every parent wants the best for their children and Liew is no exception. 

By joining the company now, Tian Xiong will have “the history” of the company. But will he be able to take on turbulent times? 

He ponders: “It’s a pressure cooker here.” 

If the staff do not accept him, he will never be the “real boss”, says Liew.

Of late, Liew has been keeping the young man closely by his side.

The rationale, says Liew is that, whatever Tian Xiong had learned in EWB in the last two years, he would take years to learn outside. So he better learn fast and learn now.

Stewardship

It is not just passing the baton. It is stewardship.

Says Tian Xiong after Liew steps out of the room: “Every night, from 9 to 10pm, he would nag me about how I dress, my tie, what time I get into office, how long I took for lunch and what I did after lunch. And other larger office and market issues.

“He also told me that I have to earn it, that it is not going to drop on me, that I have other siblings,” says Tian Xiong.

On whether he was pressured into returning to Malaysia from Melbourne where he graduated in 2012 with a Bachelor of Commerce from the University of Melbourne, Australia, he says he returned on his own free will.

The young man first surfaced in 2013 as a buyer for a little known company Focal Aims Holdings Bhd. His emergence “caused a tsunami” because during that period, there was many questions as to Liew’s move.

Tian Xiong started out in corporate finance department for the first two years and is currently in corporate marketing. - The Star

The debate on Liew

Liew and his son Tian Xiong (left) at the interview. The biggest shareholder of Eco World Development Group is Tian Xiong, who at 22 in 2013 became the major shareholder of the company.

Entrepreneur who drives the smaller Eco World group is still a much talked-about figure in corporate world

AT 57 years of age, Tan Sri Liew Kee Sin can easily count himself to be one of the most talked about personality in Malaysia’s corporate circle – by the Government, the private sector and property investors. 

Amidst the unravelling of events over the past four years, including his exit from SP Setia Bhd, Liew continues to be among the corporate figures today that enjoy the adulation of some and the wrath of others.

Since leaving SP Setia a year ago, Liew has been furiously on the ball, trying to “regain” what he has lost. He has kept a fast and furious pace, though buffeted on every front by unabating current.

Although he has previously overcome challenges thrown at him, the pressure this time is different, in severity and magnitude. It’s a pressure cooker in Eco World Development Group Bhd (EWB), he admits.

“The momentum is on-going. It forces me to be the face of Eco World,” he says.

The positive side to all these is that he has about 300 out of a staff count of 800 who joined him from his previous company. This round of rebuilding includes his son, Tian Xiong, 24. That may also account for him being more driven than before.

While he has made a success of the 4,000 acres in S P Setia’s flagship development in Shah Alam years ago, today’s climate of high house prices and stagnant wages mean his team would have to work doubly hard. So far, however, most of his projects in the Klang Valley and Johor seem to enjoy take-up rates of 80% and above.

His latest launch in Batu Kawan, Penang, has prices hovering in the RM700,000-RM800,000 bracket. 

Credited with making something out of 4,000 acres in Shah Alam, Liew is trying to do the same in Semenyih, Selangor, and Batu Kawan, Penang, on a smaller scale. Liew says his objective is to set a new benchmark in terms of concepts, ideas and designs for branding purposes.

Next month, he will be launching 1,130 units in London City Island with a gross development value (GDV) of £617mil, at a time when house prices are frothy, with wages stagnant. The May 7 elections is another dampener. The Employees Provident Fund (EPF) has just sold a building at a profit and may be selling another. 

The weakening ringgit works for and against him. For local investors, a property abroad is a good hedge against exposure to any possible future weakening of the ringgit. The downside is that the pool of buyers shrink with the weaker ringgit.

However, the target market for the London City Island project goes to Hong Kong, Singapore and London.

Even as he is keeping his finger on sales, other challenges faces Liew and the Eco World group.

Eye on SPAC

In October last year, Liew and his team proposed to list Eco World International Bhd (EWI) as a SPAC (special-purpose acquisition company). But the Securities Commission has yet to approve the application. 

While awaiting the SC’s nod for the the proposed SPAC, in January, he and his right hand man Datuk Voon Tin Yow in their personal capacity, via a private vehicle, entered into a joint venture with UK-based Ballymore on a 75:25 basis to develop three projects in London – with the first slated to kick off next month.

The plan was to inject the three properties into EWI, which will be the vehicle for the proposed SPAC. Shareholders of EWB would not be left out as they would be offered up to a 30% stake in EWI.

It was a neat plan – at least on paper.

But the snag is that a SPAC is a blank cheque listing. It is supposed to list without pre-identified and ready assets, which is an issue when it comes to EWI. This is despite Liew’s plan to inject the private purchases “at cost plus holding costs” – meaning Liew and Voon do not profit from the asset injection.

“But this goes against the spirit of SPAC guidelines as set by the SC. A SPAC is a blank cheque listing ... a cash box looking for assets,” says a merchant banker.

“To go global, we must react quickly to market conditions, better design concepts and learn. We have the skill set,” he says. He learned a lot managing and marketing Battersea. No matter how challenging a project, “you gotta break it down to smaller bits”.

Nevertheless, Liew hopes to see some development with respect to the SPAC application within the next month or so.

Keeping EWB and EWI on separate lanes will help him to manage the gearing of both companies and reduce dilution for shareholders of EWB that includes his son, who is the major shareholder.

Liew says he also does not want to park the London assets under EWB because they are too big for its balance sheet.

Although his stake has diluted from 35.05% in 2013 to 13.52% on March 27, 2015, he is still the major shareholder.

Visionary though he may be, time was on his side when Liew built his previous “priced possession”, which is S P Setia. He built S P Setia over the years at a more even pace while the momentum and task he faces today with regards to the Eco World Group has been nothing short but blistering.

Within two years, the company has accumulated 5,396 acres with a GDV of about RM55bil. Debts was up at RM1.15bil as at Jan 31, 2015, from RM215mil in September 30, 2014. (Sept 2013: RM52mil). EWB completed a rights issue raising RM800mil and will undertake a placement. At the end of the corporate exercise, EWB’s gearing will be less than 0.6 times and it will be sitting on a pile of cash that will be used for working capital to develop the massive land bank here.

Liew says he received a lot of offers to work with landowners. 

“People ask, why so aggressive? It’s because of the brand. We want to charge ahead in Malaysia. We are using up about 800 acres a year.”

Dealt a good hand

Although Liew has been dealt a good hand in his working life, he may be losing another priced project, all within two years.

As he goes about tying up loose ends on the Battersea chairmanship, a legacy from S P Setia days, and finishing the restructuring in EWB by the end of this month, questions about conflicts of interest have surfaced.

The Battersea Power Station is a 40:40:20 project with S P Setia and Sime Darby holding equal share and EPF remaining 20%.

“When I resigned from S P Setia in April 2014, the Battersea board suggested I wait till September 2015. At that time, there was no Eco World Ballymore (Holding Co Ltd, a developer of the three projects) yet.”

The private vehicle belonging to Liew and Voon – Eco World Investment – has a 75% stake in EcoWorld-Ballymore while UK-based Ballymore Group owning the rest.

At about June of last year, he declared to the board of Battersea of his interest to go into property development in Britain. He was told to wait.

Six months later in January this year, Liew and Voon went public with their 75% stake in the UK-Malaysia joint venture. At that point, he felt “obligated to resign” but was told to wait.

“We have three projects which may seem to be competing with Battersea Power Station although in terms of price point, they are priced differently.”

The latest Battersea Phase 3A units are priced at £1,700 per sq ft while the EcoWorld-Ballymore units are being sold at about £1,000 per sq ft. About 90% of the EcoWorld Ballymore units will be less than £1mil. 

Ironically, a vexing issue confronting Liew these days is his chairmanship of Battersea. The roots of the situation he is caught in today can be traced to his entrepreneurship that created Malaysia’s biggest property company that he lost control to Permodalan Nasional Bhd – after a protracted corporate exercise which started in 2011. 

Liew, however, is still capable and motivated to use his set of skills to further create value for himself and those around him. But the dichotomy is between duty and interest.

“I do not want to offend anyone anymore. But I (also) feel duty bound,” says Liew.

The Battersea project, which is Liew’s brainchild when he was in S P Setia, has several key milestones in the next one year.

Phase one of the project will be handed over to buyers next year. Work on Malaysian Square – the pride and joy of Malaysia – has just started. Work on London’s underground Northern Line extension, which connects to Battersea, begins this year. These milestones will help the investment to appreciate.

The British authorities are concerned about the reconstruction of the four white chimneys and the restoration of the power station brickwork. So Battersea has quite a bit of important obligations to meet in the next one year and it cannot afford any slip-ups.

“I am under a lot of pressure ... Morally, I should resign. But when I buy (my land in London), I also declare (to the board). I am duty bound to declare on the grounds of good governance. At the same time, I am also duty-bound as chairman because this year is crucial for the Battersea.

“I am trying to get out of this (situation) because I want to reduce the areas of conflict between myself, the Government and everybody else. I have lost S P Setia and I should gentlemanly give up (Battersea),” says Liew.

Time will only provide an answer.

With London mayor Boris Johnson ending his term in 2016 – and considering Liew has a good working relationship with him – there are are more than several reasons for shareholders of Battersea to continue to retain him for another year as chairman. Before works such as the construction of the underground station and reconstruction of white chimneys take off, there is a lot of interaction with the London authorities, something that is not easy to cultivate.

Interest versus duty

Whatever the outcome of his Battersea chairmanship, there are at least two broad contentious issues here. His fiduciary responsibility and duty of care is one. Liew has taken that duty seriously and returned value for that which was entrusted to him. The second issue is his skill set. Life has obviously given Liew a good card, despite his losses.

Now, the question that arises is if he should wait if opportunities come, complete all ties with Battersea and S P Setia before embarking on new ventures that may not come knocking every day?

Every day, directors are offered various opportunities which conflict with their fiduciary duty. Often times, the fiduciary duty of directors, parallel to trustees, can be onerous. But the law is the law.

Yet, in many ways, Liew’s situation is parallel to a 1978 case of Queesland Mines Ltd v Hudson. The company Queensland Mines was an iron ore mining company that established as a joint venture between A Ltd and F Ltd. Hudson was the managing director of A Ltd and had negotiated with the Tasmanian government for mining licences.

Just before the licences were issued, Hudson’s joint-venture partner ran into financial difficulties and was unable to proceed with the venture.

Hudson resigned, taking the licences with him, and formed his own company. At considerable risk and expense, Hudson exploited the licences and earned profits. Queensland later filed a suit against Hudson for what it claimed was abusing his position to divert opportunties for himself.

However, the courts ruled that although the opportunity to make profits came to Hudson through his position at Queensland Mines and was something that the board was made aware of, Hudson was not in a position of conflict.

The position Hudson was prior to 1978 is the predicament Liew faces today. In both these cases, the contention boils down to timing and turn of events. 

If one were to consider the big picture and balance out the events surrounding Liew in the last four years, should he not be allowed to exploit the resources due to him because of his skills and expertise? Or should he be shackled by time and ties, despite having added value to those he has been entrusted with? That would be unfair to Liew. - The Star