Rehda looking for alternatives in financing projects

KUALA LUMPUR (Mar 2): Real Estate and Housing Developers' Association of Malaysia (Rehda) president Datuk Seri Michael Yam announced that Rehda along with the ministry are currently in talks with various financial institutions to discuss further initiatives for the financing of projects.

Speaking at a press conference during the official opening ceremony of Malaysian Property Expo (Mapex) 2012 in Mid Valley, Yam mentioned that Rehda already had a meeting with the Islamic banking institutions to understand whether there is a scheme to fund developers.

"It's still in progress, but we are trying to understand whether they have a scheme to fund developers from ground zero to completion," he said.

Yam said they are meeting up with Bank Negara Malaysia (BNM) next week to understand better the issue of gross income and net income, following bank borrowings for property purchases.

"There's a little vagueness with income, and we want to understand it better," he explained. "The worst thing to happen is uncertainty and no clarity when dealing with this issue."

Yam raised the issue of the 3% of the total estimated development cost excluding land costs in order to obtain the developer's license.

"In order to apply for an advertising permit, you used to only have to put down a payment of RM200,000. There are groups out there that say that is too small probably because it is not enough to salvage an abandonement. Now, instead of RM200,000, they are now asked to pay 3% of the gross development cost and the land cost," he explained. "If you have a RM50 million gross development cost (GDC) project, 3% is like putting down RM1.5 million as opposed to the original RM200,000."

Yam added, "To a bona fide property developer, this is RM1.5 million in working capital locked in an idle account. If you have 10 of these projects with RM50 million GDC each, obviously the cost becomes higher."

Yam lamentsed that in the future, this will become a pass-through cost. This will affect the supply into the market.

"Instead of RM50 million, developers will probably split it into five phases of RM10 million. It's the only way you can afford it,"

The Mapex 2012 property exhibition was officiated by Datuk Arpah Abdul Razak, deputy secretary-general of the Ministry of Housing and Local Government.

During her opening speech, Arpah — on behalf of Datuk Seri Chor Chee Heung, Minister of Housing and Local Government — mentioned that their department was working closely with the Ministry of Natural Resources and Environment (NRE) to repeal Act 663 (the Building and Common Property (Management & Maintenance) Act of 2007), and replace it with the Strata Management Act together with amendments to Act 318 (the Strata Titles Act of 1985) to provide a more conducive environment for those living in high rise buildings. She added that these acts will be tabled in Parliament in June 2012.

In October 2011, Chor had announced the ministry's plans to replace Act 663, the reason being that the move was to overcome problems that always arose; eg, owners not paying maintenance fee, and taking the repair and maintenance of buildings lightly.

Arpah also mentioned that the government has been looking at improving the delivery of the housing system, which would have the country adopt the Build-Then-Sell (BTS) model.

However, she said, "The effective mechanism for financial institutions to finance housing developments under the BTS must first be sought and implemented, failing which the BTS system may not be implementable."

Mapex 2012 features 89 property developers (Rehda members) and five international developers, showcasing over 7,500 units of properties worth more than RM5.9 billion. Also present were seven financial institutions.

Yam, commenting on the fact that nearly RM6 billion worth of properties up for sale, saud "If we can achieve 10% of sales it is still pretty good. RM600 million worth of sales is good."

Mapex 2012 is held at the Mid Valley Exhibition Centre in Mid Valley Megamall Kuala Lumpur in Hall 1, 2 & 3 from Mar 2-4. Admission is free.