Tuesday, August 21, 2012

The Empire Damansara in Pictures

The Empire Damansara will become a very happening place in the near future. Developer Mammoth has integrated commercial and residential together with entertainment, F&B and retail in one location. The architecture is certain to appeal to the young and upcoming. 

The shops appear to model after Xintiandi in Shanghai (pic below), which is a neo-colonial style architecture complex housing upmarket and trendy F&B outlets. Xintiandi is immensely popular with expats and locals alike, not to mention tourists.

The flagship development are the 640 units of studios and 700 units of SOHO duplexes (below). They were quickly sold out at launch despite what was reportedly a very extremely lop-sided S&P terms and conditions imposed on buyers.

The rest of the development is well supported by office complexes.

All in a very cooling and green environment. Hopefully it will stay that way with all the development coming into the area.

The studios are now in the sub-sale market at about RM750psf. The SOHOs are a bit more drastic, asking almost RM1000psf. Anyway, comparing the studios at RM750psf, that's about the launch price of the Dorsett Place Waterfront in Subang Jaya. So let's make a blow by blow comparison...

1. Land title - Dorsett's is freehold. Empire Damansara is leasehold 99 years. However, this is probably not so important on strata properties

2. Density - Dorsett's whopping 1900 units completely overcome Empire's studios and sohos combined 1300 units.

3. Location - both are located not too near any proper public transport. Dorsett is some 1.5km away from the KTM and future LRT stations in SS16 while Empire Damansara is also about the same distance from the future MRT at the Curve, Mutiara Damansara. In terms of commercial value of the locations, Dorsett is in a matured neighbourhood, close to private colleges and located right next to a popular medical center and a recreational lake while Empire Damansara is in a young and upcoming precinct with nothing much at the moment.

4. Furnishing - both comes fully furnished with suspect quality but I have reasons to believe that Empire's probably better not because it is going to be better but rather Mayland's will be abysmal in contrast

5. Carpark - Empire offers no car park, just like Dorsett. But at least Mayland sold carparks to the 1st 700 lucky buyers at RM28k per lot.

6. Facilities - Dorsett's facilities are free of charge to residents. If we use the Mammoth's Empire Subang as a gauge, they said they'd build a swimming pool and gym but later leased it to Fitness First who charges residents at least RM150/month to use them!

7. Price and Timing - Price about the same but timing is on Empire's side. Mayland's Dorsett is beset with problems and risk not even taking off. And if it does, it will definitely be late and may take more than 5 years whereas Empire Damansara is soon going to VP end of this year. It has to be noted that Mammoth also initially faced problems getting the Empire Damansara approved but it seems Mayland is going to face a completely impossible situation. I'll have more on this next.

Yes, for those who knows, Mayland's Dorsett may be shelved.

Monday, August 20, 2012

TRX set to benefit Bukit Bintang, Pudu, Kampung Pandan

KUALA LUMPUR, Aug 20 — The soon-to-be-developed Tun Razak Exchange (TRX) along the southern end of Jalan Tun Razak here is expected to create a positive spillover impact to the surrounding areas of Bukit Bintang, Pudu and Kampung Pandan, say analysts familiar with the urban renewal project.
Formerly known as the Kuala Lumpur International Financial District, TRX will be a critical enabler and vital catalyst for the government’s Vision 2020 and Economic Transformation Programme initiatives, and is poised to attract more than RM3.5 billion in foreign direct investment. 
File photo of Najib (centre) looks at a scale model of the TRX after launching the project.
Its construction was recently launched by Prime Minister Datuk Seri Najib Razak.
A senior analyst with RHB Research Institute, Loong Kok Wen, said the value of properties in the surrounding areas of TRX could gradually appreciate due to new infrastructure and transportation facilities.
She said the appreciation rate could be about five per cent annually and there would be speculative buying of the properties near the areas as well.
“Although more substantial appreciation will depend on the Mass Rapid Transit stations, but I believe the appreciation of value for property located in the vicinity will happen,” she told Bernama.
The 28.3-hectare development is also expected to bring in RM26 billion in gross development revenue.
Loong said the development would not only impact commercial properties but also residential properties.
She said developers would tend to build their projects in the surrounding areas such as Kampung Pandan, Pudu and Bukit Bintang as these areas were set to enjoy good response.
“The new properties surrounding the TRX are likely to enjoy good sales as buyers are confident of future demand for their properties once the financial hub is completed,” she said.
AMMB Holdings Bhd group managing director Ashok Ramamurthy said the project would have a spillover effect on real estate investment where many people would hope to have their offices or homes, within the proximity of TRX.
“Real estate developers will take this opportunity to plan their projects in these areas to attract local and foreign buyers,” he said.
He felt that Malaysia was “relatively comfortable” with the level of exposure that the real estate sector was enjoying currently.
“I believe that property prices in areas close to TRX will appreciate,” he said.
Federation of Chinese Association of Malaysia (Hua Zong) deputy secretary-general Prof Dr Chin Yew Sin felt the properties in the surrounding areas of TRX would appreciate in a bigger way once people see the physical development of TRX.
He said property development in areas near TRX would definitely enjoy quick demand, and rental prices for both residential and commercial properties will increase as well.
“The immediate beneficiaries will be those who currently own properties in the surrounding areas,” he said.
Chin said the spillover effects would also benefit hawkers, restaurants and hotels in the area. — Bernama

Thursday, August 16, 2012

Islamic or Conventional Loan to Finance your Property?

Conventional or Islamic loan? Indeed, these days bankers are pushing Islamic loans to property purchasers. I found that if you do not specify, they will automatically prescribe you Islamic loan. My concern about the Islamic loan is the subjectiveness and there are a lot of discussions on-going here and here. So, that is why I am so concerned. Bankers insists they are the same, just that the contracts have some  Islamic terms and conditions here and there. They push it further by offering no-lock-in period, lower stamp duties etc. However, I urge everyone to study this closely. 

As far as I am concerned, the no-lock-in period incentive is a gimmick. Nobody has been able to explain to me exactly how much I have to pay the bank in the event I sell my property - within 1 year, 3 years, 5 years or beyond. I am talking about the actual total cost because there are hidden costs such as fees. Moreover, I am not comfortable about the "Sharing of Risks" and the "Selling Price" which are both subjective matters which are to be interpreted by the bank at their whims and fancies. Let's put it this way, the best an Islamic bank loan can be is as good as a conventional one.

The below article, written in 2006 by Kalathevy Sivagnanam, a lawyer says it all. Although much has changed since 2006, it gives you an overview.

Conventional or Islamic loan financing? 
02/06/2006 The Sun - Law & Realty By Kalathevy Sivagnanam

TODAY, most banks and financial institutions offer to a purchaser of property, a choice of either a conventional loan or Islamic financing. When asked about the difference between these two types of financing, the general answer is that both are the same, except in a conventional loan, the purchaser will pay interest, and in Islamic financing, the purchaser will pay a profit.

A common home Islamic financing facility is offered under the Shariah principle of Al-Bai Baithaman Ajil (BBA). In BBA financing, a bank's customer buys a property from the vendor under an agreement of sale. The bank then, at the request of the customer and with the consent of the vendor, steps in to become a party to the sale agreement by executing a novation agreement between them, making the bank now the purchaser of the property. The bank's purchase price is described as the loan facility amount. 

At the same time, between the bank and the purchaser, the bank sells the property to the customer at a selling price which comprises the bank's purchase price and a predetermined profit margin. The agreement is usually called the property sale agreement. Since Islamic financing entails a predetermined profit to be made by the bank, a customer will never have to worry about a sudden hike or changes in the interest rates. Right from the onset, he will know the total amount which he has to pay to the bank. His monthly instalment of the bank's selling price will not change throughout the tenure of the financing.

In a conventional loan, the customer will repay to the bank the loan amount, together with interest at the prescribed rate. The prescribed rate is based on a margin above the bank's base lending rate (BLR), and both the margin and the BLR are variable from time to time. In a case of late payment or default, the bank is entitled to charge compound interests. Interest payable may also be capitalised and the capitalised amount will be subject to further interests.

The contrast in obligations and liabilities of a bank's customer under a conventional loan and under Islamic financing, did not really manifest itself until the recent case of Zulkifli Bin Abdullah v. Affin Bank Berhad, a decision of the Kuala Lumpur High Court in December 2005.

Zulkifli bought a house from a vendor and applied for BBA financing from his employer, Affin Bank. The bank paid the balance sum due to the vendor (the facility amount) and Zulkifli was required to repay to the Bank the facility amount over a period of 18 years by a fixed monthly amount. The total payment of RM466,847.28, is the bank's selling price to Zulkifli. Zulkifli's facility was restructured because he had defaulted in his repayment and also because he had left his employment with the Bank. The restructuring involved a revision of the bank's purchase price, the bank's selling price, the tenure of the facility and the monthly instalments payable. Zulkifli agreed with all the terms of restructuring, and hence agreed to pay to the bank the revised selling price of RM992,363-40, over 25 years. After making some payments, Zulkifli defaulted, and the bank commenced an action to sell the property by way of public auction. The Bank claimed that the balance due from Zulkifli was RM958,909-21, being the difference between the revised selling price and the amount he had paid.

The Learned Judge did not agree with the bank's calculation of the amount due and held that the bank is not entitled to claim for profit margin for the full tenure of the facility over 25 years. His reasonings are summarised as follows:

• Under a conventional loan, the amount due by a borrower over and above the loan amount (i.e. interest and late payment interest), is limited to the period from release of the loan until the loan amount is fully settled, and not for the full original tenure of the loan where no interest is applied on the unexpired tenure. However, in this case, the bank is seeking to claim the profit on the unexpired tenure of 25 years.

• The bank's selling price in BBA financing, is not a sale price paid in a single payment, but is a series of equal monthly instalments. The profit margin is calculated with the profit rate applied to the full tenure.

• If the customer is not given the full tenure to pay the selling price, then the bank is not entitled to claim for the bank's profit margin for the full tenure, as to allow the bank to do so would mean that the bank is able to a earn a profit twice upon the same sum at the same time.

• The profit margin charged on the unexpired part of the tenure is unearned profit and not actual profit, and therefore cannot be claimed under BBA.

The Court then recalculated the bank's profit margin up to the date of judgment and held that the balance due by Zulkifli was RM582,626.80 instead of RM958,909-21. The bank is however entitled to profit per day until full payment. Zulkifli therefore got away with having to pay substantially less than what he had agreed to pay to the bank for the restructured facility. The bank did not appeal against the decision.

Both the legal fraternity and the banking industry were quite alarmed and concerned over this decision. The main concern is whether payment of a daily profit instead of a fixed profit, is Shariah compliant. The Learned Judge distinguished this case from a few other High Court decisions which allowed banks to claim for the profit margin for the whole original tenure, in cases where the facility is terminated before the end of its tenure. The decision appears to contradict a basic Shariah principle, which prohibits the giving and receiving of riba (interest). In conventional loans, a bank lends you money and in return, you repay the loan with interest. Islamic financings are trade transactions where the profit is fixed right from the start which the customer has contracted from the beginning to pay. Further, if there is early settlement of the selling price, the bank is allowed to give an ibra (rebate) to the customer. But the Learned Judge held that as ibra is entirely discretionary, it is not relevant to the issue whether in the event the loan facility is terminated due to the customer’s failure to pay, the bank is entitled to the unearned profit margin of the entire unexpired period or tenure of the loan facility. 

In the light of this decision which is different from other High Courts on the matter, it is important for a purchaser who requires financing to fully understand the different obligations and liabilities under a conventional loan and BBA Financing. Why Zukifli’s decision has attracted so much attention is because the view held by practitioners of BBA Financing, until now, is that a borrower has to pay what he has contracted to pay, that is, the bank’s selling price which is calculated up to the full period of the loan. As such, other High Courts may not follow the decision in Zukifli’s case.

Therefore, as a customer of the bank, you have a right to be informed of your obligations under the different forms of financing. If you are unsure, you should always check with your banks and their solicitors who are under a duty to explain the effects of such documents to you.

The writer is a member of the Conveyancing Practice Committee Bar Council Malaysia www.malaysianbar.org.my

Monday, August 13, 2012

Empire Damansara

Developer Mammoth of Empire Subang fame is completing their next Empire series at Damansara Perdana. This is due for vacant possession later this year. 

The Empire Damansara is a commercial/residential project located right next to the PJ Trade Center which is a wonderful building beside the LDP as you're going up towards Kepong.

The PJ Trade Center is quite a popular spot for wedding couples photographs to give people the impression that they are in some European destination... because the kind of architecture is very different to those you find in Malaysia. 

Empire Damansara's claim to fame will be their location next to PJ Trade Center. It was launched around 2010, peddling hundreds of units of 333sf Studios and 445sf unit duplex SOHOs (700+sf if include the mezzanine). Back then, the studios were being sold around RM130k to RM150k, now just before VP, they are going into the sub-sale market around RM250k to RM260k. Not sure if there are any takers even as some punters are trying their luck at RM300k and above.

Perhaps the most interesting part about the studios is the layout of the floor which looks like a fan (below). Other than that, there isn't much to this as the units are just... well... a studio... rectangle box with bathroom and a kitchen sink... 

A lot of this kind of properties are flooding the market. I am not sure if there is any demand from young urban professionals, who is the target market for this kind of accommodation. But certainly, these make an easy target for investors who want a low entry point with high appreciation. What happens after that, I am not so sure. 

Perhaps, my greatest reservation is, there is no real public transport to this area which goes against the concept of Studio/SOHO living professed here. And no car park is provided - it has to be rented from the management on top of the monthly maintenance fees. So one argues that most modern young professionals will not own cars but where is the public transport??

The SOHO units are quite similar to the Empire Subang in that they have a mezzanine. This time, Mammoth arranged the units in shapes of L. Great for those who got the "outer-L". They have bigger windows for more day-light and more window space to display their business. The only incentive for the inner-L owners is the lower investment on curtains. 

At launch in 2010, the SOHOs were going at around RM300k. Now, they are in sub-sale for over RM450k... that's like almost RM1000k psf for this leasehold suburb!

I like the location next to the PJ Trade Center, though lease-hold, but this looks to me like an investor trap. Much like Mah Sing and Mayland churn of small studio boxes. There is little thought of where these will end up in the future. i.e. I am quite happy to buy one with a RM5k booking fee and then when completed try to flog it off to someone else for a RM100k profit. The guy who buys it from me has the same plan that is to try and sell it a few years later for a profit and meantime he tries to rent it out to someone who just needs a shoe box to sleep in. 

Perhaps the main thing that differentiates the Empire Damansara is the the overall development of the area which includes office complexes, chic and fashionable retail and entertainment outlets. Besides the 39 floors Empire Studio with 640 units, there are 2 SOHO blocks of 24 and 27 stories each with total 700 units, a 12 floor office tower, residential Empire Residences 277 units and 29 units of shophouses. 

The architecture is also very interesting, modern and appealing to the young and trendy. This may well be a hang out place in the future. Much like how we would definitely like to own a small pad above Bangsar Telawi or Changkat Ceylon, I think many of the future or current young and trendy would like the same here. Certainly, this will be a boost to the area. 

Now, Mammoth is launching another one called Empire City just across the LDP highway. 

Saturday, August 11, 2012

The Incompetents Which is E&O

Vacant Possession on 2nd of August 2012 - earliest appointment they can arrange for unit inspection and keys hand-over is 22nd August, 20 days later!!

Reason? Not enough staff.

They typically need to spend 1 - 2 hours with each home buyer to inspect a 1500sf unit. They've been handing over since end July. Only 400 units sold. They need more than 30 days to hand-over 400 units.

Maintenance fees of RM0.55psf already started charging since 2nd Aug 2012!

So, if you are planning to buy a unit at St Mary's Residence, wait till after November when they are less "chaotic".

Friday, August 10, 2012

Calling ALL Furniture BUYERS!!

I've been struggling to find good furniture that are not too expensive to fit into my recent acquisitions. Problem in Malaysia is, you've got those really high end designer stuffs which are just off limits. I mean, we're talking about spending RM2k to RM3k for a dining chair. L-shaped duck feather stuffed sofas going for RM15k and above. 

Then coming down to the other end, we've got those el-cheapo furniture shops you see by the highways. And somewhere in between, if you go to the many home fairs in Malaysia, you find those Cina Apek furniture with designs that will please your grandparents. I am sick of going to Malaysian home fairs. They are always packed with the same old faces, peddling wood laminated floor and leather sofas that look like those we find in seedy massage joints in Guangzhou. 

Then there's Ikea...

But for the higher end properties, Ikea is absolutely not allowed. But this is really the only decent place to find modern and nice furniture (not necessarily good quality) at a decent price. However, no... Ikea, you cannot put in a million dollar condo. Cannot!

So one has to venture further and where else but Thailand.... Last year I went to the Bangkok International Gifts and Homefair. It was much smaller than previous years but nevertheless not disappoint. I have contacted the suppliers again for a quote for these lovely chairs...

These are typical stuffs you find at high end furniture shops in KL such as Gudang, Bauhaus etc and I don't think you can find a dining chair in there for under RM1k unless there is a sale. So these fine oak wood chairs costs just US$155 each. If I get them sent over, with shipping plus tax they will still be less than RM1k.

Now, to find like-minded property owners or investors who want to make the cost lower by sharing out a 40feet container. There are other stuffs in the catalogue as well. If you give me a call, we can organize a meeting, place orders or if necessary make a visit to the factory in Bangkok. What say you? Contact me sinleongng@yahoo.com before 15th August 2012!

Saturday, August 4, 2012

Seri Riana Residences @ Sri Rampai

Developer IJM is building the next series of Riana, the Seri Riana Residence which is located beside the Riana Green East. The Riana Green East, just like the original Riana Green at Tropicana PJ are all leasehold properties. However, they have done well in terms of capital appreciation despite that, owing much to the resort like concept and good maintenance of IJM properties. I have a lot of respect for IJM. They can even make a lower middle cost apartment in Sunway nice, Belvedere.

Good concept aside, Seri Riana's location is superb.  It is just beside the new Seri Rampai LRT station, in between vibrant Wangsa Maju and up-market Setiawangsa. Next to it is Carrefour and the expat-friendly Wangsa Walk shopping mall. Carrefour Wangsa Maju is the French hypermarket's most profitable store. Fairview has also located their flagship international school in this area.  

Today, IJM only launched 2 of the towers, almost 400 units on an 8 acre plot. Pretty high density it seems. But eventually, they will have at least 6 more blocks on the same 8 acres plot. 

Currently, Seri Riana only caters to the family. Unlike Riana Green which has studio units, Seri Riana only have 3 bedroom units starting from 1380sf up to almost 2000sf. The price starts from RM690k before their 3% early bird discount and if you are looking at the more family-friendly 1700sf/1900sf built-ups they are almost a million each. 

Between the 1380sf and 1700sf unit show rooms, I prefer the larger one. The living space does not seem so claustrophobic.

They have also a wet and dry kitchen and a maid's quarters.

Unfortunately, the master-bedroom has a disproportionate sized walk-in wardrobe and bathroom which is a lot of wasted space.

The other 2 rooms seem decent sized, one of them has an en-suite bathroom.

The 1380sf is an intermediate unit. It is just long, with bedrooms and kitchen tucked to the side. 

The master bedroom gives you that really cramped feeling, probably due to the built-in wardrobes which took up much of the width of the room.

The kitchen is also rather tiny but probably sufficient for a small family.

 and just like the larger units, it has a wet "asian" kitchen for that rough oily cooking style. Being long and narrow, the ID for the living and dining area incorporated a lot of glass which deceived us into believing that it is rather spacious.

So, for almost a million a piece, and being leasehold, this is a rather difficult choice. The only saving grace is probably the residential title but is this enough to warrant a buy? 

Judging from history, both previous Riana series almost doubled in their value but this was due to the blanket property boom all over the Klang Valley. Also, looking at the generous offer, with 3% rebate, DIBs, 1st 10% deposit spread over 12 months interest free and with both loan and SPA legals fees covered, I can't help but feel that the developer bundled these costs into the purchase price. The current selling price for neighbouring Riana Green East is about RM700k for a 1600sf unit and RM800k for the larger 1900sf... so, what do you think?