Property sector to benefit

THE proposed KL-Singapore high-speed rail (HSR) project will profit Malaysia’s economy and property sector with the rental market expected to be the biggest beneficiary, said Kumar Tharmalingam, executive director of Sunway Bhd, during the panel discussion on "The impact of the KL-Singapore high-speed rail" at The Edge Investment Forum on Real Estate 2013 on May 11.

Anticipating improvements in corporate relations between Singapore and Malaysia thanks to the HSR, Kumar expects more foreign companies to set up shop in Kuala Lumpur. Citing a Hong Kong-based bank operating in Malaysia as an example, Kumar said the bank has foreign employees who are paying an average of RM35,000 a month per person for penthouses.

"In Singapore, the same bank has 250 foreign employees and the rental market there is booming. So, to an extent, our rental market will boom with the enhanced connectivity," shared Kumar, adding that foreigners who come to Malaysia will be prepared to pay higher rents.

Furthermore, in 2015, Malaysia will remove barriers aimed at foreign companies looking to establish businesses here, said Kumar. He expects new law firms, engineering companies, architectural firms and Singaporean government-linked companies (GLCs) to start coming to Malaysia. This will provide more corporate content, higher quality companies and better paid workers, he said.

Kumar believes this is a good thing because in comparison with Singapore’s 750 financial institutions, Malaysia only has about 47.

Malaysia's strategic location between India, China and Indonesia should add to its appeal. "Half of the world's population can use Malaysia as its base because of the country's multiculturalism,” said Kumar, adding that it is common for foreign companies to employ the local Chinese to operate in China, the local Indians to operate in India and the local Malays to operate in Indonesia.

In the Kuala Lumpur city centre, hotels, serviced apartments and offices will likely benefit from the HSR. Kumar also foresees more growth and development for smaller towns with stations on the HSR route. "Wherever the train stops, there will be development."

In terms of property development, one can expect more multimillion-ringgit projects from companies in Singapore and Malaysia as well as from the region. "With the lure of large tracts of land and better connectivity, we can attract foreign interest," said Kumar.

However, Kumar, the former CEO of Malaysia Property Inc, raised some concerns about the project. As optimistic as the scenario sounds, he cautioned that there may be delays due to problems of land acquisitions and in drawing up the alignment of the lines as various states may compete to have the train stop in their respective towns.

The funding of the HSR project is another issue. While the Singaporean government has committed to fund its part of the project, Malaysia will be required to fund much of the reportedly RM30 billion project.

"We have a budget deficit of 54% of our GDP. If we fund this, we could be nudging 56% to 57% in deficit. It depends on how we fund it. It could be stock taking, sukuk or anything else but one thing's for sure, the project requires a large amount of funding," he said.

Sunway bus rapid transit (BRT)

Kumar, however, said public transport systems do not necessarily require large acquisitions of land. This, he said, is demonstrated by the proposed BRT line that is designed, and will be constructed by Sunway at Bandar Sunway.

"Sunway has designed a bus transit system that doesn't use the existing transport lanes but will use the divider between the highways or roads to put the bus transport system on top."

The proposed BRT will be 5.4km long and will link key commercial areas in Bandar Sunway and Subang Jaya with seven stations. It is targeted to be completed within 24 months.

During the question-and-answer session, Kumar was asked for his opinion about the possibility of foreign direct investments (FDIs) in Iskandar, Johor, surpassing that of Kuala Lumpur in the future. Kumar noted that current investments in Iskandar are more developer-based.

"Everybody is looking at Singapore to raise sales. There are only three million people in Singapore that can buy in Iskandar. The first wave has come and gone, and the second wave has to be more definite," he said.

He added that FDIs are coming into Iskandar to buy real estate and not to build new developments, and Kuala Lumpur as a capital city will always attract more real investment rather than speculative investment.

A member of the audience also asked about the prospects of Cyberjaya, which has been commanding a lot of interest from developers and purchasers of late. Kumar believes Cyberjaya has reached its second stage of growth; the first stage was when it was launched and the second is when it's maturing.

"Population wise, you can see more students there and more people who are working nearby. As that grows, Cyberjaya will certainly, in the next few years, be more like a satellite town, similar to what Petaling Jaya was to Kuala Lumpur some time ago."

On property prices, Kumar said as demand outweighs the supply of homes and with construction cost rising, prices will inevitably continue to rise.

"We seem to be building fewer houses each year. In 2012, we built 70,000 units — the country's demand is for 75,000 to 80,000 a year across all kinds of products. Because of the demand for housing, the price of properties will rise. There will also be a rise in construction costs and the cost of doing business, all of which will be passed back to consumers."

This story first appeared in The Edge weekly edition of May 20-26, 2013.