Thursday 22 March 2012
Wednesday 21 March 2012
Making The Right Choice When Buying A House
KUALA LUMPUR -- Buying a house to live in is often a very positive experience, especially for first-time homeowners.
However, for some, the transaction process can appear daunting, and for most people, the purchase is probably the biggest financial commitment they've made in their lives.
With the dream house identified and booking fees paid, the next step is to withdraw one's savings from the Employee Provident Fund (EPF) and apply for a loan to pay the 10 percent deposit and the balance for the house.
Most buyers use both the EPF funds and the loan to pay for the house. The first thing that is likely to be on the mind of first-time buyers is whether they are eligible for a loan and how to apply for a loan.
Today, borrowers are spoiled for choice since non-banking institutions also provide loans, and their interest rates are highly competitive compared with banks that offer a discount of 1.8-2.4 per cent on the base lending rate (BLR) for a fixed period.
Apart from financial institutions, insurance giants such as AIA and ING also offer fixed-term loans at a profit rate of 4.8 per cent.
CONVENTIONAL LOAN
The writer's own experience with buying her first house in the 1990s could serve as a guide to other buyers.
When a new phase of the housing project was launched, several banks had opened their counters in the housing developer's lobby located at Wisma Tractors in Subang Jaya.
Since Islamic loans were unheard of at the time, the writer and her husband took a joint conventional loan from Bank Simpanan Nasional (BSN).
All the calculations and documentation for the RM120,000 loan with a 15-year duration were left to the bank. By the end of the term, the writer had repaid the bank RM150,000 through a fixed monthly payment of RM850.
ISLAMIC LOANS
And today, the Muslims prefer the Islamic loan based on Syara'.
Starting with the Bai Bithamin Ajil (BBA) at the end of the 1990s, there are now more Syariah-based loans such as the Bai Al Inah, which is becoming increasingly popular.
Islamic loans are based on a fixed profit rate and not on the fluctuating BLR. The basic concept is that the financial institution sells the house to the borrower at a future value, that is, the value at the end of the loan term.
For example, if a property costs RM 350,000, the repayment over a 20-year period could reach RM 900,000, inclusive of the fixed profit rate. Although this entails repaying about three times the original loan, the borrower need not worry about fluctuating interest rates or the conventional interest forbidden by Islam.
However, an Islamic loan can be settled early if the borrower agrees to return the excess payment through "hibbah."
Nonetheless, Islamic loans allow fixed repayments-a factor most welcomed by wage earners walking a financial tight rope in keeping up with their repayment obligations.
WHICH IS BETTER: INTEREST OR PROFIT RATE?
Hazel Lim, a private sector worker, recently chose to buy property in Bangi.
"Like other borrowers, I too place my complete trust in banks, lawyers and developers to complete the whole transaction.
"I will ask the bank to calculate an affordable repayment by adjusting the repayment period.
"It is important that I'm able to keep up with my payment obligations as stated in the agreement. If I feel that I cannot afford to repay the loan, then it's best that I don't take it in the first place. Then I have to look for a cheaper home," explained Hazel.
Her choice is a corner double-storey terrace unit on 470 meters of land costing almost RM900,000, and it is Hazel and her husband's second property.
"If I take a 15-year conventional loan from a local bank, after paying a down-payment of RM 150,000, the monthly repayments amount to RM5,500.
"When I asked for the payment to be extended to 20 years, the repayment [amount] reduced to RM5,000 per month. I'm still considering this option. The repayments are high considering people like me and my husband are just wage earners," said Hazel.
However, buyers should also take note of the much lower interest rate available now with a discount of 1.8-2.4 percent on the BLR.
THE DEVELOPERS
Before making any decisions, buyers should also consider the developer's reputation.
Buyers should be wary of the developer's status to ensure their housing projects are not abandoned halfway through, leaving them burdened with repayments and no house to show for it.
Developers such as Sime UEP Development Sdn Bhd, Guthrie Property Development Holding Berhad, MK Land Holdings Berhad, IJM Land, SP Setia Berhad Group and I&P Group have etched a sterling reputation in the industry.
Some newcomers such as Trinity Group Sdn Bhd have received good reviews from buyers for their ability to complete projects on schedule and to meet the buyers' expectations.
-- BERNAMA
Sunday 18 March 2012
Malaysian housing projects abandoned as developers want huge profits
NUSAJAYA, Malaysia - Greedy developers are the main reason for the many abandoned housing projects in Johor.
State Local Government and Housing Committee chairman Datuk Ahmad Zahri Jamil said there were 12 abandoned projects involving more than 4,616 residential units.
"They (greedy developers) want to finish their projects early to make huge profits without having a strong cash flow," he said.
The Johor Baru district has the highest number of abandoned projects with four in Taman Cahaya Kota Puteri, Taman Seri Baiduri, Taman Desa Larkin and Taman Mewah Jaya.
Ahmad Zahri said the Ledang district was second with three abandoned projects, namely Taman Tangkak Emas, Taman Sri Nilam, Taman Sri Emas 7 while Batu Pahat's three abandoned projects were in Bandar Putera Indah, Taman Jasa Amir, and Taman Emas Surya.
The two stalled projects in Kluang are in Taman Mengkibol and Taman Sri Layang-Layang.
"Several steps have been taken to revive these projects," he said in his reply to Ng Lam Hua (DAP-Mengkibol) during the state assembly meeting yesterday.
Ahmad Zahri said new developers had been appointed to take over the projects with eight developers appointed by the Housing and Local Government Ministry and one by the state government.
He said the ministry was in the process of appointing new developers to rehabilitate Taman Mewah Jaya in Johor Baru, Taman Emas Surya in Batu Pahat and Taman Sri Layang-Layang in Kluang.
"We have to make sure that it is a win-win situation for both the new developers and house buyers," he said.
-The Star/Asia News Network
Friday 16 March 2012
Bankers and lawyers should know better
(Published in the Star BizWeek 10th March 2012, page 27)
Column "Food for Thought" by Datuk Alan Tong
Column "Food for Thought" by Datuk Alan Tong
BUYING a property that eventually becomes abandoned is a painful experience for many house buyers. It not only hurts purchasers who have lost their hard-earned money but also affects the property industry’s reputation which has taken a beating due to unethical activities of a few culprits.
This is particularly so when the abandoned project is not caused by factors such as economic downturn or withdrawal of purchasers, but solely due to irresponsible people who claim to be “developers” but do not hold a licence to do so.
It was recently reported that our Housing and Local Government Ministry has identified 195 abandoned developments that were unlicensed in our country. I am puzzled as to how these “developers” are able to start their projects when they do not even have their licence to apply for financing if they require a bridging loan, and is their sales and purchase (S&P) agreement properly attested by a lawyer before they start selling?
In this context, what can be done and who should play a part in reducing these unlawful developers? Assessing our existing housing development process would provide us with some ideas.
When a developer plans for a housing project, he must first get the necessary approvals and licences from the relevant authorities such as the development order, building plan, advertising permit and developer’s licence. The developer then may need to source for a bridging loan from a financial institution and this is followed by getting lawyers to prepare the legal documents which include the S&P agreement.
When the project is launched to the market, the developer will require the purchasers to sign the S&P agreements in order to finalise the purchase. Should the purchaser acquire a housing loan from a bank, the bank will come into the picture to process the loan application submitted by the purchaser. Those are the basic procedures involved in developing and marketing a housing project in Malaysia.
For unlicensed development, the regulatory bodies are not in the picture. In such cases, it becomes apparent that the lawyers and/or bankers, both representing the house purchaser, have a role to play as the first line of defence to protect the interest of the purchaser.
Hence, there are questions that begged to be answered. How is it possible for financial institutions to approve the end financing loan for a property development in the absence of all or part of the required approvals and licences? The same questions are posted to lawyers who prepare the legal documents for unlicensed development.
I believe everyone has a role in identifying irresponsible players in the industry, especially the bankers and lawyers with their better access to information and strong regulatory network as compared to the general public. As a purchaser and a customer, you would have expected your banker and lawyer to carry out their due diligence duties to ensure that your interest is not compromised.
In other industries, professional practitioners who do not convey the right message and do not protect customers’ interests can be given stern punishment as their action may be deemed as negligence, fraud or even criminal breach of trust.
According to the record of National House Buyers Association, in the case ofKeng Soon Finance Bhd (1996), a financial institution had granted a loan to an unlicensed developer, and it was decided that the loan and the security offered were invalid. The bank could not institute the foreclosure proceedings on the land and therefore could not recover its loan.
Under our Housing Development Act, a property developer that engages in, carries out or undertakes housing development without having been duly licensed can be fined between RM250,000 and RM500,000 or to imprisonment for a term not exceeding five years or both. This is an avenue to take action against unlicensed developers. While we have the law in place, it is equally important to ensure strong enforcement comes along.
For house buyers, you are strongly advised to purchase property from reputable developers and to do thorough “shopping” and analysis before signing on the dotted lines. Responsible developers are keen to work hand-in-hand with purchasers and appreciate the role of the National House Buyers Association which advocates the protection of house buyers in Malaysia. We should stand together as a team to fight against irresponsible developers.
And for anyone of you who think that you have bought into one of those unlicensed developments mentioned earlier in the article, it is time to write and call your banker or lawyer for clarification.
Datuk Alan Tong is the group chairman of Bukit Kiara Properties, he was the FIABCI World president in 2005-2006 and was named Property Man of The Year 2010 by FIABCI Malaysia.
Tan & Tan is not limiting itself to high-end projects
(Published in the Star BizWeek 25th Feb 2012, page 26)
By EUGENE MAHALINGAM
RENOWNED property developer Tan & Tan Developments Bhd, which is known for developing high-end projects, is not limiting itself to this segment if it considers other prospects viable.
“We develop projects for all segments and across the board, and not just high end,” IGB Corp Bhd property development head Teh Boon Ghee tells StarBizWeek.
Tan & Tan is a wholly-owned subsidiary of IGB Corp.
“If it is viable and feasible, we will do it. We have found a niche in the market and prefer to do more value-added projects,” Teh says.
Established in 1971, Tan & Tan is known for developing the first condominium lifestyle concept in Malaysia with Desa Kudalri in 1979 and Sierramas in 1993 - the first gated community development in the country.
One of the company's latest developments, the G Residence service apartments project at Jalan Desa Pandan, he says, is “not too expensive” compared with other projects within the area.
“We don't think it's expensive, seeing as response is quite good. It is around the range of terrace house prices within the Klang Valley,” Teh says, noting that other apartments within the area ranged between RM850 and RM1,100 per sq ft.
According to Teh, the G Residence units are priced at an average of RM650 per sq ft with an expected maintenance fee of 30 sen per sq ft, including the sinking fund. Units range from 1,080 to 1,545 sq ft, and are located on two 23-storey-high blocks. Selling price are between RM610,000 and RM1mil.
He says that the units are targeted at young couples and families.
Despite the recently tightened lending rules, Teh says he expects the G Residence service apartments to be fully sold within the next few months.
“Since sales opened in December, about 80% of the 474 units have already been sold. Over the next one to two months, we should see more units sold,” he says.
Teh says he is confident of full take-up given the response the development has received so far and despite the recently tightened lending rules.
“One or two of our buyers had problems with the new banking requirements, but most of them had no issues.”
However, Teh does believe that the new rules will have some impact on property buying trends in Malaysia.
Effective this year, banks have started using net income instead of gross income to calculate the debt service ratio for loans. This pre-emptive move by Bank Negara is meant to contain the rise in household debt.
“It will affect the buyers' ability to buy property. However, it's still early days since it (the new rules) was implemented and we will monitor closely to see if there will be any impact going forward.”
Separately, a recent online property survey conducted by the iProperty Group covering Singapore, Indonesia, Hong Kong and Malaysia, revealed that demand for houses priced at around RM1mil had dropped and was expected to be flattish throughout the rest of this year.
iProperty Group chief executive officer Shaun Di Gregoria was quoted in a local news report as saying that Malaysians were expected to continue to be upbeat about the property market, with interest seen mostly in properties priced between RM400,000 and RM500,000.
Teh meanwhile noted that location played an important factor in the development of property, adding that the company's G Residence was strategically located.
“G Residence is just a few minutes' drive away from the Kuala Lumpur city centre and within embassy row.
Construction of G Residence, which has a gross development value of RM430mil, has commenced and is expected to be completed by February 2015. The project is located on 1.46ha of leasehold land. Two car parking bays are allocated for each apartment.
G Residence is being developed by Opt Ventures Sdn Bhd, a joint-venture (JV) company between Tan & Tan and Sin Heap Lee Sdn Bhd.
G Residence also comprises 26 units of retail outlets on the ground and first floors. On whether the developer had secured any anchor tenants for the retail outlets, Tan says: “They (the potential tenants) like to see some progress in the project first before they take it up.”
“We expect mainly food & beverage (F&B) stores, as the surrounding area has a shortage of high-end (F&B) outlets.”
The current rental price is RM4,000 per unit, with an approximate size of 1,500 per sq ft. Teh says the retail space will not be for sale.
“This is so that we can have better control (of managing the tenant mix),” he says.
On its other projects, Teh said IGB is developing an apartment project in Jalan Tun Razak, which the company hopes to launch by mid-2013. It also has a JV bungalow project with KL Kepong Bhd.
IGB has some 688ha of landbank in Malaysia.
Thursday 15 March 2012
Residential prices hardly fall
(Published in the Star BizWeek 10th March 2012, page 27)
HOUSING INVESTMENTS
HOUSING INVESTMENTS
By THEAN LEE CHENG
On a per sq ft basis, it has risen
THERE was a lot of talk late last year that property prices will tumble in 2012 after the steep rise in the residential sector over the past few years. So far, we have not seen any of that.
What we are seeing is:
● Bank Negara's tightened guidelines on consumer lending have started to work. Loan applications and loan approvals have fallen in January;
● In certain locations, house prices and rental have started to ease; and
● Developers are offering very enticing terms since the beginning of this year.
Keep your finger on these three factors and let us now take a look at today's launches. In some of these launches, buyers need only to pay about 1% downpayment of the property price instead of the required 10% on signing of the sale and purchase agreement. The stamp duty and legal fees are also waived and they need not pay anything else until after the property is completed. Such schemes have attracted many buyers.
The question to ask is: If the market is as good as many claimed it to be, why are developers offering such schemes? When a property is sold, it is registered as a sale. But the absolute revenue of the unit is yet to be paid.
For easy calculation purposes, 10% of a RM500,000 property is RM50,000. If the first 10% is paid, this RM50,000 is registered as revenue by the developer, but in the sales column, a sale of RM500,000 is recorded. That is why the sales and revenue figures vary considerably.
If a developer allows a buyer to pay only 1% of the purchase price, this does not mean he “loses” that other 9%. He will get it back after a certain period of time. The same goes for the waiver of the stamp duty and legal fees. The developer has to pay the lawyers for services rendered. All these charges and fees are packaged into the deal which the buyer will have to bear in due time. In this case, later rather than sooner.
Developers are offering such attractive terms in order to make a sale. Many of these schemes are offered in condominium projects because there is generally a glut in this segment. While such schemes may attract genuine buyers who need a roof over their heads and who are thankful that they can defer payment, it also attracts those who have no problem forking out that 1% downpayment and take a gamble that they will be able to offload it when the project is completed.
If one were to drive around certain parts of the Klang Valley today, there are some completed high-rise with large mobile numbers plastered on windows. It may not be so easy to offload units when there are so many of them.
What is noticeably absent, and which many would like to see are more launches of landed housing. But this is unlikely to happen. Only the secondary market is offering landed units, which may explain to a certain degree why the secondary market was rather robust last year. It applies not only for the Klang Valley, but for Penang as well and is a reflection of strong domestic demand despite the many negative predictions for this year.
When a developer considers a piece of land, he thinks of how much he can make from it. If he were to build a condominium and throw in various facilities, he can sell more houses than if he were to build landed units. That is why most of the launches today are high-rise projects, be it condominiums or serviced apartments.
Developers are also limited by what they have. Increasinlgy, land in city centres and popular areas are getting smaller. Which explains why in highly dense areas, condominium projects continue to be sprout up in the most congested of areas.
The development of landed units can only take place when there is large tracts of land, which also explains why the big boys like Mah Sing and SP Setia are venturing further away from city centres.
The other obvious factor in today's launches are the size and price of the condominium units. Most of the units are small. Studio apartments may be in the 500 sq ft range or thereabouts while those targeted at families may be three-bedroom units with built-up areas of 1,200 sq ft onwards. Most of the launches today are priced close to RM700,000 onwards. On a per sq ft basis, the price is still going up, whether it is a Petaling Jaya address or a Bukit Jalil one.
So, while sales volumes may stagnate in newly-launched projects (which explains why developers are offering units for sale with a 1% downpayment), on a per sq ft basis, prices does not seem to be stabilising. Developers are trying to maintain affordability by having smaller units, deferring payment and leveraging on low interest rates.
Assistant news editor Thean Lee Cheng is glad that Bank Negara is monitoring the household debt and lending in the property sector closely as this year promises to be an exciting one.
Wednesday 14 March 2012
A house owner in name only
(A Letter to Editor by a Reader of the Star newspaper and published on 1st March 2012, page49)
IT was with bemusement that I read recent reports about various government departments achieving their Key National Result Areas (KNRAs) targets under the Government Transformation Plan (GTP).
My own experience makes me wonder if the KNRAs set are worthy targets, if performance measures are accurately reported, or if my own experiences are an exception.
Almost two years ago, I purchased a house in Klang from a developer. This was a fully completed property and the developer assured me that the Certificate of Fitness (CF) was expected in a matter of weeks.
Almost two years later, I am still waiting. In the meantime, I have had to pay substantial sums in interest payment as the bulk of the bank loan was disbursed since the property was deemed complete.
I also have to pay assessment and quit rent for a house I do not have the keys to. And, given current laws, I have no recourse to remedy or justice.
I would like to suggest that a distinction be made in the waiting period before a developer has to compensate buyers for late delivery for houses that are yet to be built and for completed property. The latter, I suggest should be weeks, and not more than three months.
In addition, the blame game should end and all parties need to get their act together, from developers to government departments, the electric utility board (TNB), water works (Syabas) and the town councils (MPK).
There should be no excuse for unnecessary roadblocks and inordinate delays for routine service operations as these only provide room for unscrupulous, dishonest, unethical practices, and leave helpless customers frustrated, inconvenienced and victimised.
Only when we have prompt, efficient, professional service delivery that can be objectively measured through well-developed KNRAs and KPIs can we begin to claim that we are on the way to achieving the GTP.
DISAPPOINTED,
Klang.
Monday 5 March 2012
Banks refuse to approve loans for My First Home scheme
KUALA LUMPUR, — Putrajaya’s home ownership scheme for low-income earners has come to a grinding halt just a year after it was launched as banks are unwilling to risk loans with monthly repayments worth more than half the applicant’s salary.
The My First Home scheme launched by Datuk Seri Najib Razak last March offers 100 per cent financing to those aged below 35 and earning less than RM3,000 per month to purchase homes worth up to RM400,000.
But Chinese-language daily Sin Chew Daily reported today that a 30-year-loan for RM400,00 with a 4.3 per cent interest rate would require a monthly repayment of RM1,780.
“The banking industry finds that with an income of RM3,000, they do not qualify for RM400,000 loans,” it reported, adding that not a single loan under the scheme has been approved.
The scheme’s website also states that to qualify for the programme, the repayment commitment cannot exceed 55 per cent of the applicant’s gross income.
The newspaper also quoted an industry source as saying that “even if the loan is for 80 per cent, the buyer must pay a deposit of RM80,000 and many cannot afford to pay this.”
However, the government had said that a state-owned mortgage agency would put up the initial 10 per cent deposit required to purchase the houses.
Prime Minister Najib announced in October when tabling Budget 2012 that the RM220,000 ceiling would be raised to RM400,000 as property prices continued to spiral.
The National House Buyers Association (HBA) last year warned that an entire generation of young adults are at risk of being locked out of the property market due to runaway house prices.
Property prices in urban areas, such as Penang and Kuala Lumpur, rose by up to 40 per cent in 2010 fuelled by low interest rates and a surge in speculative buying, although prices grew slower last year due to dampened sentiment from tightening measures such as a hike in the real property gains tax for early disposals.
Some reports have also estimated that property prices jumped from 5.9 times income in
1989 to 10.9 times in 2010.
The Demographia International Housing Affordability Survey rates markets, whose property prices are 5.1 times median income or more, as “severely unaffordable”.
--The Malaysian Insider
Saturday 3 March 2012
IOI gets tenants for mall
(Published in Star Biz 28th Feb 2012, page 4)
By TEE LIN SAY
It will sign agreement with anchor and key tenants next months
PUTRAJAYA: IOI Properties Bhd's new shopping mall, IOI City Mall, will be sealing an agreement with one anchor tenant and one key tenant next month. Construction of the mall is on track to be completed by 2014, and will feature a one-of its-kind entertainment park that has yet to be seen in any mall in the Klang Valley.
“By 2014, the mall, along with two office towers will be completed. By 2015, a hotel will be added next to the mall. The mall and the office blocks will be fully leased out. We will only sell the office blocks if we get an en-bloc buyer,” said IOI Properties Bhd senior general manager, Lee Yoke Har.
She added that the total gross development value for the commercial project was some RM2bil, with the mall taking up RM1bil. The mall, the office blocks and the hotel would occupy 36 acres and funding of it will come from internal funds.
The mall would have a crucial differentiation point that would set it apart from other malls. While refusing to divulge details, she added that the differentiation was in its entertainment park that was targeted at teenagers and young adults.
“If you like adrenaline rush coupled with information technology, then our entertainment park is for you,” said Lee.
Featuring the Garden Mall concept with lots of alfresco dining, the IOI City Mall will have a net lettable area of 1.35 million sq ft, some 350 shops and 7,200 car parks. The mall will be located in IOI Resort City.
“At present, construction of the three basement levels of the malls had been completed, and we are now starting to construct the above level storeys. The mall will have four storeys,” said Lee.
She added that the immediate target market of the mall was the 1.1 million residents living within a 10 minute drive from the Putrajaya area. Once completed, she felt that the mall would play a big role in further stimulating the vibrancy of Putrajaya.
“Actually, it was one of our tenants who suggested that we build the mall here. The southern portion of the Klang Valley is an untapped mall area. Most of them are concentrated in the northern part,” said Lee.
To support the commercial activity of the mall and the office towers, IOI Properties will also be launching condominiums and semi-detached houses in IOI Resort City and 16 Sierra, in 2013.
Lee said that accessibility to IOI City Mall was excellent, and they were targeting people from the KL-Seremban highway. Right now, IOI City Mall's location is five minutes off the Kajang Toll. It is connected to Kuala Lumpur via the Maju Expressway to Putrajaya.
“There will be two new interchanges from the Maju Expressway in the future. One is from the Equine Park in Serdang, where construction has already started.
“The other interchange, which has just received approval, is near the Malaysian Agricultural Research and Development Institute, which is diagonally opposite to us,” said Lee.
Meanwhile, she added that the other exciting project in the pipeline was its IOI Vivo City commercial project in Puchong.
This project, which takes up some 80 acres, will have a high emphasis on the green concept. Infrastructure construction of Phase 1 which consists of some 7 acres, will start by year-end.
“We see demand for a neighbourhood mall in Puchong. A mall which is unlike the family mall of IOI Mall.
The new neighbourhood mall will have a heavy focus on food and beverage with lots of niche offerings for the young adults,” she said.
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