Builders eager for benefits to kick in

Builders eager for benefits to kick in

With the Government firmly behind the revamp of the public delivery system for the property sector, developers are hoping the bold initiatives will spawn an efficient and productive sector thus resulting in greater opportunities and growth. In the first part of a roundtable discussion with StarBiz deputy news editor ANGIE NG and journalist CHAN CHING THUT, chief executive officers of property companies are eager to see the new initiatives bearing fruit.

STARBIZ: Recently, the Prime Minister (PM) announced a series of new initiatives and measures to improve the public delivery system for theMinister (PM) announced a series of new initiatives and measures to improve the public delivery system for the property industry. How do you view the changes?

Ng Seing Liong: The announcement is actually a very bold step in the right direction to streamline the delivery system of the housing industry.

This is not new as the PM had started the ball rolling three years ago and the Housing and Local Government Minister Datuk Seri Ong Ka Ting has put all the facts together and made sure all the acts had to be streamlined.

We will now have to support the PM and the Minister to make sure that this works for the benefit of all of us.

StarBiz: What is the feedback from developers so far?

Ng: The first round of road shows launched by the Building Industry Presidents' Council (BIPC) had paved the way forward to educate developers.

Within the next two months, the Government is going downstream to educate all local authorities and employees of local councils on this delivery system.

Tengku Abdul Aziz Tengku Mahmud: To add on to what Ng said, the announcement seemed very bold and timely. This was something we had been looking forward to in the last one or two years. There have been announcements on the Certificate of Completion and Compliance (CCC) and this is now formalised.

As property developers, we are always looking at how to shorten the process from land management to marketing.


The panellists at The Star Property Roundtable on the new public delivery system are (from left): Sunway City Bhd senior managing director Datuk C. K. Wong, SP Setia Bhd group managing director and chief executive officer Tan Sri Liew Kee Sin, Fiabci Malaysia president Datuk Richard Fong, Angie Ng, Real Estate and Housing Developers Association president Ng Seing Liong; Guthrie Property Development Holding Bhd chief executive officer Tengku Abdul Aziz Tengku Mahmud and Bandar Utama Group director Datuk Teo Chiang Kok
In the past, we have seen approvals, for example, taking one or two years, or even longer.

With the commitment, the approval process would be shortened to six months. It would give us a very good timeline to plan - from land management to project design and construction.

This will certainly improve efficiency and make the work more effective. I hope this will translate into better costincentives, allowing us to design better products and be more efficient.

Datuk Teo Chiang Kok: Now, there is room for optimism; the rules of the game are clear.

We know all our procedures, deadlines and timelines. This is very important because uncertainty causes a lot of risk, especially in the property industry, which is cyclical.

When you have certainty of delivery, in terms of approvals and delivery, then at least you can manage the cycle of the property industry.

Datuk Richard Fong: : This new initiative shows that the Government is very serious in improving the delivery system for the property sector.

The top leadership has taken the first step in trying to remove all the delays and obstacles faced by the developers in obtaining approvals from the various government departments.


For local properties to have an international appeal, developers have to make sure they build buildings with international quality
Now, it is up to the civil servants to implement these policies. It is still too early to tell whether the implementation will be a success or not.

I expect the implementation of these policies will not be smooth. But the PM has made it clear that he wants the delivery system to improve.

We hope that the civil servants will consult and have more dialogue with us, the private sector, so that we can iron out these hiccups together.

Tan Sri Liew Kee Sin: This is something that all of us have been waiting for a long, long time.

For us in this industry, sometimes we can get approvals in three months or even two years. Sometimes, we don't get approvals and sometimes, we do not even know why we cannot get these approvals.

They do not give answers as to what is wrong with the plan or the procedures. By making it very clear and precise, hopefully, we can plan and execute better. We can bring our products to the market in a shorter time, which will cut down the holding cost on our land.

Definitely this will help the industry but I also agree with Fong that it will take some time before everything can be smooth, especially in big cities. I think the biggest problem will be Kuala Lumpur (KL), because there are so many things going on.

In smaller cities, it is easier to implement. For example, in Kota Bharu, Kuantan or Kuala Terengganu, they will help you with everything you want because they do not have much to do.

It is a matter of commitment and how they want to do it. It is a matter of workload and how we streamline it better.

Datuk Wong Choon Kee: We should all applaud the PM's directive and the Minister, who is very passionate on this subject. The PM wanted the property developers to help him along the way and fine tune, if necessary, the smaller parts of the initiatives.

However, these sweeping changes will need all parties from the federal and state government to work in unison. What the PM announced was a major paradigm shift from how business was done in the past 50 years.


The government needs to push Malaysia to become the regional headquarters for foreign companies so that foreign managers and executives will take up the high-end condominiums and properties in the country
Now, he wants approval to be given in four to six months. It is very difficult because of the mindset of the people in the local authorities and various states (which has control over land matters). It is not easy to de-control what they have been in control of for many years.

With timely approvals, we will be able to launch our products in a timely fashion, thereby cutting down unnecessary holding costs. We will try to pass these cost savings to house buyers.

I foresee most of us will be more efficient and competitive because of this new and more efficient Government administration. With the CCC certified by private consultants, things should move faster.

Developers should also applaud the Government on the build-then-sell (BTS) system.

We will look into BTS; it is not going to be easy but it is something that the Government wants us to do. We are very pleased that it is going to be a parallel system with the present sell-then-build (STB) system.

It is going to take a long time for property developers to really get into the swing of the BTS system because there are many agencies and banks, for example, that have not come forward with very supportive measures.

Ng: On the change in mindset, we need to go down to all the local councils. I also would like the Government to change the word “local authority” to “local government”.

We should take the word “authority'' out because the word is associated with power.

StarBiz: Has Rehda highlighted this to the Government?

Ng: Slowly, this is one of the steps that come to mind. So, the moment you can change the mindset, the whole scenario of the delivery system can have a nice follow-through.

The other matter is planning approval (referring to a comprehensive for the whole project).

Now, every planning approval only lasts for one year. If the architect delays the plan along the way or does not submit the building plan in time, you have to go back to square one, which is the planning approval stage.

Although all the titles are already subdivided, they still want you to go back and do a planning approval. Apparently, this is stated in the law, but if that is the case, then I think there is something wrong with it.

Teo: What happened was, about four or five years ago, they introduced the Town Planners Act. It required plans to be submitted for planning by town planners only, not by architects.

Due to that, new steps were introduced for planning approvals. Actually, it is a superfluous step.

Ng: That step has to be taken out because imagine a situation whereby we have all the subdivided titles and then suddenly, they want us to go back to step one of planning approval.

However, if we want to change the whole layout, it would be fair to seek planning approval.

StarBiz: This could be some of the processes that are hindering development and the industry must point it out to the Government.

Ng: The other thing that I want to point out is the building plan (referring to the respective phases of the project) stage. By right, they do not even need to approve the building plan because they are only collecting revenue.

As long as all the plans are in order, which means you follow all the by-laws, by right, we should submit the plan just for information and they just calculate the fee. Mind you, most local governments do not have a qualified person to check another qualified person's work.

Abdul Aziz: Just to add, the question is how detailed we want the authorities to check the building plans because that is when the problems start.

Whenever we start submitting building plans, there is the issue of manpower.

If an officer has a different comment and then another officer steps in, you will have another set of comments. This will keep going on.

The challenge is how to draw the other departments coming through because we have the local authorities and other bodies.

Besides, can we do it within that time frame?

Fong: On the implementation, the civil service will really have to work it out, but we fully support it.

Wong: We all support the Government and all its moves but we know it is a monumental task to change the mindset and get them to work together.

It can work if there is more dialogue with the private sector. The Government must see the private sector as a partner and not an enemy.

We must sit down, talk it out, improve the system and make it much better.

Liew: I think the Federal Government's point of view is very strong and that is beginning to carry through.

Teo: If we place more emphasis on people to act professionally, the level of suspicion can be reduced. I believe the attitude of the civil service being the centre servicing the ratepayers has to be there.

They have to realise that it is their duty to serve the community and not the other way round. It is a process of education and indoctrination.

Liew: Well, that is not quite true. For example, in Kelantan and Terengganu, they will do it for you. In fact, they are quite efficient. It is the mindset of the people. Perhaps people there are more simple-minded, friendlier and more open.

Perhaps, there are not many projects, so they are competing for investment. When they are competing for investment, they will be become friendly.

Wong: In Malaysia, we are restrictive in property development compared with other countries.

For example, in Singapore and Hong Kong, there is no such thing as Foreign Investment Committee (FIC) approval.

Until recently, FIC approval was required for property acquisitions.

Including approval from land office, as we all know, the time frame could be anything from three months to three years, on top of the normal process.

In Singapore, it could be one to three months, while in Hong Kong, it may even be shorter than one month.

In both countries, they are also very busy but the whole system is so well oiled and well-structured. In many respects, we need to change our structure.

StarBiz: What are some of the expected effects and changes on the property sector as a result of the latest Government initiatives?

Wong: First, it is the beginning of the internationalisation of Malaysian properties. Meaning, with the removal of the FIC approval and exemption from real property gains tax (RPGT), we will see more interest from foreign buyers.

I believe the Government will like to see more foreign investors into the country. Let's face it, we only have 26 million people but if you go down the line, maybe only five million people can afford to buy a home.

So, I think the Government has decided to make this change and it is very proactive. Of course, the gap in the prices of Malaysian property and other countries such as Singapore and the region is ever widening.

There is no reason for it because our homes are well built in fantastic locations.

Now, they make it easy for banks to allow lending to foreign buyers, as there is no more restriction. Eventually, our properties will inch up to the value of our neighbours, but it will not be so soon.

It will take a long time as we have some quite restrictive laws.

I was told Malaysia is the only country in the world where demand is restricted. How is that possible?

We have the FIC, the RPGT, bumiputera requirements and at one time, the banking system. Demand should be opened up.

You can restrict supply like in Singapore. When you control supply, you control the value, but demand should not be controlled.

We should open our country to investors. For our properties to have an international appeal, we have to make sure are of international quality and are on par with those in Singapore, Hong Kong and New York.

I think we are there already. We should also have international roadshows to showcase Malaysian properties.

In one word, we want to make Malaysia a property investment destination for foreigners, which we have not done for our country. I mean, we all do our bit for our launches but I think we should do it in a concerted manner.

StarBiz: A number of developers have taken their products to be exhibited in other countries, especially Singapore and Hong Kong.

Fong: We have been doing it individually. We should work as a team if we want to market the country.

Wong: For foreigners coming to invest in Malaysia, our properties must increase in value. When they buy an apartment, for example, they want to make sure they can rent it out for a good return.

For people with money, they can go anywhere.

For foreigners to come in to buy properties in our country, the yield must be good and there must be some appreciation in the value.

Otherwise, they will go and buy at other places.

Fong: With the RPGT waiver and the FIC ruling relaxation for foreign property buyers, we have seen the effect over the last two months.

Suddenly, there is ten times more interest in high-end properties from foreigners over the last few months than before.

StarBiz: So, the measures are working?

Fong: Yes. When I was in Singapore recently, speaking to foreigners from Hong Kong and Singapore, they were interested in Malaysian properties.

However, they are unaware of the opportunities because we have not been marketing the country. They do not know anything about the country.

StarBiz: As pointed out earlier, there are no broad-based initiatives and the industry needs to undertake holistic and concerted efforts like what Hong Kong or Singapore are doing.

Teo: However, that should not be in isolation. We foresee foreigners buying high-end properties, but who will take up high-end properties for rental?

The expatriates.

Therefore, on the other end, we need to create foreign direct investment (FDI). We also have to push Malaysia to become the regional headquarters for foreign companies.

We need the regional headquarters' managers and executives to take up the high-end condominiums and properties.

Therefore, it is the whole game; the holistic thing must work.

The developers just cannot push and if pushed too hard, there will be no take-up.

We can sell but there is no take- up.

So, the whole game must be looked at properly.

Liew: The expatriate community in Malaysia dropped tremendously over the last two years. I think it dropped 50% and the quality is also lower.

To get better yield, we have to attract a higher class of expatriates to live in this country.

Most of them are going downscale; some only get a few thousand in rental allowance.

It is the quality of expatriates we are hoping to attract.

It is not just this or that sector which must do well; all industries must do well.

On the point of concerted efforts to market Malaysia as a property destination, I believe it has to be backed by the Government.

A minister must be committed to this cause.

Wong: The problem is to find the best person and the PM is the better sales person.

Abdul Aziz: With regards to the Malaysia, My Second Home programme (MM2H), it is also an opportunity for us to tap into the market and for developers to attract these purchasers.

Presently, it is still very high-end. They go for multi-million ringgit properties in the Kuala Lumpur City Centre (KLCC) area but at the same time, there are areas outside Kuala Lumpur that we can invite them to see.

So far, however, there has not been a big interest for areas outside KLCC. Perhaps we can look at ways to create international zones, for example.

Teo: I agree with Abdul Aziz that tourism is actually the country's big earner and the spinoff is property development.

Tourism is our best bet because we are unique with some of our tourist attractions.

Our tourism ministry is working hard to market MM2H, which unfortunately is targeted at the lower end.

So, the whole thing again is a holistic look, either we want or do not want it. If we want it, then let's go and do it properly.

Otherwise, we'll go in all directions and waste all the resources and opportunities.