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COVER STORY

INJECTING LIFE INTO GREATER KUALA LUMPUR by Aisyah Mahzan Kuala Lumpur aims to be in the top 20 most liveable cities in the world by 2020. To achieve this target, the government has taken the initiative to implement The River of Life (ROL) project, which aims to revitalise and transform both the Klang and Gombak rivers. The project was launched in July 2011 by the Prime Minister, Datuk Seri Najib Tun Razak. The project aims to improve the water quality of both rivers and transform the two rivers into vibrant, diverse, thriving iconic waterfronts on par with the like of waterways in Amsterdam, London, Paris and Melbourne by 2020. This revitalisation project is an Entry Point Project under the government’s Economic Transformation Programme (ETP). The Economic Transformation Programme oversees twelve (12) national key economic areas which includes the transformation of Greater Kuala Lumpur. The River of Life project is the biggest river revitalisation project in Malaysia initiated by the Malaysian government. One of the best examples Malaysia can set as a benchmark is South Korea’s Cheonggyecheon restoration project that turns a nearly dried river stream after years of neglect into a vibrant eco-friendly history and culture region. This restoration project preserves the natural environment and the historic values of the central business district of Seoul. After 2 years of restorations, the Cheonggyecheon was open to the public in September 2005 and was laundered as a major success in urban renewal and beautification. The restoration project brought balance to the north and south of the river. This has been cited as a real life example of Braess’s Paradox.

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Three major components of the River of Life project are the river cleaning, river master planning and beautification and the river development. The river cleaning process is aimed to improve the water quality of both rivers which are at the heart of Kuala Lumpur.

The Klang River has all the elements to become an attractive waterfront bustling with activities.

The goals and objectives of this project are to tear down all the barriers and act as a connector between the city and the riverfronts which will be accessible for the public to enjoy. The ultimate objective is to establish a new identity for Kuala Lumpur to become a more liveable city with a vibrant waterfront.

This will in turn increase the economic value of the surrounding development by making the waterfront as one of the selling points. By improving the water quality of the rivers, it will indirectly help the rehabilitation of the natural ecology of the area and bring back nature into city life whereby both nature and urbanisation can complement each other and create a harmonious living ambience. The Klang River has all the elements to become an attractive waterfront bustling with activities. The earmarked beautification of the rivers’ 10-kilometre stretch has a catchment area of 40.4 square kilometres with an estimated population of 146,000. The revitalisation of the river will have a huge economic potential which automatically will attract more tourists, create more job opportunities and raise the property values along both the Klang and Gombak rivers. Once revitalised, one can expect significant traffic that will fully utilise the waterfront. (continued next page)


COVER STORY

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(from previous page) This will drive and encourage more businesses to be set up and make the waterfront a lively place where people can just relax and hang out together with family and friends at any given time of the day. By 2020, the River of Life is expected to contribute a revenue of RM11.3 billion to Malaysia’s Gross Domestic Product (GDP). Cultural heritage, social gathering and recreational activities will mushroom along the river and turn the area into a thriving city scene during the day and a vibrant colourful scene at night while preserving the cultural heritage and fully utilizing the space along the city waterfront. Apart from the river cleaning and beautif ication along the rivers, developments are being planned under a master plan to areas adjoining the waterfront to spur high economic investments and commercial values. These types of developments are also expected to increase along the MRT lines, enabling expansions to newer areas with high pedestrian volume. The beautification of adjacent areas plays a vital role in steering the Greater Kuala Lumpur population back towards the river. The project is comprised of five (5) districts encompassing 11 precincts in different phases. The five (5) districts are Eco Village (Precinct 1), Transportation Hub (Precincts 2 and 3), New Heart (Precincts 4, 5 and 6), Heritage Quarter (Precinct 7)

and Confluence Community (Precincts 8 to 11). Each district has its own unique feature that emphasises different elements of Greater Kuala Lumpur. For example, the Heritage Quarter covers the heritage trails to bring a new lease of life to the old buildings and the forgotten riverbanks. With every mega project, there is bound to be obstacles and challenges. One of these obstacles is finding spaces that can be opened up to enable beautification efforts to take place as people have built their communities close to the riverbanks. A mega project of this scale requires cautious and extensive collaborations among the different components. Moving from a single plot development to a large scale project such as this requires a change of attitude in ensuring all goes

Figure 1: Key Plan for River of Life Project

according to plan as it integrates various elements and components. A lot of thought, careful planning and discipline are needed to minimise disruption as the project is located at the heart of the city. This type of mega project will not be viable if it does not meet the market demand. Comparing the River of Life mega project with the country’s 2020 Vision forecasted projected demand, the mega project only meets an estimated 24% - 49% of the residential demand while taking into account the population in Greater Kuala Lumpur is expected to grow between 33% - 55% by 2020. However, this under par demand can be overcome by the smaller projects being developed within the area. On a good note, the office and retail demand surpasses the expected market demand. Despite facing many obstacles and challenges, the government should still encourage and support this type of mega project as it will bring long-term benefits to Greater Kuala Lumpur. The longterm benefits include a more efficient flood protection system, an increase in the overall biodiversity of flora and fauna within the area while reducing the urban heat island effect along the river to approximately 3°C to 5°C cooler than parallel roads located a few blocks away. It will ultimately increase the land prices by 30% to 50% for properties nearby within the next 5 years thus increase the number of businesses and visitors to these areas as seen and proven through similar mega projects across the globe. With this in mind, Greater Kuala Lumpur will achieve its goals and objectives to be one of the top 20 most liveable cities by 2020 on par with London, Melbourne and Amsterdam.


POLICY CHANGES

COMMENTARY ON BUDGET 2014

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The raising of the floor price to RM 1 million per unit for foreign buyers will not significantly impact demand.

by Ivan Chan & Chris Chan The Budget as announced by the Prime Minister, Dato’ Sri Najib on Friday 25 October 2013 covered in essence 6 areas relating to the real estate industry: Real Property Gains Tax, Developer Interest Bearing Scheme (DIBS), raising of the floor price cap for foreign buyers, transparency in the developer’s selling prices, provision of the medium to low cost houses, and the introduction of the Goods and Services Tax (GST). We will dissect them one by one for your information. Real Property Gains Tax While the increase of the tax rates were greatly anticipated from the very beginning, the scale of the tax was a bit of a surprise in view of the substantial increase. The strategic reason for this was obviously to curb property speculation by weeding out the speculators in the market place in order to stabilise prices. But to circumvent this, a wise property investor may adopt a rental strategy. By doing this, the investor prolongs the time line and may eventually pay little or no tax at all depending on the circumstances. As it is, we are currently witnessing a flurry of activities as some property owners

are disposing their properties before the end of this year in order to avoid the higher tax rates for next year. The exact details have not been released by the government. But if it is based on past practise, the timeline for the calculation of the RPGT is from the date of the Sale & Purchase Agreement (SPA) for Freehold properties whereas it is from the date of obtaining the State Authorities Consent to transfer properties for leasehold properties. This is provided for under the Real Property Gains Tax Act 1976. It is prudent to mention that the RPGT hikes for foreigners under the Budget 2014 were the most severe at 30% at 1st to 5th year of disposal. This was slightly harsh in our opinion. We would have thought that the government would have given a preferential treatment to participants of the Malaysia My Second Home Programme (MM2H) as they have brought in many benefits to Malaysia by participating in this programme such as the inflow of money that they have brought along with them and as a result, creating positive economic multiplier effects as they spend their money here in Malaysia. But having said that, this is relatively mild if one were to compare to our neighbour in Singapore where

Table 1: RPGT rate for Budget 2013 and 2014 Year

Budget 2014

Budget 2013

Companies (%)

Individuals (citizens & Permanent Residents)

1

30

30

30

15

2

30

30

30

15

3

30

30

30

10

4

20

20

30

10

5

15

15

30

10

6

5

0

5

0

Individuals (Non-citizens)

From 1st Jan 2013 (%) (Apply for all categories)

Source: Hartamas Real Estate Malaysia, Messrs Amir Toh Francis & Partners (Advocates and Solicitors)

(equivalent to our Cukai Pintu in Malaysia) and the stamp duty on the transfer is much more severe than that in Malaysia. Developer Interest Bearing Scheme (DIBS) The cessation of the DIBS was much anticipated as the market was talking about this long before the official Budget announcement. But this is not an effective measure to curb speculative buying as the ever creative developers have already introduced measures to circumvent this such as DIRS (Developer Interest Reimbursement Scheme) and would also offer further incentives like rebates to make it ever attractive for buyers to buy. Minimum price for foreigners to purchase The raising of the floor price to RM 1 million per unit for foreign buyers will not significantly impact demand as many foreign purchasers usually go for higher-end properties above the cap of RM 1 million per unit. Projects such as those in KLCC and Johor which are targeting foreign buyers may experience some challenges especially in selling off their smaller units to these groups which are priced at below RM 1 million. This is not a surprise move on the part of the Government as Penang had already introduced higher floor price for foreign purchasers at between RM 1 million to 2 million depending on which area and the type of property on 1 July 2012. We would have thought that the Government would have given some exemptions for participants of the Malaysia My Second Home Programme (MM2H) for reasons mentioned above. But one thing is for sure: Medini Iskandar Malaysia (under the Iskandar Malaysia Development Blueprint) will not be affected by the new floor prices for foreign buyers. This has not been confirmed by Medini. However, Medini has said that it is exempt from new RPGT ruling. We will likely witness a surge in demand as foreign buyers will flock here to buy. Transparency Property developers will be required to display the detailed sale prices that reveal the benefits and incentives offered to buyers such as cash rebates, free gifts etc. This may bring about some undesired consequences for property buyers as


POLICY CHANGES (from previous page) they may now be able to get a lesser amount of loan (as at the current time, the margin of finance is based on the gross price (before deducting the rebates etc) and hence the buyer is able to obtain more money from the bank). Provision of Low and Medium Cost Houses for the low to medium income earners We c a n s e e f r o m t h e B u d g e t announcement that the government through various channels like National H o u s i n g D e p a r t m e n t , P r o g ra m Perumahan Raykat Disewa and Perumahan Rakyat Bersepadu, PR1MA and the Private Affordable Ownership Housing Scheme (MyHome) will provide affordable residential properties for the low to medium income earners. A big bulk of our population falls under this category. This is a herculean task and it would be very interesting to see how this is implemented.

Goods and Services Tax (GST) The Goods and Services Tax (GST) will be introduced in 1 April 2015 replacing the Sales Tax and Service Tax. We expect demand for properties to surge during the period prior to the implementation of the GST. While we were expecting this, we did not anticipate the quantum of tax to be higher at 6%. Many thought that it would be capped at 5%. While the new residential properties will be tax-exempted, developers will not be able to claim back the GST incurred on costs (e.g. labour costs, building materials etc) and thus, this will be passed to the buyers. In many countries (like Australia and New Zealand) that have implemented the GST, they have witnessed the same pattern: that there was a marked increase in demand for properties prior to the implementation of the GST as buyers rush to buy properties before they become more expensive once the GST hits the ground. In a similar manner, we would

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A challenge confronting all emerging markets is the need for credibel and robust supporting regulatory infrastructure

expect property developers to hasten their action plan and launch their new projects prior to the introduction of the GST.

Ivan Chan Partner, Messrs Amir Toh Francis & Partners (Advocates & Solicitors). Ivan can be reached at cphchambers@gmail.com Christopher Chan Associate Director & Registered Real Estate Agent of Hartamas Real Estate (Malaysia) Sdn Bhd. Chris can be reached at christopherchan@hartamas.com The views set forth in this publication here are the personal views of the contributors and do not necessarily reflect those of the firm.


HIGHLIGHT

WELL STANDARDS FOR BETTER HEALTH by YK Heng While LEED, Green mark, GBI and other green standards for building have gain ed acceptance in most countries, a new building standard emphasizing on the integration between wellness and real estate has emerged in the US. WELL Building Standard, a standard that was created to protect human health and achieve wellness through the built environment is getting more attention nowadays.

L e t ’s t a k e a s i m p l e e x a m p l e which is sleep. Sleeping is a day-today activity which most of us often overlook. A good night’s sleep will actually put your body to full rest and energize you for a new day ahead. However, Delos’ research shows that sleep is affected by four major elements. Sleep, as one of the Domains, is associated with nourishment, light, comfort and mind. Sleep quality is affected by nourishment or diet, or to be precise, the amount of calories consumed. Some studies revealed that hormone melatonin (a hormone which helps control sleep and wake cycle) is highly associated with light. The intensity of light plays a significant

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The WELL-certified development which incorporates health and wellness amenities into its architecture design aims to target the exclusive group of consumers.

Figure 2: Framework that illustrates the 7 Concepts and its linkage to the 12 Domains

WELL Building Standard is a new certification standard started by Delos, a real estate development company which is based in the United States. The building standard is developed by a team of medical experts, policy makers and designers which took into consideration architectural design, biological, environmental and etc. Delos prioritizes the incorporation of personal wellbeing and personal sustainability in the design and construction decision. Improving wellness of the occupants The Well-certified development which incorporates health and wellness amenities into its architecture design aims to target the exclusive group of consumers. As mentioned earlier, WELL Building Standard takes into consideration both built environment and human health. As shown in the Figure 2, seven major aspects in built environment have been considered. These aspects are referred as Concept by Delos which includes air, water, nourishment, light, fitness, comfort and mind. With the establishment of major Concepts that holds a certain impact to the human health, Delos has furthered their studies into the Domains of human health, which are divided into 12 sections. Each of the Concepts has linkage with one or more Domains of human health.

Source: Delos Living

impact on the production of melatonin which then affects the sleep-wake cycle. Lastly, healthy and restorative sleep required a stress-free mind and a comfortable environment. Hence, sound wave technology and aromatherapy are integrated in the design for stress-management and comfort. WELL Standards Delos has been piloting the WELL Building Standard in 42 Stay WellTM hotel rooms at the MGM Grand Hotel in Las Vegas, residential project at 66 East 11th Street. The recent

completed CBRE Global Corporate Headquarters is the first commercial office space to be certified under WELL Building Standard. Among the features that were incorporated includes smart lighting systems, energy absorbing flooring, advanced air purification, water filtration systems and anti-microbial coatings on all surfaces. The residential project lies at 66 East 11th Street in the Greenwich Village neighbourhood of New York City and is priced ranging from $15.5 million to $ 50 million for the six condos. (continued next page)


HIGHLIGHT

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Figure 4: Reported Rental Rate increases of certified green building compared to conventional building

Again, all of these questions will eventually arise when there is any transaction on WELL-certified building which is said to be adopted along with the green building guidelines. The WELL building standard involves much more complicated framework as it combines the elements of health, well-being, and preventive medicine into architecture, design and construction including sustainability and green features.

A complete standard should be established so that the market value can be determined without having to justify the price being justified in the absence of proper support of hard data.

Source: World Green Building Council

LEED was first launched in 1998 and soon enough, the property market has recognized the green rated building as a property evolution. Research by CoStar Group (a commercial real estate information company in US) showed that the green building tends to have higher rental rate and capital value compared to conventional building. (Figure 3) Another similar research conducted by World Green Building Council revealed that rental premiums for green accredited building in US and Australia range between 0% - 17.3%. (Figure 4) Public often has a misperception that construction cost for green building is significantly higher than conventional building. According to a 2010 study by Greg Kats in which the dataset comprise of 170 U.S buildings, the median cost increase for constructing a green building was 1.4% compared to conventional building.

Although it has been more than a decade since LEED was launched, valuation issues on green building still exist until today in developed green building markets such as US and UK. However, these issues can be resolved temporarily with the use of traditional approach but with proper refinement.

Figure 3: Rental Comparisons between LEED-certified building and non LEED certified building $90 $80 $70 $60 $50 $40 $30 $20 $10 $0

Fr an cis Ho co us to n W De as nv hi Se er ng at to tle n, /P DC ug et So un Ch d ica go Ea N st e Ba y/ w Oa kl Sa an M in d ne cra m ap en ol to is /S tP Lo au sA l ng el es At la nt a Ch ar lo tte Da lla Bos to s/ n Ft W or th Po rt la nd Ba lti m Sa ore n Di eg So o ut A h Ba ust i n y/ Sa n Jo se

Thus, how will the market determine the value of the WELL-certified building? Back in 1998 when LEED standard (a green building standard) was launched, how fast did the market adapt to it?

Moving Forward Being the pioneer in introducing the real estate product which puts emphasis on both environmental impact and human health, Delos has captured the most crucial component that every human treasured in their life. According to the interview between Worth Magazine with the founder of Delos, Marad Fareed, the company’s goal is to introduce WELL into as many households and places in the near future.

Sa n

Value Assessment Being the pioneer in creating a wellnessrelated standard, WELL building standard might be able to create a new market segment in the current real estate market. WELL-certified building’s benefits are much more intangible and unaccountable.

So, one may ask, how do valuers / appraisers assess the market value of green building? How was the value of the first transacted green building established? How much is the depreciation rate of the M&E in the building? Is the age of a green building longer than conventional building? In what ways do the sustainability influence market value and how does one identify, measure and price the impact?

Average Office Rent (50.000 + sq.ft, Built in 2003 - 2013 )

(from previous page)

A complete standard should be established so that the market value can be determined based on proper support of hard data.

Non LEED Rent

LEED Rent

Source: CoStar Group Inc


INVESTOR PREFERENCES

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PROPOSED REVISION OF ASSESSMENT RATES PURSUANT TO ACT 171 by Chris Chan In recent weeks, we have read newspaper reports that the Datuk Bandar Kuala Lumpur (DBKL) has issued the ‘Notice of Revision of the Valuation List’ to residents for an increase in assessment rates for properties in Kuala Lumpur. The deadline for submission of the objections from the affected property owners is on the 17th of December 2013. Seeing the news reports and how this has come through, we believe that there could have been a lack of understanding in this area and hence the objective of us sharing some information for the public at large. The Notice of the proposed increase in assessment rate is issued by the Property Management and Valuation Department of DBKL in accordance with Section 141 of the said Act. It is stated in the said Notice that anyone who disagrees with the proposed Annual Value as stated therein on any grounds specified under Section 142 of the said Act may lodge an objection thereto in writing and which objection must be received by DBKL within the date stipulated in the said Notice. It has recently been reported in the newspapers that there has been an outcry against DBKL on its proposal to increase assessment rates for house owners estimated to be between 100% to 300%. Various parties have objected and questioned the justification for the new valuation to such a level that will burden and penalize residents and house owners, especially those from the low and middle income groups. Section 142 (1) of the said Act sets out the various grounds of objection which may be relied on by any person aggrieved with the increase in assessment. The grounds of objections to be made in writing are (a) that any holding for which he is rateable is valued beyond its rateable value; (b) that any holding

valued is not rateable; (c) that any person who, or any holding which, ought to be included in the Valuation List is omitted therefrom; (d) that any holding is valued below its rateable value; or (e) that any holding or holdings which have been jointly or separately valued ought to be valued otherwise. A “holding” is defined in the said Act to mean (among other things) any land, with or without buildings thereon, which is held under a separate document of title and in the case of subdivided buildings, the common property and any parcel thereof. Section 142 (2) of the said Act states that all objections shall be enquired into and the persons making them shall at such enquiry be allowed an opportunity of being heard either in person or by an authorized person. The proposed increase in assessment rates was long overdue. Naturally with any proposal that makes a dent in our pockets, we would be gravely unhappy. Therefore as property owners ourselves, we understand the sentiments of the affected public. The last revision was over 2 decades ago. During the time interval, costs have naturally increased in tandem with the inflation rate of the country and hence the rationale for the increase. City Hall wishes to obtain an extra RM 400 million to upgrade roads and other infrastructures. Let us look at the subject matter of the assessment and the prevailing laws governing it to gain a deeper understanding. Assessment rates The subject matter of assessment is governed by the Local Government Act 1976 (Act 171) and Subsidiary Legislation.

Assessment rate collected goes to the respective local council that governs a particular area.

The Local Government Act 1976 of Malaysia (“the said Act”) was enacted to revise and consolidate the laws relating to local government. The local government or local authority has the power to collect taxes (in the form of assessment tax), to create laws and rules (in the form of by-laws), to grant licenses and permits for any trade in its area of jurisdiction, to provide basic amenities, as well as planning and developing the area under its jurisdiction (among other things). Assessment rates are imposed to finance a number of activities such as collection of refuse, cleaning of roads, cutting of grasses and trees, building of roads, street lightings, Community Halls, public toilets etc. The money collected goes to the respective local council that governs a particular area. The estimated annual rental of the subject property is the basis of what the council will use to determine the rates to be charged. There is a certain percentage assigned to this. The percentage can be as low as 2% for agricultural land to as high as 12% for commercial properties. It is interesting to note that vacant land with title can be levied with an assessment as well. The amount charged varies according to the properties’ classification (residential/ commercial/ industrial/ land). (continued next page)


HIGHLIGHT (from previous page) As an illustration we provide you with two real cases of properties within the jurisdiction of City Hall. Robson condominium in Persiaran Syed Putra 2, KL The current assessment is based on the annual rental value of RM 20,400 @ 6% (with built-up of 1,270 sf) which comes to RM 1,224. Therefore the owner has to pay RM 612 every 6 months. The proposed new annual rental value is RM 22,200, an increase of 8.8% and therefore the new assessment rate is RM 666 per 6 months, a mere increase of RM 54. Townhouse in Taman Bandaraya, KL The current assessment is based on the annual rental value of RM 10,200 @ 6% which comes to RM 612. Therefore the owner has to pay RM 306 every 6 months. The proposed new annual rental value is RM 25,200, an increase of 147% and therefore the new assessment rate is RM 756 per 6 months, an increase of RM 450. increase for constructing a green building was 1.4% compared to conventional building.

9 When it has to be paid The assessment should be paid twice a year, i.e. on the 1st half of the year (1 January to 28 February) and 2nd half of the year (1 July to 31 August). If you have not received an assessment bill during the stated time then you should visit your local council bringing along your previous bill and/ or your account number of your assessment bill in order to get a print out of the latest. You can visit the website of your local council and register as a user for purposes of checking and payment of assessment. What happens if the owner of the property has sold/ transferred his property? To complete Form I and J (Notis Pindahmilik and Pegangan Berkadar). This form can be obtained from City Hall’s website. You can just download it, print it out and fill in your particulars. For properties under the jurisdiction of City Hall, you should go to Dewan Bandaraya Kuala Lumpur, Jabatan Penilaian & Pengurusan Harta, Tingkat 4,

Bangunan TH Perdana, No. 1001, Jalan Sultan Ismail, 50250 Kuala Lumpur (tel no:03- 261 71038). Please remember to provide these when you go there: 1. A full copy of the Sale and Purchase Agreement 2. A copy of the latest Assessment Bill showing that the amount paid by you 3. A copy of the Identity Card(IC) of the relevant parties Failure to do the above within three months from the date of your Sale & Purchase Agreement/ transfer can result in a fine of not more than RM 2,000 or jail of not more than six months or both. What if your property is vacant/ is uninhabited If your property is vacant or is uninhabited for more than 1 month, you can apply for remission (Pemohonan Pulangan Balik atau Remisi) by completing Borang Permohonan Elaun Kekosongan/ Remisi which can be obtained from your local council’s website. This is subject to some conditions as follows: 1. The subject is in a good and liveable condition 2. To show proof that all efforts have been done to get tenant. You would have to provide evidence of advertisements. 3. That the subject property is vacant for the time period that you are applying to get the refund of the assessment paid earlier. 4. For offices, commercial properties and warehouses, only areas of more than 1,000 square feet on the same level is eligible to apply for remission.

Christopher Chan Associate Director & Registered Real Estate Agent of Hartamas Real Estate (Malaysia) Sdn Bhd. He can be reached at christopherchan@hartamas.com This article first appeared in Starproperty, 4th Dec 2013.


NEWSFLASH

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BNM SEES 2014 MALAYSIA GROWTH RISE AMID STRONG DOMESTIC DEMAND by Aisyah Mahzan According to Bank Negara Malaysia (BNM), the economy is on track for 4.5% - 5% growth in 2013 as domestic demand holds up and exports recover and predicts higher growth in 2014.The latest numbers for exports are positive and will end higher by the end of 2013 compared to the gross domestic product forecast by BNM in August. Next year economic growth is expected to show improvement from 2013. Malaysia is Southeast Asia’s third-largest economy, posted an average 6% growth in the last three years driven by domestic demand and investment. As the Asian emerging markets such as Indonesia and China faces a slower growth, however, Malaysia’s ringgit has been relatively stable compared with other regional currencies and is expected to appreciate over time provided that the country’s underlying fundamentals remain strong. The domestic sector has been solid and has been the anchor that drives Malaysia’s economic growth during this challenging period. Global trades are slowing down significantly and it is affecting the country due to the country’s open economy. Malaysia cuts its forecast for expansion in 2013 to between 4.5% - 5.0% in August from a previous prediction of 6%. In the next 6 months to one year, BNM held the benchmark interest rate at 3.0% to support the economic growth as the country will be more focused mainly on growth rather than inflation as the global growth remains subdued. The inflation will remain stable as demand is on a steady growth path and Malaysia has a significant expansion capacity.

REDEVELOPING KAMPUNG BARU

by Aisyah Mahzan UDA Holdings Berhad is confident in developing the 112 year old Kampung Baru as the redevelopment plans was stalled since the establishment of Kampung Baru Development Corp (KBDC) in 2012. UDA is currently in talks with Kuala Lumpur City Hall and the Federal government to redevelop a portion (1.1 hectare) of the City Hall owned land near the weekly market and turn it into a catalyst project for Kampung Baru. UDA plans to build affordable executive homes on the said land within RM350,000 to RM400,000 price range. Once completed, it will be a showcase to the rest of Kampung Baru landowners on the government’s capabilities and commitment to develop Kampung Baru. KBDC was set up to act as a mediator between the landowners and potential investors in developing Kampung Baru. KBDC is trying to amalgamate all the lands while convincing the landowners with a larger land size who command a higher price. It is not easy to develop Kampung Baru due to its multiple ownerships and 5,000 scattered individual land titles.


LEGAL ADVICE

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STRATA MANAGEMENT ACT : BETTER THAN ITS PREDECESSOR by Steven Nyu Chin Eu The latest law to be enacted concerning real estate and properties in Malaysia is the Strata Management Act 2013 (“the Act”), which was passed in early 2013. The Act repealed the Building and Common Property (Maintenance and Management) Act 2007 and made quite a number of important changes in comparison to the latter. Judging from the fact that there have been so many complaints and unresolved matters relating to strata properties, it is hardly surprising that one of the most obvious changes made by the Act is the establishment of the Strata Management Tribunal (“the Tribunal”). Created particularly to deal and handle with the ever increasing list of problems and injustices, the members of the Tribunal will be appointed from the members of the judiciary as well as senior lawyers (advocates and solicitors with more than seven years’ standing). Hopefully, the appointed members will be those who are experienced specifically in resolving matters relating to strata properties. It is important to note that the jurisdiction and orders of the Tribunal are clearly and quite sufficiently spelled out in the last part of the Act, namely the Fourth Schedule, which is vital as most (if not all) of them are being put in place to solve many of the current grievances and if properly and thoroughly enforced, they may well do justice to many complainants. Further, the Tribunal has the powers to determine the rules and procedures of the proceedings (which presumably should mirror our civil courts’ proceedings), to appoint experts with regards to issues to be determined by the Tribunal and

even to refer any question of law to a High Court Judge as and when the need arises. Once a decision is reached, the Tribunal will make a binding award, which is enforceable in a court of law. Hence, it can be seen that the Act gives complainants the proper avenue to seek justice from those who have wronged them. What is also clearly evident is that the Act imposes more rigorous duties and obligations on the main parties in the property market, namely the developers and strata property purchasers. For the developers, the Act imposes a duty on them to hand over the strata titles to the purchasers immediately after the keys are handed over to them. This main change itself will solve quite a number of the current problems associated with strata titles, namely:(1) Non-applications of strata titles by the developers; (2) The delay in their issuances by the relevant authorities; and (3) Changes made by developers of the common property of the strata properties for commercial purposes.

The Act imposes a duty on developers to hand over the strata titles to the purchasers immediately after the keys are handed over to them.

Perhaps, one of the intentions of the Act is to bring the issuance of strata titles in line with the issuance of individual titles for landed properties where currently, the time taken to come up with the latter is significantly shorter compared to the former. In addition, the Act imposes an obligation on the developers to give the registration of finalised plan and division of parcels within the strata properties to the Commissioner (which includes Commissioner of Buildings and his/her deputy and other officers appointed

(continued next page)


LEGAL ADVICE

12

(from previous page) by the State Authority) in advance of completion. Whilst this change may speed up the process in the stage of planning for the developers, it may however, lead to an increase on the costs of building strata properties, which may in turn contribute to the surge in property prices. For the purchasers, the Act has made provisions to ensure that payment of service charges is made promptly as anyone who defaults on such payment will face punitive fines and imprisonment. Presumably, this move will eradicate errant owners/occupiers of the strata properties and accordingly, ensure that the joint management bodies are able to proceed smoothly with their plans for the benefits of these owners. In the same vein, it is also worth noting that, for the office bearers of the joint management bodies, the Act imposes tougher penalties to those who neglect their duties; therefore, this will definitely cast out those office bearers who only perform their duties at their whims and fancies.

For the purchasers, the Act has made provisions to ensure that payment of service charges is made promptly as anyone who defaults will face punitive fines and imprisonment

While the Act may look detailed, there are nevertheless few problems with some of the terms used, especially those in the schedules of the Act. One of them is that there is no definition for the terms “year” and “term”. Loosely translated, “term” is meant “period” and a period can be taken to mean a six-month period or a two-year period. Can one term be considered as one year or vice versa then? The Act is silent on this. Another confusion is where the clause provides that the general meeting is to be presided over by a chairman who shall

be elected by those present who are entitled to vote. The difficulty here is that is the chairman mentioned here the chairman of the general meeting or the annual general meeting? Presumably, these are minor hiccups that will probably be overcome as the Act takes shape either by the passing of a subsidiary legislation or through the interpretation of the Tribunal. It can be seen therefore, that the substantial changes made by the Act certainly look good on paper and are sound enough to overcome current problems. “There is little or no chance for unscrupulous companies or groups to trick and victimise any party. Everything is clearly stated in the new Act [the Act]” said the Mayor of Kuala Lumpur, Datuk Seri Ahmad Phesal Talib.

When it comes into force (which should be sometime in 2014), many big cities where strata properties are on the rise, will see the impact of the Act in future. On the whole, the Act is definitely worded better than its predecessor but the success and effectiveness of the Act, however, will lie on the proper enforcement of the same by all of the relevant parties involved.

Steven Nyu is the founder and managing partner of Messrs Steven Nyu & Partners, Advocates & Solicitors, For more information, kindly contact Steven Nyu at +6016951 1984, or nyu.steven@yahoo.com


GRAPHICALLY SPEAKING

13

Kuala Lumpur

OCCUPANCY RATE OF PURPOSE BUILT OFFICE IN KUALA LUMPUR SHOWS DECLINING TREND

Total Space (sq. meter) 10,000,000

Source: NAPIC & MPI Research

80

6,000,000

60

4,000,000

40

2,000,000

20

0

4Q 2009 4Q 2010 4Q 2011

0

4Q 2012 3Q 2013

Occupancy Rate (%) 100

3,000,000 2,500,000

CBD

80

2,000,000

Total Space (sq. meter)

60

1,500,000

Occupancy Rate (%) 100

1,800,000 40

1,000,000

20

500,000 0

100

8,000,000

KLCC- GT Total Space (sq. meter)

Occupancy Rate (%)

4Q 2009 4Q 2010

4Q 2011

0 4Q 2012 3Q 2013P

1,600,000

80

1,400,000 1,200,000

60

1,000,000 800,000

40

600,000 400,000

20

200,000

WCC Total Space (sq. meter)

4Q 2009 4Q 2010 4Q 2011

Occupancy Rate (%)

3,500,000

80

2,500,000

60

2,000,000 1,500,000

40

1,000,000

4Q 2012 3Q 2013P

Total Space (sq. meter)

Occupancy Rate (%) 100

3,000,000 2,500,000

80

2,000,000

60

20

500,000

0

Suburban

100

3,000,000

0

0

1,500,000 4Q 2009 4Q 2010

4Q 2011

4Q 2012 3Q 2013P

0

40

1,000,000

20

500,000 LEGEND: Existing supply of PurposeBuilt Office (sq meter) Future supply of PurposeBuilt Office (sq meter) Occupancy rate

NOTES: WPKL : KLCC - GT : CBD : WCC : Suburb :

Wilayah Persekutuan Kuala Lumpur Kuala Lumpur City Centre - Golden Triangle Centre Business District Within City Centre Suburban Region

0

4Q 2009 4Q 2010

4Q 2011

4Q 2012 3Q 2013P

0


CROSS-BORDER QUERIES

14

LOOKING FOR

INVESTMENT Source: MPI Research

Request

Malaysia Property Incorporated (MPI) receives foreign investor queries on an ongoing basis. For any parties interested to pursue these investment requirements, please contact the MPI team at research@malaysiapropertyinc.com

Client

Requirement

Location

Landbank

Japan

40,000 sq meter of land for chemical factory development

Industrial Park in Selangor, Penang, Kedah

Factory Space

China

50,000 sq feet of factory space for lubricant oil production

ECER in Kuantan, Johor, Perak

3Q 2013


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Malaysia Property Incorporated is a Government initiative set up under the Economic Planning Unit to drive investments in real estate into Malaysia. As the first port-of-call for real estate investment queries, Malaysia Property Inc. connects interested parties through an extensive network of government agencies, private sector companies, real estate firms, business councils and real estate-related associations. MPI has two core objectives; to create international awareness and to establish connections between foreign interests and Malaysian real estate industry players, ultimately contributing to real estate investments into the country. For further information and up-to-date tracking of Malaysian real estate data, visit: www.malaysiapropertyinc.com For further enquiry, write to: info@malaysiapropertyinc.com

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All information compiled in Malaysia Property Incorporated’s (MPI) Property Quotient (PQ) is for its internal use only. Information compiled in a series of PQ edition is made available on MPI’s website at www.malaysiapropertyinc.com for its own reference only. These information may be downloaded by the public if they so wish to do so. Although every reasonable care has been taken to ensure the accuracy of the information contained in this internal series of compilation, neither MPI nor any of its employees nor agents can at any time be held liable for any errors, inaccuracies, and/or omission howsoever, if these information is relied upon. Anyone downloading these information is strongly advised to independently verify the accuracy any information derived from MPI’s internal compilation. MPI shall not be responsible for any loss or damage, whether direct not indirect, incidental or consequential arising from or in connection with the contents of these internal compilation and shall not accept any liability in relation thereto.


Property Quotient Issue 10