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 ©New Sunday Times
(Used by permission)
by Farrah Naz Karim and Chong Jin Hun
• Using real estate to attract investment
• SpotLight: Opening doors to foreigners in real estate
DOES Malaysia have what it takes to be an attractive destination for rich
foreigners to buy property?
Yes, is the resounding answer from property and government
experts.
Nowhere in Asia is there a relatively cheap or hassle-free place like scenic
Malaysia where foreigners can own quality property, and with low down payments,
they noted at a roundtable discussion in Putrajaya last week.
Some great areas where foreigners could buy property besides urban areas were
those in Kota Kinabalu, Kuching, Kota Baru, parts of Penang, Cherating and the
Iskandar Development Region in Johor.
Unfortunately, they pointed out, Malaysia’s diverse strengths in this
multi-billion ringgit real estate business have so far not been fully exploited
by local players and Malaysia’s story has not been told well abroad.
To put Malaysia on the world real estate map as a preferred
destination for foreign property buyers, they wanted concrete joint
government-private sector action to be taken.
What was needed, they said, was the creation of a centralised co-ordinating body
that would draw up action plans to attract foreigners to own slices of prime
real estate.
The body could be spearheaded by the National Implementation Directorate (NID)
in the National Economic Action Council (NEAC) and include players from the
property and real estate sectors, they added.
The experts who participated in a New Sunday Times roundtable included the head
of the NEAC Secretariat, Datuk Dr K. Govindan, and a member of the private
investment panel in the NID, Tan Sri Thong Yaw Hong.
Private sector participants at the roundtable, moderated by Business Times
executive editor Rajan Moses, were Tan Sri Lee Kim Yew, managing director of
Country Heights Holdings Bhd and Kumar Tharmalingam, secretary-general of Fiabci
Asia Pacific.
The timing, they said, was just right to launch a co-ordinated effort to promote
Malaysia as a property destination, given a number of government incentives
announced recently to spark the country’s real estate and property sector.
In a landmark move, Malaysia recently abolished real property gains tax on
property sales and put in place other incentives to make it easier for locals
and foreigners to buy and sell real estate.
National Implementation Directorate head Govindan said boosting property sales
to foreigners was in tandem with the country’s attempt to restructure its
economy.
"We are trying to move into a knowledge-based economy and this fits in well with
our attempt to move into what is known as the services sector," he said.
"We want to develop Malaysia into a centre for financial services, including
Islamic finance and we want to attract the fund managers and equity venture
capitalists.
"Hence, there is also an excellent opportunity for them to reside in Malaysia."
The target is for ownership of some RM20 billion worth of property by 2010.
Lee said that Malaysia, with its strong selling points and excellent location,
had the edge in becoming an international property destination.
With good products offered by real-estate developers and architectural accolades
received, Malaysia, he said, had proven its excellence in property and
infrastructure development.
"Our airport and the green landscape throughout the country are beyond
comparison.
"Our unique multiracial culture and widely spoken English is also a major pull
factor," Lee said.
Kumar said Malaysia was set back by poor marketing of the country’s offerings
and potentials.
He noted, that in the Jones Lang La Salle transparency index, Malaysia was
placed in tier two in transparency in real estate because of conveyancing
problems.
It takes about four months to register a piece of real estate while countries
like Singapore can get it done in three days.
"In that context, we dropped one tier. But in terms of the delivery of the
system of the real estate, because we have the Torrent system of real estate,
ownership is not an issue.
"In the whole of Southeast Asia, with exception of Singapore, we have the most
complete economic delivery system for real estate.
"You buy a house from a developer, the developer arranges the financing,
transfers, stamp duty and deposits for you from their one-stop-centre office
where there are a lawyer, valuer and the tax agent."
However, it is also time to revisit ancillary processes and practices which are
monitored by foreigners and if not done well could be a turn off for some.
Govindan said: "While we’re trying to bring in high-level, rich and high net
worth people to buy our property, we also have to make sure that we have a
proper maintenance culture."
This is also timely because the government was making efforts to improve
processes and was speeding up the delivery of services, including Immigration,
processing of applications and land transfers, he added.
Thong said one urgent measure could be the launching of roadshows by both the
government and the private sector to promote Malaysian real estate.
Tailoring some Malaysian property projects to meet the taste of foreign buyers,
especially the Japanese, Korean and Taiwanese, could go a long way towards
getting them to buy relatively cheap Malaysian assets, Lee said.
For example, the Japanese found property in some areas relatively cheap and were
willing spenders, but they refrained from buying because the projects failed to
complement their lifestyle.
Kumar said a successful marketing project was in Kudat where 40 villas were sold
only in London to high net worth buyers because it met their taste for £1
million (RM6.9 million) each.
He suggested that the government also attract international property agencies,
analysts and renowned real estate players to base offices in Malaysia.
They could be Malaysia’s best ambassadors abroad given their networking with
hedge funds and high net-worth individuals.
He called on the NEAC to bring together the over 800 developers, 5,000 real
estate agents, the three Islamic, 10 local and four international banks to help
market Malaysia’s real estate abroad.
Using real estate to attract investment  The roundtable discussion in Putrajaya
on June 20 sought to explore Malaysia’s potential as an international property
destination. A four-member panel from the public and private sectors — Datuk Dr
K. Govindan (KG), Tan Sri Thong Yaw Hong (TYH), Tan Sri Lee Kim Yew (LKY) and
Kumar Tharmalingam (KT) — with Business Times executive editor Rajan Moses (RM)
moderating the discussion, contributed their views. The initiative was
spearheaded by Minister in the Prime Minister’s Department Datuk Seri Mohd
Effendi Norwawi in anticipation of the prime minister’s announcement next month
on Malaysia’s plan to make its real estate sector globally competitive. Here are
excerpts of the discussion
RM: What prompted the government to work on a fresh initiative to make
Malaysia an international property destination?
KG: This has to be seen as much more than just property development. You
must see this as an attempt to restructure our economy.
We are trying to move into a knowledge-based economy and this fits in well with
our attempt to develop the services sector.
For instance, we want to push Malaysia as the centre for financial services,
including Islamic finance. This would be an excellent opportunity to provide a conducive
environment for foreigners to reside in Malaysia.
We have good property in suitable areas and the cost is relatively cheap.
However, we need to provide a good environment. What we’re trying to provide now
is a fresh approach, a fresh environment for high-end property.
THY: We have seen in the last few years that there was a decline in the
construction industry. Only towards the end of last year was there some positive
growth. The construction industry is a very important industry as it has a
multiplier effect, which impacts other activities.
LKY: The property industry is a very important catalyst for the growth of
our economy. That is why the government is focusing on this industry as it can
bring in long-term investments.
We allow foreigners to buy stocks in our companies. But in the stock market,
today they buy, by tomorrow they can get out easily.
But if you allow them to own property, they will continue to maintain the
property, pay taxes and assessments. If they own a hotel, they will help bring
in guests (from abroad).
Yes, Malaysia definitely has what it takes and has a big advantage in becoming
an international property destination.
Malaysia has very good products in terms of real estate. I like to describe them
as hardware and software.
First, the hardware. Look at the architecture, our buildings here, KLCC and the
Twin Towers are famous.
And Malaysia has already proven that it has very good infrastructure. Our
airport is excellent. Our landscape throughout the country, when you compare
with other countries, is green.
I think that we have very creative developers. We also have enough designers,
not only local, but also foreign designers coming here to create great products.
If you talk about the software side, to be an international property
destination, first you have to look at the culture.
We have a multi-cultural society. Secondly, it is the language. Bahasa Malaysia
is the national language but English is commonly used.
And I think, most importantly, if you look at other countries in the last 10
years, for example China or India, the time when their real estate boomed was
when their governments eased restrictions on foreigners buying real estate.
Malaysia already has a conducive legal and regulatory framework for foreigners
to buy (property).
KT: First we have to ask ourselves, are we an international property
destination now or in the future?
The answer is we already are an international property destination now. But our
problem is perception.
The perception is that we are not an international property destination. Purely
because we don’t tell our story often enough, hard enough overseas.
In the Jones Lang La Salle (real estate) transparency index, we are in tier two
with Japan. Why we are not in tier one is because our conveyancing takes too
long.
It takes three to four months to register a piece of real estate compared to
three days in Singapore.
But ownership, in terms of the delivery of the system of real estate is not an
issue, because we have the Torrent system of real estate.
In Southeast Asia, with the exception of Singapore, we have the most complete
real estate economic delivery system.
Nowhere else in Asia is it so cheap or efficient. But again, not many (abroad)
know this.
In Malaysia, with a five per cent deposit you can buy a house. In other parts of
the world, like India, deposits are almost 60 per cent.
In Indonesia, there are no housing development authority laws. Deposits can be
90 per cent.
In that context, our system of entry and exit is very transparent.
As an international property destination, we have the necessary building blocks.
The only thing is, we haven’t put a roof on it.
KG: Promoting property in a fresh (international) area gives us a good
opportunity to re-look some of our processes like legal, regulatory,
operational, even cultural.
Where do you want to place them (foreigners)? Should they be in one community?
Should they be dispersed? Which town? All these issues have to be thought
through.
We need to look at financing. How do we utilise our funds? Do we allow them to
bring more funds from abroad?
And, maintenance. We really have to look at how we maintain these places. We do
not have a good reputation for this and we’re trying to bring in high-level,
rich guys.
RM: Is the government serious about efforts to promote real estate?
TYH: I think the government is serious in its efforts to improve the
processes and speed up the delivery of services, including immigration,
processing applications and land transfers, as well as making the country a very
congenial place to live in.
RM: Is there a perception that crime and security are an issue,
especially in the south and some parts of KL and that this may deter property
investors?
LKY: Something must be done. I think crime happens everywhere in the
world. The important thing is what happens after the crime (has occurred).
If your bag is snatched, and you go to the police station and approach a police
officer (to make a report), he may be very busy.
You are just one of many who go and make police reports but to you, this report
is very important.
We need to address this. And once we correct this, tell the world that we can
solve problems very effectively.
KT: The perception is that the post-crime delivery system has failed in
Malaysia.
A few days ago in Melbourne, a city larger than Kuala Lumpur, a gunman shot
three people. Within 20 minutes the policemen were there; within 10 minutes an
ambulance arrived to take the injured to hospital.
The police cordoned off the area and advised the people not to leave their
offices. All of these were done within 45 minutes of the crime.
This is the delivery system that is lacking in Malaysia.
LKY: We must be seen doing something to repair this damage and improve
the security problem. This is an important thing for the government to do.
KG: There are many other ways to bring down crime as they have shown in
New York and Hong Kong. It is not just putting in more policemen.
There are other things which we can do, innovative ways of doing things. And the
Iskandar Development Region can be an example of how you can actually pre-plan,
rather than build a place, let the crime occur, and try to put in the police
station.
How do you strategise security into a regional development area? Gather
intelligence before you start. Where are the entry and exit points? Rather than
let five people get beaten up and then ask what should we do about it, the
approach should be preemptive.
There is scope for future developments like the Northern Region, Eastern Region
to adopt this.
RM: Do you have ideas about which cities or areas you want to promote to
foreign buyers?
KT: I think Kuala Lumpur, Johor Baru, Penang, Langkawi, Kota Kinabalu,
Kuantan, Cherating, Terengganu and Kuching .
The foreigners are not interested in going to remote areas. They want places
where there are facilities, entertainment and the ease of leaving and entering
the country.
We don’t have a direct advantage. Singapore is a hub, Bangkok is a hub, Hong
Kong is a hub. We cannot compete with China, we can’t compete with India.
But the competitive advantage is we are in a central location. For anybody
wanting to do business in Southeast Asia, Malaysia is the place to do it.
That’s the advantage. We know in the Asia-Pacific region there is tremendous
interest from countries like Japan, Korea and Taiwan.
RM: How can Malaysia tell its story better abroad?
KT: The fact is we don’t have enough international analysts in Malaysia
because there are regulations against allowing them in.
If we allow international analysts or firms to establish positions in Malaysia,
they would be your best ambassadors because they have control over hedge funds,
and high net worth individuals use them to invest their money.
Investment banks are also excellent ambassadors and we should get them involved
to market Malaysia.
LKY: The private sector and government must join hands and do promotion
and marketing.
KG: It all comes down to the question of research. Now we are talking
about promoting Malaysia, we need to understand what we are offering, what
people are complaining about, and what others are doing.
RM: Who should be charged with setting up of this government-private
sector partnership to promote Malaysia? And how do we brand Malaysia?
THY: I think it should be the NITF (National Implementation Task Force).
LKY: A private sector association like Fiabci (International Real Estate
Federation) should play a meaningful role to get market intelligence for the
government.
I would like to see our industry associations playing an important role
coordinating with the government on this.
KG: The branding should be "Living in a livable city in a rural
environment".
We need to have a strong public-private sector group which looks at issues
backed up by research. We need to understand the rules and regulations, what is
deterring the foreigners and how we can attract them.
LKY: Before talking about branding, we should ask ourselves: Are we well
known in the world?
We must spend our promotion money wisely and promote consistently.
We need to find niches and new ideas that no other country is using. Foreigners
are very impressed with the "Malaysia Truly Asia" slogan.
KT: We are the only Muslim-majority country in the world to have
democratic elections. We never had any coup like Thailand, the Philippines or
Indonesia.
And the story that Malaysia is a very safe and secure country doesn’t get told
often enough.
Crime happens everywhere. What we now lack is the post-crime delivery system. If
we do that right, we will find our image improving.
SpotLight: Opening doors to foreigners in real estate
MALAYSIA has all the ingredients to be an Asian haven for foreigners seeking to
buy real estate.
But industry experts say it is failing to seriously do so because of inability
on the part of local players and the authorities to package good deals.
They say what is needed is for the government to take the lead with the
private-public sector to communicate the international profile of local assets
to the right people abroad.
These people can then shepherd more offshore investments into what is seen as
relatively cheap value-for-money Malaysian property.
These include promoting local properties to foreign private-equity funds, or
global investment bank analysts whose critical views and connections can shape
international investor perception.
"Malaysia has a strong story which is not told. The effort
has to be led by the government," said real estate agency Zerin Properties chief
executive Previndran Singhe.
In a move to attract more foreign property buyers, Malaysia has in recent months
(December to April) introduced several landmark policies to make it easier for
them to own real estate.
These include allowing foreign purchasers to own or invest in as many houses
costing more than RM250,000 each as they want here without the Foreign
Investment Committee’s consent.
The authorities also scrapped the real property gains tax from April 2007 and
changed the rules to allow foreigners to take more than three loans to buy
property.
Developers, however, claim that efforts to liberalise foreign ownership of
properties was being hampered by slow processing at government department level,
at the state-level and at local council level.
According to the Real Estate and Housing Developers’ Association Malaysia, some
state authorities take up to 153 days to approve property transfers compared
with about 14 days in Singapore and Australia.
"The effort to promote Malaysian property must involve the government and all
industry stakeholders, including developers, valuers and architects," said Dr
Teoh Poh Huat, a director of property agency Henry Butcher Malaysia.
Meanwhile, analysts expect the liberalisation of the property market to put the
sector on a level playing field with regional countries.
This would mean Malaysia, where real estate is relatively cheaper, stands to
gain as it offers a lower entry point into the regional market.
"We believe the government’s latest move to abolish real property gains tax is
the turning point of opening up one of the heavily-guarded sectors in the
country.
"We expect property prices to accelerate at a faster pace in selected areas like
Kuala Lumpur, Penang and Johor," TA Securities Holdings Bhd analyst Kamarulzaman
Hassan said in a property sector report.
High-end property prices in Kuala Lumpur, Penang and Johor rose quicker at eight
per cent annually, surpassing the national housing price index’s average gain of
3.7 per cent.
Moreover, the gradual strengthening of the ringgit against the US dollar is also
good news for foreign buyers due to the potential foreign exchange gains, and
capital upside.
Meanwhile, the House Buyers Association said Malaysia needed to benchmark itself
against international standards to be a world-class property destination, said
association honorary secretary general Chang Kim Loong.
These include adopting the "build-then-sell" method (or its variant 10:90
approach) for new property transactions, and honing a more efficient
public-delivery system.
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