City&Country: Cover Story-- Playing catch-up

It is easy to dismiss Segambut Dalam’s potential based solely on a drive through the neighbourhood located in the north of the Kuala Lumpur city centre.

As one drives down Jalan Kiara 3 in Mont’Kiara towards Segambut Dalam, luxury condominiums, lavish bungalows and landscaped grounds give way to a narrow two-lane road (Jalan Kiara 3 and Jalan Segambut) flanked by rows of squatter homes with rusty zinc roofs and modest self-constructed houses in Kampung Segambut Dalam.

Chickens roam the neighbourhood, oblivious to the vehicular and pedestrian traffic during rush hour. In the late afternoon, children can be seen running or pedalling around the area while some residents sell fresh produce from shops on both sides of the road. If it weren’t for the traffic, one would think one were in an idyllic village far away from the city.

According to Kuala Lumpur City Hall (DBKL), the Jalan Duta-Sungai Buloh Expressway acts as the border between Mont’Kiara and Segambut Dalam. However, a sizeable portion of the land before the border remains undeveloped and is littered with kampung and squatter homes.

Mont’Kiara itself was part of Segambut before Datuk Alan Tong acquired 100 acres of rubber plantation land in the early 1990s and transformed it into the high-end enclave it is today.

Since then, exuberant building and development has spread towards Segambut Dalam, leading to the renaming of certain areas. Dutamas, which is situated to the east of Segambut Dalam, is one such area.

Set among the squatter and kampung houses, however, are newer urban developments. For instance, sandwiched between rows of kampung houses is Kiara 3, a modern 24-storey, 160-unit condominium project developed by Yuk Tung Group while further down the road is the high-end development by Pembinaan Purcon (M) Sdn Bhd called Laman Damaisari. This comprises bungalows and semi-detached houses going for more than RM3 million on the secondary market.

Laman Damaisari was launched in 2009 at RM2.5 million per unit onwards while Kiara 3 was launched in 2008 at RM495 psf onwards. In fact, a number of established developers own parcels of freehold land here, including Bina Puri Holdings Bhd, Hunza Properties Bhd, UOA Development Bhd, Yuk Tung Group and Sunrise Bhd. It appears that more developers are recognising the area’s potential.

Bina Puri owns a 3.34-acre tract right next to Bukit Prima Pelangi, a 70-acre development by Brem Holding Bhd. The tract is slated for a gated and guarded development - Villa 30 - comprising a condominium block and garden villas with built-ups of between 3,446 and 3,921 sq ft. The project, which is scheduled for a soft launch next month, is a joint venture between Bina Puri and Norwest Holdings Sdn Bhd, and has a gross development value of RM100 million. “The condos are priced at RM2.5 million each and the garden villas at RM2.8 million,” says Wincent Saw, principal of Twins Realty, its exclusive marketing agent.

About two parcels away to the west of Villa 30 are Hunza’s two tracts of a combined 6.28 acres that were acquired in 2008 for RM21.3 million or about RM77 psf. It has been reported that the tracts are earmarked for a residential development targeting the mid-to-high-end market. The launch date had yet to be set at press time.

Situated behind Laman Damaisari is UOA’s 9.81-acre tract that is earmarked for a residential development. According to an UOA official, the developer is in the midst of finalising the concept and is expected to announce the details in the next few months.

Across the road from Laman Damaisari, in Dutamas, is Bandar Raya Developments Bhd’s (BRDB) first mid-range condominium project — Verdana @ North Kiara in the Klang Valley. Separated from the kampung by a 1.14-acre plot, the first phase with a GDV of RM330 million was launched in August. Phase 1 and 2, whose 1,400 to 3,000 sq ft units are priced at an average of RM580 psf, is 75% sold.

According to K C Chong, the CMO of BRDB, the developer plans to construct a road linking the development to Jalan Segambut for better accessibility.

Before the border, right next to the completed Kiara 3, Yuk Tung has already started construction on Richmond, Kiara 3 @ Mont’Kiara — its second condominium project in the area. A foreign property acquisition website shows that it offers  large units of 1,933 to 2,419 sq ft, priced at RM750 to RM800 psf. The developer is targeting foreign investors as well as locals for the project, which is scheduled to be completed in early 2013.

Brem, meanwhile, is planning to launch a new condominium in Bukit Prima Pelangi next year. Chia Thye Kong, its project manager for Bukit Prima Pelangi, says the new development will target the mid-end market.

These new developments come as no surprise to the real estate experts City & Country spoke to. The general consensus is that Segambut Dalam, which has long been regarded as Mont’Kiara’s poorer cousin, will be transformed in time. Among the factors citied are the scarcity of land, not just in Mont’Kiara but also in Kuala Lumpur; its strategic location between the city and Petaling Jaya; and the execution of the long-proposed road expansion project by DBKL, stretching from Jalan Segambut to Mont’Kiara.

“High-end projects like Mitraland Group’s Kiara 1888, YNH Property Bhd’s Ceriaan Kiara and Mitrajaya Holdings Bhd’s Kiara 9, all of which were completed in the past three years, have edged towards the kampung area. I believe the trend will continue and the kampung area will make way for new developments eventually,” says See Kok Loong, director of Metro Homes Sdn Bhd.

BRDB’s Chong feels that with construction in Mont’Kiara taking place at a feverish pace, developments will naturally expand to Segambut Dalam as the supply of land begins to dwindle. Also an important factor is the improvement of infrastructure such as the widening of Jalan Segambut, he adds.

“As developers, we look for land for the short, medium and long terms. The 4.4ha plot where Verdana is sited was acquired a few years ago as we saw the area’s potential. Obviously, it turned out to be a good decision.”

Access road
According to Bernard Khuan, principal of Bernard Realty, the Jalan Segambut road expansion project, which was planned years ago by DBKL, was likely held back by financial constraints as the cost of land rose over the years.

“A number of landowners and developers that own parcels here have taken a wait-and-see approach to ensure the infrastructure is in place before taking action,” he remarks.

So, what is the status of the road expansion? In an email reply to City & Country, Datuk Raja Nong Chik Datuk Zainal Abidin, Federal Territories and Urban Wellbeing Minister, says DBKL has prepared a comprehensive plan to upgrade and widen Jalan Segambut, which will involve the 4km stretch from the KTM Komuter station bridge in Segambut to Mont’Kiara.

“This high-impact project is expected to reduce traffic congestion, provide a more efficient and safer network of highways and present an integrated public transport system in an urban area that is experiencing fast-paced growth and development,” he says.

Raja Nong Chik explains that the project will be undertaken in phases based on approvals granted by the federal government under the 10th Malaysia Plan (10MP). Work has already started on the upgrading of the 1.4km Section A from underneath Jalan Kuching to the SPPK Segambut intersection and is expected to be completed by January 2013 at a total cost of RM32.3 million. Squatters living in Section A of Jalan Segambut have been relocated and construction started in February this year.

“The project is being implemented through land reclamation to facilitate the widening of Jalan Segambut. The land reclamation for Section B involves the range from the SPPK intersection to Mont’Kiara and will be undertaken under the provision of the 10MP Rolling Plan 2 upon approval by the federal covernment,” says Raja Nong Chik.

Section B will cut through Segambut Dalam to reach Mont’Kiara and has been reported to include the acquisition of about 104 tracts of land valued at an estimated RM65 million.

A changing neighbourhood
Segambut Dalam has undergone subtle but significant changes in the past three years. One of the most successful projects in the area is Bukit Prima Pelangi, a medium-cost development that comprises two completed condominiums — Bougainvilla and Rosvilla — and one that is still under construction — Villa Orkid — as well as terraced houses.

When Sue Wong moved into Bukit Prima Pelangi in 2007, it was a quiet place. Since then, however, certain parts of the main road have been widened slightly and a number of kampung houses have been demolished to make way for new developments. Perhaps, the biggest change is the increasing traffic volume.

“Traffic has increased tremendously. Some evenings, it can take me nearly 30 minutes to travel the roughly 1 1/2km stretch from Plaza Mont’Kiara to Bukit Prima Pelangi,” says Wong. Still, the convenience of the location outweighs the hassle of traffic for her.

“It is located between the city and Petaling Jaya and right next to Mont’Kiara and Desa Sri Hartamas. I can find almost every daily necessity I need within a 5 to 10-minute drive,” she explains.

According to Brem’s Chia, the developer bought its first parcel in Bukit Prima Pelangi in the mid-1990s when the site was nothing more than a dense forest for about RM15 to RM20 psf. Ho Chin Soon Research’s transaction records show a 3.34-acre tract next to Bukit Prima Pelangi was transacted at RM80 psf in 2010. 

By keeping its products affordable, Brem capitalised on the opportunity to market Bukit Prima Pelangi as an alternative to Mont’Kiara’s high-end homes while still allowing residents to enjoy what Mont’Kiara and Desa Sri Hartamas have to offer.

“Those who bought our products when Bukit Prima Pelangi was launched in 2002 took a risk but the payoff has been good,” says Jennie Beh, sales manager of Harmony Property Sdn Bhd, a subsidiary of Brem.

Siti, who lives in Sri Hartamas, was one of the risk takers. She paid about RM150,000 for a 1,049 sq ft unit in Bougainvilla in 2003. The unit she bought was one of the higher-priced ones as it is located on a high floor with an unobstructed view of the KL skyline. The launch prices started at RM122,000.

“We bought it as an investment with the plan to turn it into a retirement home when we got older. I see good potential for growth here once the government improves access as proposed. But a lot depends on how and when they are going to clear the old kampung settlement.”

Although the rent for Siti’s unit is about 20% lower than the market rate, she believes keeping a good tenant is better than earning a higher yield. She estimates her net yield to be 6% to 7%.

According to data supplied by CBD Properties Sdn Bhd, units in Bougainvilla are now transacting at between RM245,000 to RM280,00.Similarly, Rosvilla, which was completed in 2010, has seen a substantial increase in capital value. Launched at RM238,000 onwards in 2008, it is now commanding between RM450,000 and RM800,000.

Brem launched another condominium in Bukit Prima Pelangi late last year — Villa Orkid. This was marketed as being in a better class than Rosvilla. Priced at an average RM280 psf with built-ups ranging from 1,577 to 3,353 sq ft, the non-bumi units were was sold out within a day.

“Most of the buyers were repeat customers; some bought for investment and others for self-occupation. These days, it is difficult to find freehold apartments that are more than 1,000 sq ft in a location so close to the city at this price,” says Beh.

As for the million-ringgit landed properties in the area, such as Purcon’s Laman Damaisari and The Serai by Vantage Lifestyle Sdn Bhd, Jonathan Lee, the COO of GMAC Realtors, says while transactions are slow on the secondary market, the properties can still command about 20% to 30% more than their launch prices.

The Serai was launched in 2008, comprising 3-storey bungalows and 3-storey semidees. The bungalows were priced at RM3.2 million and the semidees at RM1.65 milliion onwards.

“The transactions are slow because this area is still in the beginning stage of growth. While the location is great, you are still buying high-end property in a neighborhood that is surrounded by squatter homes,” says GMAC’s Lee.

The situation is different for developments such as Bukit Prima Pelangi, adds Lee, as the prices are more affordable, which means room for capital appreciation. Bukit Prima Pelangi is especially appealing to young executives and families, given its close proximity to the city centre and Petaling Jaya, and generates strong owner-occupier demand.

“The primary market for landed properties in the area is doing well. This is because of the developers’ financing packages, discounts, waiver of legal fees, which make it easier for purchasers to commit,” says Adrian Wang, the managing director of CBD Properties.

However, like investor Siti, Wang too sees a definite increase in value and demand in Segambut Dalam in the future.

“Once the kampung area is cleared and the roads are widened, the outlook will change and values will definitely increase,” says Wang. 

GMAC’s Lee estimates that it will take about five to seven years for Segambut Dalam to fully realise its potential. “It will take some time and money to improve accessibility and clear the old kampung houses. Then it will take about three to four years to develop the area.”

Rebranding
Bernard Realty’s Khuan believes that once developed, Segambut Dalam will be more of an owner-occupier than an investor market.

“Once you move past Kiara 1888, the majority of the condominiums and houses are owner-occupied. It will also likely be a middle-class market where medium-cost properties will do well,” says Khuan.

He adds that some form of rebranding will be needed, similar to what was done for Dutamas, to break away from its kampung image. “Most expatriates would not want to live within or near a kampung. Even now, most of the expatriates who live in some of the higher-end projects here are not high-net-worth individuals.”

Khuan feels that another hindrance to the area’s development is the small plots owned by individuals.

“Some of these plots have as many as 20 to 30 owners each. They can be difficult to purchase or to sell. So most of the developers that have land here are looking at boutique developments as they own mostly small parcels. The developer with the most landbank here that I know of is Sunrise,” comments Khuan.

Sunrise, the master developer of Mont’Kiara, owns about 20 acres in the kampung area before the Jalan Duta-Sungai Buloh Expressway.

Still, says GMAC’s Lee, the fact that Segambut Dalam is more suitable for a middle-class market does not mean all the properties in the area will be below half a million ringgit. “The middle class has shifted. Previously, a RM200,000 property was considered medium cost, but today we are looking at anything between RM500,000 and RM1 million. You can still categorise this group as middle class but they are people with high disposal income.”

But affordable products will bring more people into Segambut Dalam, Lee adds.

“It’s an ideal location for people who work in the city or in Petaling Jaya and it’s just a matter of time before Segambut Dalam becomes a part of Mont’Kiara. If you keep the properties medium cost, people will come.”

Metro Homes’ See believes more homeowners will be drawn to the Segambut area, including Dutamas, as it is quiet and offers high-rise dwellers good views. “It will be a mix of homeowners and investors, but it will be difficult to turn it into another Mont’Kiara. However, I expect to see some residential properties fetching high prices.”

“There has also been talk of a new road linking Desa ParkCity to Mont’Kiara through Segambut Dalam. As Segambut Dalam is sandwiched between these two high-end townships, the potential is there for property values in Segambut Dalam to catch up once everything is in order,” says Saw of Twins Realty.

As for BRDB’s Chong, he sees no reason why the market here should not go high-end once the infrastructure is in place. “Accessibility will be enhanced once the roads are expanded and it will bring growth to the area. Besides, KL and its population are still growing.”

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 881, Oct 24-30, 2011