Stratified property owners given till December 31 to settle dues for 2019
Chow (second right) with (from right) Jagdeep
Singh, State Land and Mines office director Akmar Omar and State
Secretary Datuk Seri Farizan Darus, showing the new bills for the parcel
rent in Komtar, Penang.
OWNERS of stratified properties will now have to pay parcel rent directly to their respective district and land offices.
Chief Minister Chow Kon Yeow said the billing for parcel rent, replacing quit rent, would be sent out to all parcel owners next month through their respective management corporations.
“Previously, it was paid by the respective management corporations of stratified properties.
“Since the bills will be sent out late, parcel owners are given until end of this year to pay up although the deadline is usually May 31 each year,” he told a press conference at Komtar on Friday.
Chow said the parcel rent came into effect since January this year.
He said the rates for parcel rent would be based on the size of each unit, while quit rent was based on the total plot of land which the building was built on.
“Parcel owners will need to update their addresses with the respective district and land offices when paying their parcel rent this year,” he said, adding that the parcel rent billing for next year will be sent to their addresses.
Citing an example, Chow said the total quit rent collected from a specific stratified property last year was RM28,268.
“The collection in parcel rent for the same property will be lesser at RM24,239, as it will not take into account common areas, unlike for quit rent,” he said.
State housing, town, country planning and local government committee chairman Jagdeep Singh Deo, who was also present, said the arrears for quit rent has amounted to RM65mil to date.
Parcel owners are advised to update their mailing addresses at the land and district office or online at etanah.penang.gov.my
In troubled waters: An artist’s impression showing where the tunnel project will start on the island.
Land swap under MACC scrutiny
PETALING JAYA: The Malaysian-Anti Corruption Commission (MACC) probe into the controversial Penang undersea tunnel is focused on land swaps that were made for the feasibility and detailed design study which has yet to be completed.
Sources said investigators are scouring documents involving two plots of land – Lot 702 and Lot 713 in Bandar Tanjung Pinang – with a size of 1.48ha and 2.31ha respectively.
The value of Lot 702 is around RM135mil while Lot 713 is around RM160mil.
It is learnt that both parcels of land have since been mortgaged to banks to obtain financing. The state government has also authorised planning permission on both parcels of lands.
“The state government paid the consultant for the feasibility studies by means of two land swaps. The cost for the feasibility study is around RM305mil.
“It has become an issue on why the study cost was inflated so much when it should have been an estimated RM60mil,” sources said, adding that determining the inflation and the reason behind it were among the challenges faced by the investigating team.
The sources also said that the graft-busters have their sights targeted on “somebody” who has been enjoying kickbacks and entertainment from the deal.
The feasibility and detailed design study is for the 7.2km undersea tunnel connecting Gurney Drive on the island to Bagan Ajam in Seberang Perai.
It is part of the RM6.3bil mega project comprising a 10.53km North Coastal Paired Road (NCPR) from Tanjung Bungah to Teluk Bahang, the 5.7km Air Itam–Tun Dr Lim Chong Eu Expressway bypass and the 4.075km Gurney Drive–Tun Dr Lim Chong Eu Expressway bypass.
Yesterday, the investigating team also questioned four officers from several state government agencies on the land swaps.
Sources added that the anti-graft agency also raided a property agency office in Penang and carted various documents away. It is learnt the chief executive officer of the company was not around during the raid.
MACC deputy chief commissioner Datuk Seri Azam Baki said his investigating team has yet to call in any witnesses for the case as they are still conducting a thorough study on the seized documents.
He added that the officers would still be obtaining more documents from the companies involved and also from the state government.
Two bosses of construction firms held for six days as MACC investigates project
Taken away: Officers escorting one of the men out of the courthouse in Putrajaya.
MACC digs deeper
A swap involving two parcels of land worth close to RM300mil is in the spotlight as the MACC intensifies investigations into claims of corruption in Penang’s undersea tunnel project and several accompanying highway projects. Two ‘Datuks’ have been remanded and several key officials in companies and agencies involved in the project have been questioned. But Chief Minister Lim Guan Eng says the project will go on.
GEORGE TOWN: Chief Minister Lim Guan Eng says the undersea tunnel project, now the subject of a corruption investigation, will proceed unless there is a court order to stop it.
He said he was baffled by yet another investigation into the project as the Malaysian Anti Corruption Commission (MACC) had been conducting an investigation into the RM6.3bil mega project comprising the tunnel and three other highways since 2016.
“What are they investigating now? Is it because of the looming general election?
“The project was awarded via an open tender overseen by international accounting firm KPMG.
“Still, I have instructed everyone involved to give their full cooperation to the MACC in its investigation as we have nothing to hide,” said Lim at a press conference at Komtar yesterday.
On Tuesday, graft-busters arrested two “Datuks” involved in the controversial Penang undersea tunnel project to help in investigations into claims of corruption.
The duo, who were picked up in Putrajaya and Penang, have since been remanded for six days to facilitate the probe.
The anti-graft agency raided the offices of four state government agencies – the Penang Public Works Department, Penang State Secretary, Penang Office of Lands and Mines and Penang Valuation and Property Services Department – and three property development and construction companies – Ewein Zenith Sdn Bhd, 555 Capital Sdn Bhd and Consortium Zenith Construction Sdn Bhd’s Penang office.
MACC officers also questioned several officers in charge of the respective agencies and companies. Sources familiar with the investigation said the probe into the undersea tunnel project was also zooming in on land swaps.
Ewein Zenith is a joint-venture vehicle of Ewein Land Sdn Bhd and Consortium Zenith BUCG Sdn Bhd.
The latter is a Malaysia-China joint venture that was awarded the RM6.3bil mega project to build the 7.2km undersea tunnel connecting Gurney Drive on the island to Bagan Ajam in Seberang Prai, a 10.53km North Coastal Paired Road (NCPR) from Tanjung Bungah to Teluk Bahang, the 5.7km Air Itam–Tun Dr Lim Chong Eu Expressway bypass and the 4.075km Gurney Drive–Tun Dr Lim Chong Eu Expressway bypass.
Consortium Zenith BUCG changed its name to Consortium Zenith Construction Sdn Bhd on Jan 18 last year after the withdrawal of Beijing Urban Construction Group (BUCG).
In a related development, Vertice Bhd (formerly known as Voir Holdings Bhd) said the current investigation by the MACC will not impact the progress of the undersea tunnel project.
It said the project was an integral component of the Penang Transport Master Plan and that the role of Consortium Zenith Construction as the main contractor would remain.
Consortium Zenith Construction is a 13.2% associate company of Vertice. PUTRAJAYA: Two high-ranking bosses of development and construction companies have been remanded for six days as graft investigators continue their probe of the Penang undersea tunnel project. The two “Datuks” were held here and in Penang before being brought to court.
A 59-year-old businessman was brought to a magistrate’s court here at 9.40am yesterday and remanded for six days until Monday to help with the Malaysian Anti-Corruption Commission’s (MACC) investigation.
Magistrate Fatina Amyra Abdul Jalil allowed MACC prosecutors’ remand application although the Datuk’s lawyer Hamidi Mohd Noh objected, arguing that there was no need for his client to be held.
“I told the court that my client has been cooperative with the MACC.
“I would also like to point out that my client is innocent and his remand is only to assist the investigation,” he told reporters after the proceedings.
The MACC had initially asked for the Datuk to be held for seven days but the magistrate only allowed six days.
He was arrested at the MACC headquarters at around 8.45pm on Tuesday after being called for his statement to be recorded.
In George Town, another Datuk was brought to court for a remand application at 11.40am.
He was handcuffed and wearing MACC’s orange lock-up T-shirt with black pants when he arrived at the courthouse escorted by MACC officers.
The 49-year-old appeared calm and smiled to reporters but did not say anything before he was led inside.
Deputy registrar Muhammad Azam Md Eusoff granted a six-day remand order and the businessman was escorted out of the courthouse about 30 minutes later.
The case is being investigated under Section 16(a)(B) of the MACC Act 2009 for bribery.
It is also believed that one of the Datuks remanded yesterday tested positive for drugs.
On Tuesday, MACC personnel raided the offices of four state government agencies – the Penang Public Works Department, Penang State Secretary, Penang Office of Lands and Mines and Penang Valuation and Property Services Department – and three property development and construction companies believed to be related to the case.
The project involves a plan to bore a 6.5km tunnel below the seabed to connect north Butterworth and the island.
The tunnel is to connect Bagan Ajam, a mature suburb of about 5km from the Butterworth ferry terminal, to the end of Gurney Drive near the Pangkor Road junction on the island.
Connected to the project are three paired roads to be built on the island as a traffic dispersal system to cope with the traffic that the tunnel would bring to Gurney Drive, which is already densely developed.
The three paired roads are from Teluk Bahang to Tanjung Bungah, from Pangkor Road to the Tun Dr Lim Chong Eu Expressway – part of this stretch will be underground – and from Air Itam to the expressway near the Penang bridge.
To finance the construction, projected to cost RM6.3bil, the state government is giving payment in kind of 44.5ha of state land to the contractor, Consortium Zenith Construction.
Chief Minister Lim Guan Eng told the state assembly in 2014 that the land was valued at RM1,300 per sq ft and the project, ending with the tunnel, is scheduled for completion in 2025.
It was reported last March that RM135mil worth of land had been given to the contractor as payment to fund the feasibility studies and detailed studies.
A public-listed company announced in January 2016 that it had secured an agreement to buy 20.2ha of the land from the contractor over 10 years at RM1,300 per sq ft.
It is believed that the MACC is looking into why the state government allowed the contractor to presell state land despite delays in the project construction.
More to be called up for questioning
GEORGE TOWN: Investigations into allegations of corruption in the proposed Penang Undersea Tunnel project are expected to deepen with more people likely to be called up for questioning.
A source in the Malaysian Anti-Corruption Commission (MACC) said the focus was on the feasibility and detailed design study, which had been paid for but not completed.
“We will call in more people involved in the project to assist in investigations into the study,” the source said.
He declined to comment on whether more arrests would follow after two “Datuks” were remanded for six days yesterday to help in the investigations.
The two were remanded in George Town and Putrajaya for investigations into the corruption allegations.
The MACC source declined to share details on evidence collected that led to the remand of the two Datuks yesterday but confirmed that it was about the delayed feasibility study and detailed designs.
The feasibility, detailed design studies and environmental impact assessment was reported to cost RM305mil with RM220mil already paid. Since 2015, NGOs, government agencies, political parties and state assemblymen had asked about the payment and studies, only to be met with replies they considered unsatisfactory.
Last July, the Works Ministry and Board of Engineers Malaysia (BEM) repeatedly asserted that Penang significantly overpaid, by four times, design fees involving three roads.
Barisan Nasional strategic communications director Datuk Seri Abdul Rahman Dahlan sought the professional opinion of BEM, and it was reported that BEM replied that the detailed design costs were four times higher than the maximum allowed under the gazetted scale of fees based on the total project cost.
Last August, the state government declared that the feasibility studies would be ready by September.
In October, however, Works Minister Datuk Seri Fadillah Yusof said his ministry “had not seen a single page” of it.
MACC to make more arrests - Penang undersea tunnel project
More arrests are likely in the investigations into claims of corruption in Penang’s RM6.3bil project involving an undersea tunnel and three highways after MACC officers raided 12 more places and took statements from a dozen witnesses. They are looking into an agreement on payments to the concessionaires but Penang Chief Minister Lim Guan Eng says there was no wrongdoing and that not a single sen has been paid for the undersea tunnel project.
PETALING JAYA: Investigators looking into the allegation of corruption in the Penang undersea tunnel project are said to be thoroughly looking through the papers related to the contract for the feasibility study for the undersea tunnel.
“The agreement looks suspicious and the feasibility study for the mega project does not exceed RM305mil as announced by the state government,” sources said.
“The state government might have made a payment which is way different than the real value of the study,” they said.
On Thursday, The Star reported that the graft-busters were zooming in on the land swaps of two plots of land in Bandar Tanjung Pinang.
The sources also say that the reclaimed land for the land swaps were of high value for development. It is believed that the state JKR has set the value for the study and that allegations of misappropriation were raised when the value that was paid far exceeded the initial value.
To finance the construction of the tunnel and three paired roads on the island, projected to cost RM6.3bil, the state government is giving payment in kind of 44.5ha of state land to the contractor, Consortium Zenith Construction.
Chief Minister Lim Guan Eng had told the state assembly in 2014 that the land was valued at RM1,300 per sq ft and the project, ending with the tunnel, is scheduled for completion in 2025.
It was reported last March that RM135mil worth of land had been given to the contractor as payment to fund the feasibility studies and detailed studies. However, the study has not been completed although the land has been handed over.
A public- listed company announced in January 2016 that it had secured an agreement to buy 20.2ha of the land from the contractor over 10 years at RM1,300 per sq ft.
It is believed that the MACC is looking into why the state government allowed the contractor to presell state land despite delays in the project construction and the study.
Source: The Star Malaysia reports by MAZWIN NIK ANIS and INTAN AMALINA MOHD ALI
TWO IN COURT: Abd Latif (right) being brought to the Johor Baru Sessions
Court by anti-graft officers. He is alleged to have abetted property
consultant Amir Shariffuddin Abd Raud (left) in the land development
scandal.
After weeks of investigation, state executive councillor Datuk Abd Latif Bandi is finally brought to court to face 33 counts of graft. The land and housing scandal - one of Johor’s biggest corruption cases - is however set to widen as graft busters warn of more suspects to be charged soon.
MACC expected to haul up more people in land and housing scandal
JOHOR BARU: One of the state’s largest corruption scandals is about to get bigger as more people are expected to be hauled up to court in the coming weeks.
Malaysian Anti-Corruption Commission (MACC) deputy chief commissioner (operations) Datuk Azam Baki said they might be charged with the case involving Johor executive councillor Datuk Abd Latif Bandi either this month or next.
Among those to be charged, he said, were those who had been arrested previously.
However, he declined to reveal their names so as not to jeopardise MACC’s investigation, saying that no VIPs were involved.
“We are in the midst of completing our probe with the Deputy Public Prosecutor before charging them in court soon,” he told reporters after meeting MACC investigation director Datuk Simi Abd Ghani and Johor MACC director Datuk Azmi Alias here yesterday.
Azam said it was also possible for Abd Latif, who was jointly accused with property consultant Amir Shariffuddin Abd Raud of committing 33 counts of graft yesterday, to face another round of charges then.
It was reported that eight suspects, including Abd Latiff ’s eldest son as well as his special officer, were nabbed by the MACC on Feb 24.
Anti-graft officers detained them after sifting through stacks of documents seized from the state government and developers.
They also seized luxury goods, including 21 cars such as Bentley, Mercedes-Benz and Porsche, five high-powered motorcycles and 150 handbags.
On its probe into the purchase of real estate in Australia by Mara Incorporated Sdn Bhd, Azam said MACC called up 24 witnesses and visited seven premises, including a law firm, the offices of both Mara Inc and an appraiser, and their associates.
“All related documents have also been seized. We have gathered more new information, and it is a continuous investigation from the previous case in 2015,” he said.
“We need more time to complete this case as it involves another country.
“We have put in a request under a mutual legal assistance with the Australian AttorneyGeneral’s office but have yet to receive any response.
“We will also prepare the documents to be sent to Australia,” he said.
MACC had previously recorded the state- ment of suspended Mara chairman Tan Sri Annuar Musa over the same investigation.
Annuar also handed over several documents relevant to the case.
The issue came to light after Australian newspaper The Age claimed that several senior Mara officials and a former politician had spent millions of Malaysian Government funds to buy an apartment block, known as Dudley International House, in Melbourne
Azam said his officers were also in the midst of preparing a report into alleged match fixing by football players from the Malaysian Indian Sports Council-Malaysia Indian Football Association.
“We expect this case to be completed within two to three weeks after we hand over the report to the deputy public prosecutor for charging.
Source:The Star headline news
Slapped with 33 counts of graft
JOHOR BARU: State executive councillor Datuk Abd Latif Bandi has been charged in the Sessions Court here with 33 counts of graft, the earliest of which stretches back to just six months after he assumed office.
TWO IN COURT: Abd Latif (above) being brought to the Johor Baru Sessions Court by anti-graft officers. He is alleged to have abetted property consultant Amir Shariffuddin Abd Raud (below) in the land development scandal.
Abd Latif, 51, was sworn in to his post as Johor Housing and Local Government Committee chairman in 2013 and according to the list of charges, he allegedly abetted property consultant Amir Shariffuddin Abd Raud on Nov 13 that same year to convert bumiputra lots into non-bumiputra lots.
Yesterday, the court interpreter took about 15 minutes to read the list of charges to each of the accused in the case, considered one of the biggest corruption scandals in the state.
In total, Abd Latif is said to have abetted Amir, 44, to convert 1,480 houses.
He is also accused of helping to reduce the quantum of payment that developers had to contribute towards the Johor Housing Fund for converting these lots.
The offences, the last of which supposedly took place on Sept 13, 2016, involved payments of between RM100,000 and RM3.7mil.
Totalling some RM30.3mil, this involved development projects in Kota Masai, Tebrau, Kulai, Kempas, Nusajaya and Johor Baru.
Among the converted lots were apartments, double-storey terrace homes, cluster houses, cluster industrial lots, semi-Ds and bungalows.
Abd Latif was charged under Section 28 (1) (c) of the Malaysian Anti-Corruption Commission (MACC) Act for abetment, which was read together with Section 16 (a)(B) for accepting bribes.
Amir was charged with 33 counts under Section 16 (a)(B) for accepting bribes for himself and Abdul Latif.
Judge Mohd Fauzi Mohd Nasir set bail at RM2mil in one surety for each of the accused and ordered their passports to be surrendered until the trial was over. He also fixed May 23 for mention.
At press time, only Amir posted bail while Abd Latif, who was unable to raise the amount, was sent to the Ulu Choh detention centre.
Earlier, 15 minutes after Abd Latif and Amir were ushered into the packed courtroom, a defence lawyer stood up and asked for their “Lokap SPRM” orange T-shirts to be removed.
Both Abd Latif, who took time to hug and shake the hands of several people, and Amir then changed into long-sleeved shirts.
Abd Latif was represented by a six-man legal team led by Datuk Hasnal Rezua Merican while two lawyers, headed by Azrul Zulkifli Stork, stood for Amir.
The case was prosecuted by MACC director Datuk Masri Mohd Daud, with assistance from Raja Amir Nasruddin.
Source: The Star by Nelson Benjamin and Norbaiti phaharoradzi
Environmental issues: IJM and Genting have interests in palm oil operations.
Norwegian fund to call off investments on environmental issue
PETALING JAYA: Norway’s US$871bil sovereign wealth fund Norges Bank has excluded IJM Corp Bhd and Genting Bhd from its investments due to risks of “severe environmental damage”.
Two other companies that the fund said it would not invest in are South Korean steelmaker POSCO and Daewoo International Corp, a trading company and listed subsidiary of POSCO.
“Norges Bank has decided to exclude the companies IJM Corp, Genting, POSCO and Daewoo International Corp from the investment universe of the Government Pension Fund Global.
“The companies are excluded based on an assessment of the risk of severe environmental damage,” it said in a statement. Both IJM Corp and Genting have interests in palm oil operations.
According to the fund’s website, it held US$46mil investments in IJM Corp and US$40.8mil in Genting.
The fund also has investments in IJM Land Bhd and Genting Malaysia Bhd.
The world’s top sovereign wealth fund has a range of ethics criteria for excluding firms from its portfolio, including environmental factors, nuclear weapons-making and labour conditions.
A handful of Malaysian companies are also on Norges Bank’s list of “exclusion of companies”, including WTK Holdings Bhd, Ta Ann Holdings Bhd, Lingui Development Bhd and Samling Global Ltd.
Norges has been one of the largest foreign fund investors in Malaysian equities since 2010. As at end-2014, the fund had invested about US$1.66bil in 139 Bursa Malaysia-listed companies. - Starbiz
Norwegian fund Norges allots RM800mil to invest in Malaysian small, mid-cap stocks
The foreign fund has invested about RM1.7bil in 53 Bursa Malaysia-listed companies.
PETALING JAYA: Norwegian fund Norges has allotted RM800mil more to invest in small to mid-cap stocks in Malaysia.
A market source said the foreign fund appointed Eastspring Investments Bhd about a month ago and was investing in general equity, with a preference for the small to mid-cap equity space.
“There are no specific guidelines as to which sector Norges is keen on. It wants to look at good companies and it so happens the local small and mid-cap space is doing well this year,” the source said.
Norges has been one of the largest foreign fund investor in Malaysian equities since 2010.
In April, StarBiz reported that the foreign fund had invested about RM1.7bil in 53 Bursa Malaysia-listed companies, managed by Kenanga Investors Bhd.
At the time, the fund was already sitting on a paper gain of some RM600mil, with its entire holdings in Malaysia valued some RM2.3bil. Its performance in Malaysian equities was attributed to the big run-up in many of the small oil and gas companies since last year.
The source added that Norges was still looking for more fund managers to manage its investment in Malaysia.
“It has always had this allocation for Malaysia which it had not entirely fulfilled yet. So it is continuously looking for fund managers,” the source said.
PublicInvest Research in its strategy note for the second half of 2014 said smaller-capitalised stocks in Malaysia have had a good run year-to-date, reflected by the FBM Small Cap Index’s 18.6% gain compared with the FBM KLCI’s 0.3% gain and FBM Mid 70 Index’s 1.2% rise.
Eastspring Investments had about US$105bil (RM334.2bil) in assets under management as at March 31.
The asset management house was named Asia’s leading retail fund manager for 2013 in an annual survey by Asia Asset Management.
Norges, also referred to as the Norwegian oil fund, has a market value of 5,038 billion kroner (RM2.73 trillion) as of end-2013.
Norges is managed by Norges Bank Investment Management, the asset management unit of the Norwegian central bank.
As of end-2013, it is invested in 8,000 stocks in 82 countries and owns 1.3% of the world’s listed companies, delivering annual returns of 5.7% since 1998. - ByLIZ LEE Starbiz
Norwegian fund nibbling at Malaysian small and mid caps
PETALING JAYA: Norway-based Norges, one of the largest foreign funds investing in Malaysian equities, has been nibbling small to mid cap stocks that offer exciting upside here.
It has taken up small stakes in 53 Bursa Malaysia-listed companies, with total investments of around RM1.7bil, according to a fund manager.
Norges has a market value of 5,038 billion kroner (RM2.73 trillion) as of end-2013.
Norges began investing heavily in the Malaysian market since 2010 and is now sitting on a paper gain of some RM600mil, giving its entire holdings in Malaysia a value of some RM2.3bil.
Among Norges’ investments are a string of mid-sized oil and gas firms such as Alam Maritim Bhd, Daya Bhd, Scomi Energy Services Bhd and Barakah Offshore Petroleum Bhd.
It has even invested in special purpose acquisition companies Sona Petroleum Bhd and Cliq Energy Bhd.
“An investment from Norges is a positive endorsement from an independent party. It shows that the company has fulfilled the international standards of a foreign sovereign fund,” said one fund manager, who tracks Norges’ movements.
In Malaysia, Norges’ appointed fund manager since 2010 has been Kenanga Investors Bhd. Every year since then, sources said that Norges had allocated Kenanga at least RM150mil as it was pleased with its local counterpart’s performance.
Prior to Kenanga Investors, Norges’ appointed fund manager was RHB Investment Bhd.
“Kenanga Investors has been investing in small and mid caps even before the recent run-up in such companies over the last one year. The big run-up in many of the small oil and gas companies has significantly enhanced Norges’ performance here,” said a fund manager familiar with Norges’ strategy.
This indicates that Norges has a lot of interest in the sector, which isn’t surprising considering that Norges itself has gained its funds from the oil and gas revenues of Norway’s state-owned pension fund.
Aside from oil and gas stocks, Norges has also invested in other sectors such as banking and property.
“The reason it has done well is because it identified mid cap investing very early on. While the Employees Providents Fund (EPF) only articulated its interest in investing in mid-sized companies last year, Norges has been doing that for the last 3 to 4 years,” said the source.
Last June, EPF chief executive officer Datuk Shahril Ridza Ridzuan said it was looking at making investments in 40 mid-cap stocks, adding that the fund was already invested in a number of mid-sized companies.
He said the EPF was happy to support companies that fulfilled its investment criteria, which include having ample liquidity, the ability to generate cash flows and dividends, and having good corporate governance practices in place.
Slightly differing from the EPF which oftentimes take substantial stakes, Norges has a policy of not going beyond 3% in any particular stock, sources said.
“Norges is in the business of portfolio management. It isn’t in the business of running companies,” said the source.
Norges, also referred to as the Norwegian oil fund, is managed by Norges Bank Investment Management, the asset management unit of the Norwegian central bank. Norges is mandated to hold 60% in stocks and 35% in bonds, and is aiming to build up a 5% holding in real estate.
As at end-2013, it is invested in 8,000 stocks in 82 countries and owns 1.3% of the world’s listed companies. Between 1998 to 2013, Norges has been delivering annual returns of 5.7%.
Strata regime: Return on investment will always be a consideration as higher cost would certainly affect the possible margin of profit in today’s buyers’ market.
Counting the cost: Investors' profit margin may be affected under new law
PROPERTY has topped the list of investment options for those who have extra cash. Property investors and those who prefer other instruments, are trying to gain maximum returns on their hard earned money.
Property investment has gained momentum because of the price boom in the last 10 years as seen by the massive development and high take-up rate.
Because the bulk of these properties are stratified residential properties, legislations have been updated for a more efficient delivery of strata titles. Essentially, these new legislations provide more protection to house buyers.
Among these are the Housing Development (Control and Licensing) (Amendment) Act 2012 (“HDAA”), Strata Titles (Amendment) Act 2013 and Strata Management Act 2013 (both “Strata regime”). The Strata Management Act came into effect on June 1, 2015.
Return on investment will always be a consideration as higher cost would certainly affect the possible margin of profit in today’s buyers’ market. While having new legislations are good news for house buyers, these new legislations could also impact the cost of any investment in strata residential property.
For a start, there is now higher compliance cost for the housing developers, as there is an increase in the amount to be deposited in the housing development account.
There is also the new requirement to maintain the common property defects account prior to the delivery of the keys to the house buyers.
This means that under the new regime, developers will have a higher compliance cost, which may indirectly result in fluctuations of property prices. This means developers need to be financially strong and there is the possibility that they may incur financial costs as they try to maintain a feasible and sustainable cash flow.
This will discourage the smaller players. Having fewer choices is definitely not good news for the investors.
In addition, there is also a higher transactional cost for those who plan to flip their properties.
The earlier issuance of strata title upon delivery of vacant possession will require investors to fork out expenses related to the stamp duty before selling the completed property to the next buyer.
In other words, there is no longer savings on the stamp duty on transfer for those investors who bought directly from the developers. This lowers the return on investment, not to mention having to bear with the longer and complicated process of double transfers for those who are eager to dispose of the property on delivery of vacant possession.
The new template of the prescribed sale and purchase agreement HDAA (Schedule H) also requires that the payment shall be in compliance with the schedule of payment and no person shall act as stakeholder to collect such payment.
In simpler sense, the developer is no longer allowed to collect booking fee from the investors for their preferred unit and the unit they have selected is only secured upon the signing of the sale and purchase agreement with the 10% payment.
As such, there is no turning back once you have signed on those dotted lines and there is no way to secure your unit of choice with lower amount while you are working on the full 10% deposit.
Another cost that will burden property investors is the maintenance fees charged by the management office when they get their keys to their properties. The new strata regime has provided for the possibility of limited common property usage and the exclusive use of certain facilities – a privilege – which comes with a price tag. If the management adopts any limited common property, they are looking at a two-tier service charges and sinking fund, with one for those who have the use of one set of common properties and the other for the use of limited common property, to be enjoyed only by a selected few.
Despite monetary cost, time cost is also a factor for investors. A purchase into a strata development now calls for more involvement in the management as the management corporation of the development is formed much earlier now with the possibility of having the title and the keys delivered at the same time.
The new strata regime requires the active participation of all owners, as the tenure of the office bearer is limited. Other owners are required to sit in the management corporation committee on subsequent years. Despite the fact that taking up the responsibilities of committee members offers monetary gains, any misconduct or negligence may now result in a penalty.
The new restrictions on advertisement and representation by the developers also mean that the investors are required to spend time on research and do their own due diligence to better understand the investment. There is no longer permitted representation such as time/distance from a particular venue, projected monetary returns/gains and rental income. Thus, before making decision to invest, the consumers have to do more personal research on the investment.
While property investment remains feasible over the longer term, investors are advised to take these legislations into consideration to come out with a realistic projection of investment return.
LOTS of people shy away from financial planning because they think they may be pressured into investing. And when you think investing, what comes to mind are horror stories of people who lost their life savings during the Asian financial crisis and Dot Com Bubble.
We hear tales of greed and chasing the hottest sexiest investment themes that has led them down the path of poverty and for some great debt due to leverage.
Admittedly, in the wealth management business, investments do form a large part of conversations that happen between ourselves and our clients.
For the most part, people speak to financial planners or wealth managers about how to make their money grow faster so they can meet their goals.
How much return can I get?
What can I get if I invest in equities?
How about properties?
How can I start investing in currencies?
When people engage in a conversation about investments, inevitably, we get seduced by the quest to find the highest yielding asset. We steer into instruments we are not familiar with, drawn by the allure of high headline returns.
Think dotcoms. Think gold investments. Think land investments. Think bitcoin. Not necessarily bad investments but the basic concept of risk and diversification fall by the wayside as we chase returns.
But, step back for a moment.
Are you asking the right question?
Is financial planning only about finding the next best investment?
While investing will likely play a key role in your financial plan, there are a lot more questions that need to be answered before you can choose the right investment, or if you even need to invest aggressively.
First question, how much do you need?
Second question, when will you need it?
Third question, how much have you set aside or are prepared to set aside?
Last question, what returns are you going to get?
So say, I would like to buy a property in five years, of which I plan to make a downpayment of RM50,000. I have currently set aside RM10,000. I can currently save RM500 monthly.
Let’s assume I have no experience investing and decide to place it in fixed deposit at 3% per annum. Doing my maths, after five years, with interest compounded, all this adds up to only RM43,000. You are RM7,000 short.
In such an example, most people approach an adviser to find out what could yield them higher returns. In the above example, any misadventures in your investments could possibly set you back in your acquisition of your next property.
What if this was your children’s education? You may not want to risk your child entering university two years late. These are things your adviser needs to know as there other alternatives.
Financial management is very much about balancing between these four requirements. While getting higher returns so you can meet your goal is one way, it’s not the only way! You have other options. So, let’s go back to the four questions.
Firstly, you could buy a cheaper property with RM43,000.
Alternatively, you could wait another year to purchase that property, giving you more time to save up.
Or, you could increase your monthly savings to RM600 at 3% per annum.
Lastly, consider investing in something that yields you 7% per annum.
So, really, out of four options, only one is about investing.
For the most part, investing plays quite an essential role in most people’s portfolio. However, before you even have that discussion, think about the goals you want to achieve and whether investing is required and what kind of investment performance is needed.
By Ong Shi Jie
For the most part, investing plays quite an essential role in most people’s portfolio. However, before you even have that discussion, think about the goals you want to achieve and whether investing is required and what kind of investment performance is needed, says Ong.
Ong Shi Jie (CJ) is head of wealth management, OCBC Bank (M) Bhd.
