Sunday, 6 July 2014

Investing Abroad.... How Housing Projects Can Become Abandoned

A client recently told me that she invested in a condo in JB in the 1990s. Initially, the yield was very high, to the tune of 10%. After about 8 years, with yearly increase in rental, she recouped her capital. However, from the fourth year onwards, the building began to look tired. Maintenance deteriorated.

Many owners failed to pay service charges or conservancy fees. Soon, lifts stopped working. The final straw was when water and electricity supplies become intermittent. Slowly, more and more tenants, home occupiers began to desert the condo until it became abandoned. You can own a piece of real estate in JB, Melaka, Ipoh, even Bali, Detroit and Chicago, they are worthless today and can be purchased for $1.

I operate mainly in developed countries, where the rule of law is strong. I prefer to invest in countries like Australia, the US, UK, Japan, New Zealand, Hong Kong and Singapore. If I were to invest in Malaysia, Philippines, Thailand etc., I require double the IRR compared to developed countries. Since I achieve around 15% returns p.a. for my financial investments, I require 30% higher returns for real estate, or 20% IRR to compensate for the lack of liquidity. For third world countries, I require at least 40% IRR.





Feb 8, 2012
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Syarikat Perumahan Negara Bhd (SPNB), a government agency established to rehabilitate abandoned housing developments, will no longer revive such projects due to a change in the policy.
Under the new policy, abandoned residential projects will be entirely managed by the Housing and Local Government Ministry via the Commissioner of Buildings, said Datuk Dr Kamarul Rashdan Salleh, Managing Director at SPNB.
"I understand that the ministry will work with private developers to revive abandoned houses," he said.
However, Kamarul is concerned over the rising costs to restore housing projects from private developers, including low or medium-low-cost houses, due to the requirement to keep the original house price.
For medium-cost housing, attracting private developers is not a problem, as competitive prices can be set and substantial profit can be made, he noted.
"Efforts to revive low-cost and medium-low-cost houses do not guarantee lucrative profits. Furthermore, developers will have to put up with spiralling costs."
"If the developers are willing to the risks, I welcome their initiative to do so, but if it is too risky for some developers, then the government has to come up with a workable mechanism to develop abandoned housing projects," he added.
SPNB will begin reviving Taman Jasa Amir and Taman Tangkak Emas abandoned projects in Johor by next month, as these projects have been idle since 2005.
Image: NST.com.my



Mar 19, 2012
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Greedy developers are the primary cause of many abandoned housing developments in Johor.
There were 12 abandoned developments comprising of over 4,616 residential units, said Datuk Ahmad Zahri Jamil (pictured), Chairman of State Local Government and Housing Committee.
"They (greedy developers) want to finish their projects early to make huge profits without having a strong cash flow," he said.
The Johor Baru district has the most number of abandoned projects with four in Taman Mewah Jaya, Taman Desa Larkin, Taman Seri Baiduri and Taman Cahaya Kota Puteri.
Next is the Ledang district with three abandoned projects in Taman Sri Emas 7, Taman Sri Nilam and Taman Tangkak Emas. Meanwhile, Batu Pahat district’s three abandoned projects were situated in Taman Emas Surya, Taman Jasa Amir and Bandar Putera Indah.
For the Kluang district, the two abandoned projects are located in Taman Sri Layang-Layang and Taman Mengkibol.
"Several steps have been taken to revive these projects," said Ahmad Zahri in a reply to Ng Lam Hua (DAP-Mengkibol) during the state assembly meeting last Friday.
New developers had been chosen to take over the development with one developer appointed by the state government while eight developers appointed by the Housing and Local Government Ministry.
The ministry is still finalising the selection of new developers to revive the projects in Taman Sri Layang-Layang in Kluang, Taman Emas Surya in Batu Pahat and Taman Mewah Jaya in Johor Baru.
"We have to make sure that it is a win-win situation for both the new developers and house buyers," he added.
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