More restrictions to ease property bubble?

THE rising prices of houses is still one of the hot topics among average Malaysians as the threat of higher inflation is growing by the day.

The fact that Bank Negara had early this month imposed a lower loan-to-value ratio (LVR) for those taking up their third and subsequent mortgage loan shows the central bank also considers the situation quite worrying. Effective from Nov 3, house buyers who have already signed up for two mortgages and are applying for their third loan will only be eligible to get financing of up to 70% of the value of their house.

Although it is largely seen as a timely pre-emptive measure to avert unhealthy speculative activities, some quarters voiced their reservation that the measure is too mild and are asking for “stiffer” measures to rein in rising prices.

Their argument is that people who can afford the higher downpayment for their property purchases will not be affected by the lower LVR although the measure may be effective on those who need financing assistance.

The LVR should be further reduced for those applying for subsequent loans. Those applying for their fourth loan should only be granted up to 60% and fifth loan up to 50%, and so forth.

Since the LVR is now used as the basis to decide on the quantum of mortgage loan that house buyers can sign up for, some properties with “unrealistic” price tags are finding it hard to get financing unless their values are adjusted accordingly. Hopefully, this situation will make developers uphold their responsibility properly and price their project according to the fair value of the property.

Just because there is strong demand for landed houses these days, developers should not take advantage of the situation by pricing their property a few notches higher and burden buyers unnecessarily.


Like some parts of the Klang Valley, the situation is also quite apparent in Penang where basic intermediate terraced houses are being priced close to or beyond RM1mil each. With house prices shooting off the roof, banks should also play a more responsible role and should not over-push their housing loans. The “war” between banks is still evident with some banks trying to outdo their competitors by offering “aggressive” interest rates of up to 2.5% below base lending rate.

In fact, banks are still aggressively pushing their credit facilities to consumers.

Although the market situation may still seem to be under control, it is important for all stakeholders to be vigilant and take note of any fast changing signs of overheating.

Like one observer says: “Bank Negara’s LVR curb is not just about the restriction per se, but more importantly it is about the SIGNAL that Bank Negara has send out, and that is, the central bank is keeping a wary eye on things and more measures could be introduced if the market does become frothy.”

Hence, the psychological impact of such a move is more important in that it will remind developers, potential borrowers, and bankers to be more judicious with their actions, and that is good for the market in the long run.

Otherwise, the central bank may have to impose further tightening measures if the market heats up further.

In fact, various Asian governments are already looking to impose capital controls to curb growing risk of asset bubbles in the region, signalling that the red flag has been raised on the havoc that can be wreaked by the inflow of hot foreign money into the region.

The measures underscore concerns over the US Federal Reserve’s second quantitative easing (QE2) – the printing of money to buy US$600bil long-term government bonds – amid an ‘’extended period’’ of super-low interest rates to support its weak economy.

The side-effect of depressing the US dollar and keeping borrowing costs near zero will cause speculative capital inflow to Asia as investors seek higher yields in emerging markets.

Hence, the environment is highly conducive for asset prices to spiral further leading to asset bubbles. Besides the high liquidity in the system, the low interest rates and inflow of foreign funds are bound to send asset prices soaring if left unchecked. And when these hot money pulls out, it will result in financial destability and a meltdown in the assets market.

Even without the threat posed by these hot-money, governments in Singapore, China and Hong Kong have already imposed a number of restrictions to dampen the rise in property prices and curtail speculative activities in the property sector.

So it won’t come as a surprise if Malaysia also have to resort to more restrictions to ensure the financial and property markets continue to be sustainable.

Be a property millionaire without investing large sums

Property millionaires, Michael Tan, 34, and Juanita Chin, 39, have proven that “you don’t need large sums of capital to invest.” Both of them have achieved financial independence through property investments in just a few short years.

It is rather easy for one’s self-admiration to balloon out of proportion with a burgeoning bank balance, but Michael and Juanita remain firmly grounded and truly believe in paying it forward by sharing their strategies and success stories in their upcoming seminar.


Property millionaires, Michael Tan and Juanita Chin.
Tell us about your background and how you became involved in property investment.
Michael Tan (MT): My parents encouraged me to be a professional. You know, the likes of a doctor, engineer. I studied engineering and worked for a couple of years and then ventured into a few businesses. It took the loss of a job, two big failures and one near bankruptcy to realise that making money does not equal to keeping money.

I then decided to pursue property investment. Now, I have 12 properties valued at approximately RM2.9million.

Juanita Chin (JC): I was a bank teller earning RM400 per month. I have no degree and I only finished Form 5. But I had big dreams to be successful despite my lack of education. I first started investing in year 2003 because I wanted more time with my children. Working for long hours wasn’t getting our family anywhere. My husband, Ignatius, and I wanted a better life and not be stuck in the rat race.

After attending two life-changing seminars, we took action within a month. To date, we have 13 properties valued at RM5.6million. We now have the freedom of time, and my husband is able to pursue his passion in options trading.

How did you get to know each other?
MT: I attended a seminar that Juanita was co-sharing and spoke with her on the last day of the seminar. I consider her as my sifu (mentor) and I am very inspired by her story. Against all odds, she and Ignatius managed to be financially free.

So, is this the first collaboration between both of you?
MT: No. The first collaboration was in December 2009, for a charity event. I called Juanita to participate and she readily agreed. The second would be an upcoming seminar on 20th and 21st of March 2010.

Tell us about your first investment.
JC: We attended a RM57 property preview and learned that we can invest with little money. So we decided to try the strategy and negotiated with a property developer. We signed the SPA (Sales & Purchase Agreement) for RM5,000 for a property in Gurney Drive. The property’s lease was priced at RM450,000 and it has appreciated to approximately RM570,000 to RM580,000.

It is rented for RM3,000, while the monthly installment is RM1,800. Minus the service charge (maintenance fee) of RM200, we get a passive rental income of RM1,000.

MT: Also, mind you, she has four kids.

JC: Yes, it is important to mention that I have four kids. When we started investing, we already had two kids. The worse thing that could happen is losing money, but at least we tried. We then bought two more units on the lower floors at the same block with the same method.

MT: Also, I would like to mention that the units are not prime units or the nicest ones.


Juanita, where are your other properties located?
JC: All in Penang.

Michael, which was your first investment?
MT: As a business person, I wanted to do different things. I took a more conservative approach. I paid RM6,000 for a low cost unit and made RM18,000 back. I shared my money-making skills with my staff as well. One of them (at his mortgage broking company) paid RM1,180 as downpayment and she made RM14,000 after three months.


JC: It is possible to start with not much and achieve great success despite limitations. Educate (yourself) and take actions. It is not always a breeze. There are obstacles but it is worth it.

So, it is safe to say that the biggest myth in property investment is that you need large sums of capital.
JC: Yes, that is the biggest myth.

Juanita, what are these obstacles?
JC: Some of them include raising cash. We have to convince the banks. If you are determined to reach your objectives, you won’t let it stop you. I live in Penang and travel to Kuala Lumpur very often. Not many people would take the trouble to travel.

MT: Tell them about your furniture shopping trip!

JC: Oh! Ignatius and I would drive all the way from Penang to KL to buy furniture. Pack it all up in our car, tie things to the roof and then drive all the way back, on the same day.

MT: I have known her for only two to three months, but I see her in KL very often. I am blessed to have met and known her.


Wow! Where do you find the energy and drive?
JC: It’s just like a mother loving a child. I don’t mind not resting. As a mother, the saddest thing is not having time for them, (or) providing more for them.

What are the essential traits or qualities to be a successful investor?
JC: The person must love property. (He/she) Must be literate about real estate or finance.

MT: Financing can be a headache. One must be able to balance financing well enough, to pay loans well. Bear in mind, our properties might be worth millions, but we also have millions in debt.

Juanita has written a book titled “Inspired To Change”. Michael, any plans to follow suit?
MT: Yes. I am planning to release my book in October this year. Soon… soon, I will start writing.

What are the key things to look out for when investing?
JC: Be practical. You need to decide on a particular location and who you are targeting. For example, if you are targeting expatriates, then buy (property) in the area where they usually are.

MT: You could identify a fixed area and buy in the same area over and over. For me, I focus on good deals in Kiara only and areas where I can attain a rental yield of 8%.

Some of the strategies include focusing on low and medium cost projects. For those who are younger and do not have much cash, start with that. There is still a demand for such units. Some people prefer commercial, so go with what works for you.

Any advice for aspiring property millionaires?
MT: Be real. Be yourself. Be grounded.

JC: Believe that it can be done. One of the other things that we hope to impart from the seminar is, “Who are you going to be when you reach your financial goals?” Success is not just about money. We take a holistic approach. We want to get there (be successful) in the right way.

Being rich is about who you have beside you at the end of the day. Surround yourself with good people.

MT: It is fulfilling as a person, to see the changes in people, to see how their lives have improved. I hope to share my knowledge and affect 10 million people. We also do charities from time to time and are currently supporting a home for the underprivileged, House of Joy, in Puchong.

Make your millions safely and quickly from real estate

In my journey to help individuals achieve their financial independence through educated investment in real estate, one of the things that worry me most is the way some newcomers invest in property. I have received plenty of feedback from young investors about their methodology and views on how they invest. As much as I respect and admire their zest and energy, I also feel that they are naive and lack understanding of real estate investments. The urge to succeed, impatience and lack of direction in property investment can be very dangerous and potentially put them in a monetary-losing position.

“How does one start investing in real estate and why?” If your answer to that question is ‘new projects because it is simple and straightforward’, then you might fall into a potential property investor trap. Now, I have nothing personal against new developments or developers. Personally, I have invested in new projects and continue to do so. But for the life of me, I will not say that it is “simple and straightforward”! Thereʼs nothing “simple and straightforward” about property investment. True, it can become easier as time goes by, when you have more experience, but it is never simple.

So how do you know whether a property is a ‘good buy’ or not?
In a secondary market, it is quite easy to determine if a property is a ‘good buy’. Secondary market is the most organically driven market of all. What drives the secondary market is the fundamental law of economics—demand and supply. Deals are made where there is a willing buyer and a willing seller, willing landlord and willing tenant. Prices of properties are also influenced by rental returns. There are many avenues on how you can determine the true value of properties, i.e. from the banks, valuers, NAPIC (National Property Information Centre) and professional map makers such as Ho Chin Soon.

This gives you a realistic picture of the past and present developments in that market. With these data, you can easily extrapolate the future value and make a rational decision on whether to invest or not.

Now, what about buying from developers?
What is the driving force in determining whether it is a ‘good buy’ from developers? Most information is provided by the developers themselves and it can be true or it could have been made “marketable”. The question is, how do you, as a newcomer, determine the true value of what is said by the developers or make a good judgement on which projects to invest in? Apart from attending courses such as Juanita Chin’s ‘Breaking the Code: Secrets of buying from property developers’ to discover how to assess new projects, the answer lies in the secondary market!


You can find a lot of information from the secondary market—the current selling prices, rental returns, take-up rates and even vacancy rates for existing properties. You can also find out about other factors such as the area’s target market, its population growth and potential tenant mix. Using all these information is fundamental in determining your best development project, no?

So, in order to make good decisions, when buying from developers, one needs to master the fundamental rules of buying in a secondary market first. Like in every good game, there are always levels to play. In the game of real estate, the first basic level should be the secondary market. Knowing and understanding the secondary market is vital for newcomers. It is the stepping stone to becoming a good investor for new projects. Therefore, it is my opinion that one must first understand and invest in the secondary market prior to entering new project markets.

Please note that the opinion above is only limited to my own experience. I am sure that there are many successful investors who are big fans of new project investment strategies. I acknowledge your successes. My main intention of sharing is to assist anyone who enters into the world of property investment and help them thrive and become success safely.

Let’s look at the overall picture. Instead of asking which is better, primary or secondary market, ask yourself, “How many properties or how much in total value (RM) do you need to acquire before you can safely retire?” You should decide on your finish line before starting the race.

Once you’ve determined your finish line, e.g. the total value of property you would like to acquire, then decide how long you would like to take to achieve this number. How much time do you give yourself to acquire that total amount? Ideally, you shouldn’t take longer than five years. Now that you’ve got these two numbers, congratulations, you now have an achievable goal, both in total value (RM or number of properties) versus the deadline to complete your acquisition.

Ok, this is the part where we turn up the heat. How do you do it quicker, safely?

"How many properties do you need to buy in order to achieve your financial goals and how quickly do you want to do it?"

Now, this is a very technical question that involves financing the deals. Assuming that you are not an heir or heiress to a multi-billion dollar empire, most newcomers would need to take a loan to finance their deals. Assuming that you’ve determined your financial freedom number and have decided on the number of properties you can buy, the next question is, “How fast do you want to be financial free?” The answer would usually be, “The shortest possible time.”

Leverage on loans
The secret is to make the banks your best friend. For the life of me, I cannot understand why people do not leverage on loans. My key to financial freedom is through leverage. So, in terms of investing into property, a lot will depend on how much you can borrow. Do you know that the total amount of loan you can borrow is dependant on how much you earn as well as how much existing loans you have?

There’s two parts of this equation. How much you earn versus How much are your borrowings? These two parts will determine how fast you can go in terms of property investment. Just think of it like a scale. Neither side should be too heavy, otherwise the scales will tip. If it’s heavy on the income side, it just means that you’re not investing enough. If the borrowing side becomes too heavy, it means that you may not be allowed to obtain new loans.

To understand this further, let me explain what income and borrowing is. Your income is derived from your salary, commissions, dividends, rental and so forth. Your borrowings include credit cards, personal loans, car loans and housing loans. So technically speaking, you can go as fast as you can, so long as the scale do not tip to one side too much. For most banks, the ratio is about 0.4. This means that your borrowing must not be more than 40% or your income. Some banks allow up to 0.8 these days. Please check with your friendly neighbourhood banker for more up-to-date information regarding these ratios.

Primary vs. Secondary market
What has income and borrowing got to do with primary and secondary market properties? Let me elaborate:

• Primary market properties, i.e. purchase off the plan or from developers, adds solely to the borrowing.
• Secondary market properties, i.e. purchase from third party buyers or auctions, adds to both borrowing and income via rental.

Therefore, the secondary market has more potential to balance the scales, allowing more purchases to be made.

Most newcomers have relatively low income from salary and/or commissions. Therefore, it is advisable to stretch the loans as much as possible and look for properties that give rental returns i.e. the secondary market. If you were to purchase a project that has yet to be built or is under construction, this would tie-down your credit because the property is not ready for rental yet. You would have to wait for two to three years before you can invest again. If you are highly geared and cannot purchase anymore, then you’ll have to sit out on all the good deals and opportunities that come along. Trust me, that’s no fun.

However, do learn how to pace yourself throughout the journey. This should be a marathon, not a sprint. There are only two ways to profit from property — capital appreciation and rental returns. Learn to master both strategies to get you to your finish line faster and safely.


Capital first
My advice is to always start with capital first. Like all investments, property is capital intensive. The best way to get capital is from income sources. Cultivate good saving habits by saving your salary, bonuses and/or commissions. Ideally, start investing in property only when you have RM3,000 to RM5,000.

Then focus on cash flow. Why? Because it is good for you and the banks. Look into properties that give you good rental returns. Anything from 6% to 10% is good. My average investment portfolio stands about 8.5% p.a.

Once you get the hang of it, you can start investing for capital returns. Use investment strategies like No-Money-Down, flipping (buy-to-sell) through auctions, or buying from developers and selling upon completion. There’s no hard and fast rule to it, but I try to keep my developer profile to only one a year. The rest of the year, I invest in secondary market only. I seldom purchase auctioned properties. It’s just my personal preference.

Alternating strategies takes time and experience. Be patient and learn from both your successes and mistakes. It is important to go easy on yourself. Learn to roll with the punches. So if you make an error, learn how to correct it, learn from it and move on. It only becomes a failure when you give up.

Take care of your investments
Always seek professional advice to deal with your property matters. Hire accountants, tax consultants, good lawyers, bankers and so forth, to help you develop a healthy profile. Some people like to look for opportunities to get rich quickly. My advice? Don’t. Declare and pay your taxes, get consultants and pay them well and set up a proper structure to manage your portfolio wisely. Understand that you are in this for the long-term. If you take care of your investments now, they will take care of you for life. If you want drama or excitement instead, might I suggest jumping off a bridge with a rope around your ankle. Keep property investments safe and boring.

These days, the market is “hot”. I hope and wish that all investors make tonnes of money. Please invest wisely and avoid getting burnt.

Selangor in talks with Dubai investors

The Pakatan Rakyat (PR) Selangor government has entered into talks with seven potential investors from Dubai to boost the state's economy.

Mentri Besar Tan Sri Abdul Khalid Ibrahim said he met the potential investors in his recent trip to Dubai.

"They (the investors) have expressed interest to invest in the state as they are confident in our (PR) management," said Khalid, after chairing a monthly meeting with government department heads today.

He said the investment value could amount to US$10 billion but he did not specify when and how the investments would start rolling in.

He added that the investors were interested in various sectors of the state’s economy, particularly in the food and manufacturing industry.

Khalid said the investments would create ample opportunities for the people of Selangor, especially during the current "stressing" economic climate caused by soaring oil prices.

On another development, Khalid said he would make an announcement on Friday on how the state government will channel profits and revenue from natural resources to the people.

He said the announcement will be part of the government's approach to have a people-orientated economy.

"Civil servants and state executive councillors are just managers of the state's resources as ultimately, the people are the natural owners. We are interested in channelling revenues and profits from the state's natural resources to the people," said Khalid.

He said for example, sand and natural resources, under the previous government, contributed about RM20 million a year in revenue.

"If properly managed, these natural resources can contributed about RM200 million a year," said Khalid, adding that the revenue can then be put to better use to help the people.

Leasehold extension for Penang's industrial, commericial property owners

All industrial and commercial property owners on Penang state land can now have their leasehold titles converted to the maximum of 99 years, while all residential landed properties are to be made freehold.

Chief Minister Lim Guan Eng said the state government's decision is part of its land reformation and renewal policy.

"We want to give ownership of land back to the people," he said in a press conference in his office today.

"This decision will have significant impact on industrial and commercial sectors, especially in their ability to get financing," he explained.

He cited, as example, owners who have 40 or 50 years left in their individual leases can now have them renewed to 99 years, making financing readily available.

"For residential house owners, these houses will be theirs forever."

Lim expressed confidence that all eligible conversion applications, to be done by the Evaluation Department and Land Office, will be completed within the next four years.

Strata title holders who own apartments and flats would have to wait while the state government liaises with the federal authorities because strata titles come under the National Land Code.

He said forms for landowners to apply to have their status converted can be downloaded from the state government's website after tomorrow.

Lim, who is also DAP secretary-general, also said the Pakatan Rakyat (PR) is coming up with a set of standard operating procedures for uniformity in governance in the five states led by the coalition.

"We are having continued discussions on this matter," he said, adding that a committee has been formed to look into the formulation of the procedures.

He said this while acknowledging that the PR administrations in the five states under the coalition did not share a similar structure.

"The process is ongoing for the PR administration to be formalised and structured," he added.

On a report that PAS Youth wants to implement Islamic laws, including prohibition of gambling and liquor, and introduction of dress code for office workers in all PR states, Lim said the issue does not arise.

"We have already made it clear that we are going to be fair to everyone regardless of race, gender, religion or political background," he said.

"As far as we know Penang PAS has not made any request to us on this matter. It was never raised, never discussed. So the matter does not arise."

Review of land status

PROPERTY consultants and developers agree it is time to review the country's leasehold land concept to keep up with the changing needs and overhaul Malaysia's land tenure system.

They concur that such an initiative would benefit individual property owners as well the respective state governments through conversion premium income.

“While owners of individual leasehold property face a steady erosion in the value of their property over time, state governments are sitting on essentially a goldmine which could easily be unlocked by returning the freehold rights to the leaseholders,” Regroup Associates executive chairman Christopher Boyd told StarBiz.

He said it was timely for the Federal Government to take the lead to come out with a Leasehold Reform Act that would enable leaseholders to buy the freehold interest based on a certain premium formula.

“Both the Federal and state authorities should realise that there is no point in holding on to their freehold reversions. An orderly and transparent system for selling the freehold rights to the respective leaseholders would be a wise and popular move.

“The whole leasehold concept is an anachronism and has outlived its usefulness. It's a legacy from the old British system and Britain has also went on to review the leasehold concept that resulted in the Leasehold Enfranchisement Act (1963), giving leaseholders the right to buy up their freehold interest. “It is long overdue in Malaysia and a review is certainly in order,” Boyd said.

He said the Penang state government's initiative to encourage residential leasehold landowners to have their land converted to freehold status would have a far-reaching impact on the property market if it was adopted by the other states.

Penang chief minister Lim Guan Eng had recently urged leasehold landowners to apply to the state government to convert government land into freehold status with a premium payment.

The new land policy would allow 30-year, 60-year or 99-year residential leasehold land to be converted into freehold land on a case-by-case basis. The state is also looking at allowing the tenure of leasehold industrial land owned by the state government to be extended from 60 years to 99 years.

“It is a very far-sighted policy that will encourage a long-term mindset in terms of development plans by developers and enhance the attraction of Penang as a real estate investment venue.

“Leaseholders will substantially enhance the value of their properties, and when renovating or improving their properties, they can take a long-term view,” Boyd said.

He said the land premium price to convert leasehold to freehold status had to be based on a fair formula, taking into account the difference between the freehold land price and the property's current market price.

Real Estate and Housing Developers Association (Rehda) president Ng Seing Liong concurred that the initiative was a positive development for the people as well as the property sector and urged other state governments to look into adopting it.

Rehda Penang chairman Datuk Jerry Chan said land and property value could easily appreciate by 25% to 30%, and property projects would be more marketable and attractive to investors.

“The onus is on the state government to disclose the quantum of premium to be paid based on a fair formula for leaseholders,” he said.

Mah Sing Group Bhd president and group chief executive Datuk Sri Leong Hoy Kum said converting leasehold land to freehold status would certainly enhance the value of the development, depending on the location of the property.

If it is in the heart of the city and at a very strategic location, the appreciation in value could reach 100% to 300%.

“There will be a two-fold benefit to the owners – they do not have to face the hassle of renewing the leases, and they may enjoy a windfall should they decide to sell the land or property later. Bank financing for freehold property will also be easier to come by compared with property with less than 40 years’ lease.

“Besides enhancing the appeal of the development for local buyers, this will also encourage foreign buyers to participate more actively in the property market,” Leong said.

He said Penang was a good state to start with the initiative “since there is not much leasehold land there and other states can observe the effects of the initiative before deciding whether this is viable for the individual states.”

“Developers who may have been hesitant to develop land with short lifespan left on their leases will have a new avenue to explore business opportunities. This will be a stimulus to boost the property market as there will be more land transactions,” Leong said.

Redevelop the Wisma Angkasa Raya, Opposie KLCC

PETALING JAYA: Sunrise Bhd is believed to be acquiring Wisma Angkasa Raya, located opposite the Petronas Twin Towers in Kuala Lumpur City Centre (KLCC), for redevelopment into an upmarket commercial project.

In a filing with Bursa Malaysia on Monday, the property developer said it had entered into an agreement with Reliance Pillar Sdn Bhd and Lembaran Segimaju Sdn Bhd to acquire Tanah Tuah Development Sdn Bhd for RM57.4mil.

Sunrise will pay RM27mil in cash and make a RM30.4mil shareholders' advance to Tanah Tuah. It has paid a deposit of RM5mil.

According to the announcement, Tanah Tuah has registrable interest in a piece of freehold land within the KLCC.

“Tanah Tuah represents a good investment as the property that is being acquired by Tanah Tuah has potential to be redeveloped into an upmarket commercial development, which will further strengthen the group's presence in a prime location,” Sunrise said in the statement.

Tanah Tuah had in January agreed to buy the 1.6-acre land from the original owner for RM152mil but the agreement has yet to be concluded.

Sunrise said it had taken the necessary legal measures to safeguard its interest in the event the company's agreement with the vendors was completed before the completion of the accord between Tanah Tuah and the original owner.

Wisma Angkasa Raya, which is around 29 years old, is Kuala Lumpur’s first high-rise office building. The unencumbered property is a 24-storey commercial building comprising a 20-storey office tower and a four-storey podium with two basement carparks.

It has a total net lettable area of 167,728 sq ft and an occupancy rate of 96.4%.

Aseambankers research analyst Ong Chee Ting said that assuming Tanah Tuah had taken a 100% debt funding for the purchase, Sunrise’s RM27mil cash payment to the vendors would have raised its acquisition cost to RM179mil, or RM2,588 per sq ft.

“Even at RM2,588 per sq ft, it is considered a fair price. Assuming that KL City Hall grants Sunrise a 10 times plot ratio for redevelopment, similar to the upcoming Menara YNH in Jalan Sultan Ismail, the price per plot ratio works out to RM259 per sq ft.

“Adding RM500 per sq ft per plot ratio for the construction of an upmarket development and factoring in an efficiency ratio of 80%, the total construction cost comes to about RM1,000 per sq ft per net saleable area,” Ong said.

Given that KL City Hall has raised the plot ratio for commercial development to nine to 10 times now compared with Wisma Angkasa Raya's three times, Ong said the redevelopment could yield a gross development value of at least RM900mil.

“If Sunrise’s new property can be sold above RM1,300 per sq ft, there's still a 30% margin to be made. This translates to a development profit of RM208mil,” he said.

Ong said the risk for the redevelopment plan was a possible oversupply of new office space in Kuala Lumpur by 2010, although this risk is “mitigated by the property’s prime location''.

RM200mil Nursing College to take shape in Bandar Sri Sendayan, Seremban, Negeri Sembilan

PROPERTY developer BSS Development Sdn Bhd, a subsidiary of Matrix Concepts Holdings Bhd, expects anchor investor International University College of Nursing (IUCN) to boost the economic development in its new township, Bandar Sri Sendayan in Seremban.


Today, state government agency Menteri Besar Inc of Negeri Sembilan will sign a deal to sell 200 acres in Bandar Sri Sendayan to Run Education Sdn Bhd, the owner and manager of IUCN.

Run Education will invest about RM200mil to build IUCN, Malaysia's first international nursing school.

BSS, in a joint venture with Menteri Besar Inc of Negeri Sembilan, is developing the 5,235-acre Bandar Sri Sendayan, which has a gross development value of RM3bil.

“We believe that the new IUCN campus will accelerate the growth of Bandar Sri Sendayan as well as stir up the local economic activities in Seremban,” Menteri Besar Inc of Negeri Sembilan chief executive officer Datuk Mohd Hasiah Mohd told StarBiz.

He said Menteri Besar Inc is confident of attracting students from neighbouring countries, as IUCN would have a competitive advantage in terms of location, being only 20km from the KL International Airport.

IUCN had a target of 60:40 ratio between international and local students, he added.

BSS managing director Datuk Lee Tian Hock said IUCN expected the first intake of 5,000 students in September next year and hoped to accommodate 20,000 students by 2011.

“We hope IUCN would attract foreign and local students to pursue nursing qualifications in Seremban as the cost of living is relatively lower than the Kuala Lumpur city centre,” he said.

Located in the middle of Bandar Sri Sendayan, the IUCN campus would be developed in two phases and construction was scheduled to start next month, said Lee.

According to him, Bandar Sri Sendayan is expected to have a population of 60,000 when it is fully developed in 15 years.

Meanwhile, BSS and the Negri Sembilan state government agency are currently in talks with a foreign party to sell 1,000 acres for over US$1bil for an integrated tourism-related project.

The deal was expected to be finalised next month, said Mohd Hasiah.

>> More info about the land/properties

Golden Triangle and Mont’Kiara still hot spots

KUALA LUMPUR: The Golden Triangle and Mont'Kiara continue to remain the top “hot spots” in the Klang Valley for property investments as these areas have shown marked increase in capital appreciation.

Property map “guru” Ho Chin Soon said some condominiums in the Kuala Lumpur City Centre (KLCC) development had breached RM2,000psf while the price of condominiums in the affluent Mont'Kiara neighbourhood were also rising.

Ho, who is the managing director of Ho Chin Soon Research Sdn Bhd, said the spill over effects from these “hot spots” was apparent but only in certain locations.

The Klang Valley, he noted, would remain the No 1 growth region in Malaysia for many years.

“Malaysia is an excellent country in Asia to invest in because of excellent infrastructure, solid legislation protecting land rights and liberal policies for foreign investors,” he said in his talk at the Malaysia International Property Showcase yesterday.

“We need to fine tune our economic policies to compete with the rest of the world in the light of globalisation. In order to compete we have to change. The recent 12th general election has started the ball rolling.

“People voted for change. They want greater transparency. There should no more be negotiated deals or land alienation but tenders and public sale of land,” he added.

Ho said there had been a lot of foreign interest in Malaysian property, especially last year when investors from South Korea and the Middle East bought office and condominiums en bloc.

He also advised investors to do their “home work” carefully and buy from reputable developers, as there were signs of the market softening.

“We have to take what developers tell us with a pinch of salt. Rental yields are going to come down,” he said in response to a question on the many vacant units in Mont'Kiara.

Difference Between Individual and Strata Title

“In general, an individual title is for a property which has its own land and this usually means that the land itself is owned by the proprietor. Strata titles are generally for properties in a multi-storey building and this usually means that the land belongs to the proprietors from the time of the multi-storey building.

Whilst properties which have their own land will be issued with individual titles, the owner of a unit in a multi-storey building (e.g. apartment, flat, condominium, townhouse, office or even shoplot) will have their right of ownership of the unit they purchased. Every owner will have their share of the land/building which is stated as Unit Share in their Strata Title when issued based on the built-up size of their unit.

It can take years for a strata title to be issued by the relevant authorities. Pending the issuance of the strata title, the owner of a unit can still sell or assign their unit and the non-availability of the strata title does not in any way affect the owner’s right to their unit.

For the sale of a property with individual title the transfer instrument is in Form 14A as prescribed in the Malaysian National Land Code 1965. As for the legal charge of the property with individual title by the owner to his financier Form 16A is applicable. Both the transfer and the charge will involve the land office and the instruments must be presented to the land office for registration.

For property with a strata title still to be issued a deed of assignment is executed to buy a property (if the seller is not the developer, i.e. a sub-sale) or to give security for a loan. A deed of assignment transfers all rights, title, and interests in respect of the property and under the previous sale and purchase agreement to the purchaser. Likewise for an owner to provide the security over the property to his financier, a deed of assignment assigns all rights, title, and interests in respect of the property and under the previous sale and purchase agreement to the owner’s financier. Once the strata title to the unit has been issued, the owner will transfer and/or charge his unit in the same way as a property with individual title.”

New property hot spots in the Klang Valley

NUMEROUS new property launches have been unveiled in the Klang Valley this year with developers scrambling to show off their highend condominiums bearing none other than the alluring address of the Kuala Lumpur city centre (KLCC) or its vicinity.

The growing list of projects in and around KLCC includes the likes of Hampshire Residences, Park Seven, Troika, Idaman Residence, Suria Stonor and My Habitat to name a few.

For those eyeing these exclusive properties, they must be prepared to fork out a hefty sum.

For instance, Hampshire Residences which is located off Jalan Ampang along Persiaran Hampshire, is priced at between RM600 and RM700 psf.

Suria Stonor, a project by Glomac Bhd, starts from RM600 psf for its standard units with the penthouses going for RM840 psf onwards.

The average price per sq ft for Idaman Residence is RM720.

Projects nearer to KLCC such as The Binjai already tops RM1,000 psf.

Why is it that the KLCC area commands such a high price? Why does a project in Jalan Ipoh, which is still very much within the city, for instance, offer such a huge discount to the KLCC prices? Jalan Ipoh, after all, is KL, as is KLCC.

These were among the questions directed at Ho Chin Soon of Ho Chin Soon Research Sdn Bhd, at the recent two-day seminar FinEx 2005, organised by The Financial Planning Association Malaysia, held at at the Mid Valley Convention Centre.

Ho’s response: "Location is a crucial factor that determines the price of the property.

For example, a unit that fronts the KLCC park without any obstructions to the view will have a high price tag attached with it.

At the end of the day, price is very sensitive and it has a positive relationship with the location of the development."

Ho, who spoke on "Growth Corridors in the Klang Valley", provided suggestions about plausible development corridors that he said are poised for rapid growth in the Klang Valley.

He sees the current growth corridors of Sungai Buloh-Damansara and Puchong-Seri Kembangan being developed soon and that new growth corridors would emerge.

And where would these be? Ho identifi ed the next hot spots in Klang North and Klang South.

Klang North would include areas such as Kapar, Meru, Shah Alam and Klang while Klang South refers to Port Klang and West Port

Why these areas?

Growth corridors are very dependent on accessibility, explained Ho, drawing attention to the Guthrie Corridor as among the latest highways that helped to open up the Klang area.

The growing attractiveness of Klang and Shah Alam has not gone unnoticed.

More and more developers have bought into land in these areas and they include established players, the likes of SP Setia, TA Properties and YNH Property Bhd.

"There is no doubt the next hot spots may be Klang North and Klang South; the centre of gravity for the Klang Valley is not expected to move southwards. Instead, it will ‘hover’ around Petaling Jaya State New Town," added Ho.

Another speaker at the seminar was P B Nehru of City Valuers & Consultants Sdn Bhd, who spoke about property as an investment.

He said properties being bought for investment purposes should be analysed differently from those being purchased for owner occupation.

"Different properties in different locations provide different rates of growth and return. If one wants to maximise total return from a property investment, one must have detailed and intimate knowledge of the entire property market and not just the individual property that one is interested in," said Nehr

Nehru identified a list of critical factors which he called the 10 commandments of property investment that must be investigated and analysed if one wishes to maximise his total returns from any property investment.

Top of the list is rental yield and rate of capital value growth .

He has analysed the Klang Valley property market from 1997 to 2005 for areas with leading capital value growth rate per annum.

Of the 15 The growing attractiveness of Klang and Shah Alam has not gone unnoticed.

More and more developers have bought into land in these areas and they include established players, the likes of SP Setia, TA Properties and YNH Property Bhd.

"There is no doubt the next hot spots may be Klang North and Klang South; the centre of gravity for the Klang Valley is not expected to move southwards. Instead, it will ‘hover’ around Petaling Jaya State New Town," added Ho.

Another speaker at the seminar was P B Nehru of City Valuers & Consultants Sdn Bhd, who spoke about property as an investment.

He said properties being bought for investment purposes should be analysed differently from those being purchased for owner occupation.

"Different properties in different locations provide different rates of growth and return. If one wants to maximise total return from a property investment, one must have detailed and intimate knowledge of the entire property market and not just the individual property that one is interested in," said Nehru.

Nehru identified a list of critical factors which he called the 10 commandments of property investment that must be investigated and analysed if one wishes to maximise his total returns from any property investment.

Top of the list is rental yield and rate of capital value growth.

He has analysed the Klang Valley property market from 1997 to 2005 for areas with leading capital value growth rate per annum.

Of the 15 key areas studied, the 3-storey shop-offi ces in Bangsar Baru scored the highest percentage of capital value growth rate of 6.25% per annum.

The 4-storey shopoffi ces in Desa Hartamas, meanwhile, recorded 5.75% capital growth per annum. Bungalow lots in Damansara Heights, on the other hand, enjoyed capital growth rates of 4.8% per annum.

"Location is an important criteria for any property. But more importantly, correct location, correct property and correct valuation are the key factors to successful investments," said Nehru.

Malaysia- Property Financing Takes New Turn

FINANCING of property developments has taken on a new form recently in Malaysia with the wholesale selling of a development to a financial institution which then helps to market the property.

With Kuwait Finance House (M) Bhd (KFHMB)'s innovative Islamic way of funding a project called Mudharabah, it has revolutionised real estate development financing by applying the Islamic principle of sharing risks as well as profits.

To be offered such a facility is a stamp of trust of the project's success with KFHMB being associated with projects such as The Pavilion and The Avare in Kuala Lumpur.

Mudharabah is a common structure in Islamic financing where a partnership is formed with a party providing capital and the other party managing the project.

In the case of real estate projects, this enables a developer to concentrate on developing a property leaving the lender with the marketing.

Take the recent signing of a Mudharabah agreement between Corner Side Realty Sdn Bhd (CSRSB), a member of the Prima Prai Group and KFHMB as an example.

Under the Mudharabah financing facility KFHMB will provide a capital of RM74.7mil to CSRSB to underwrite the sale of 30 bungalows in Phase 1B of the RM500mil, The Sanctuary, a freehold development in Batu Uban, Penang.

When the bungalows are eventually sold to the end-purchasers, the profits from the sale would be distributed to KFHMB and CSRSB, based on a profit sharing ratio.

Mudharabah ensures that the project is guaranteed completion as the developer has locked in his sales.

It also gives purchasers confidence as they know that the project will be completed and this in turn attracts more potential buyers and boost property values.

Besides having the financial muscle, KFHMB through its parent company Kuwait Finance House has a vast international network of potential customers.

Its financing structure is not only in real estate but also in various Islamic banking services including lease financing, trade finance, direct investments and portfolio investing.

Being the first to offer such a facility in Penang, it also reflects the commitment of KFHMB in increasing its investments in Penang and in developing its presence in the state.

KFHMB managing director Datuk K. Salman Younis, who described Mudharabah as a “very fair form of banking”, sees good potential in doing business in Penang, given that the government plans to spend RM23.8bil on the northern region under the Ninth Malaysia Plan.

This allocation among others would go into major infrastructure projects such as the Penang Outer Ring Road, Penang monorail system and Second Penang Bridge.

“Penang also stands to benefit from the influx of tourist arrivals which will invigorate activities in the hospitality sector.

“All these factors will act as catalysts for the economy in Penang and revive the property and construction sectors,” Salman said, adding that KFHMB would work with Prima Prai Group for future strategic alliances and co-operation.

Prima Prai Group managing director Datuk Mohd Ramzan Ibrahim said it was the group's first Mudharabah facility.

Phase 1 of The Sanctuary comprising 21 detached and 11 semi-detached houses worth RM68mil has been completed and occupied.

Phase 1B with 35 (including the 30 in the Mudharabah deal), three-storey detached houses will be launched early next year.

By S.C. CHEAH

Property or Equities?

According to some research in the United States, 90% of US traders lost their money. In Malaysia, there are no such statistics to indicate how many retailers who traded in Bursa Malaysia suffered the same fate. The situation in Malaysia may not be as bad but the percentage of losers is definitely not far from 90%.

More people make from property

On the other hand, more than 90% of property investors make money in Malaysia, except for those unfortunate ones who fall prey to defunct developers or bought properties in the wrong locations like Bukit Beruntung.

From the above observations, does it mean that property is a far better investment? Some people reckon so, while others still cannot resist the attraction of potential large capital gain provided by the stock market; after all, two of the richest men in the world, Warren Buffett and George Soros, make their fortune from the equities market.

In the above comparison between investing in stocks and properties, it is the traders who lost money but equities investors should make money in the long run. Unfortunately, most Malaysians who invest in both asset classes seem to think that they make more money from the property market than from the stock market.

Both are attractive

Property and equities investments are both attractive and could be highly profitable too. That is possible provided one has the right approach and strategy.

There are many people who make huge amounts of money from both these investments. Many of the world's richest men made their fortune by investing in properties or shares or both.

Doubling your investment by investing in the property or stock market is not a dream, and the capital required is within the means of most individuals. But those in the market can tell you that these two classes of investment are quite different.

Return — property vs share

How did property investment perform in the past? Unlike the stock market, there is no property index that can provide a clear indication of the long-term performance of property investment in Malaysia.

A simple comparison of double-storey houses in a few prime locations in Kuala Lumpur (Table 1) seems to indicate that the capital gains of these properties were about 6.2% - 6.9% over the past 16 years. The gains, however, do not include rental incomes which can yield another 3% per annum. As such, the total average return of these superb investments was about 9% per annum, which is pretty attractive.

Bear in mind, these are prime properties. The second-tier properties will have lower return, for example those in Ipoh, Seremban, etc. Over the same period, the best property stock, IOI Properties, gained 19.9% per annum. However, there were also many property stocks which performed poorly.

If we use the stock market benchmark, the KL Composite Index (KLCI), the gain over the past 16 years was a mere 4.3% per annum. The poor performance of the KLCI over the past 16 years could be due to the financial crisis in 1997/98, which affected the stock market much more than the property market.

On the other hand, if we look at a longer duration, say from 1978, the average compounded return of the KLCI was a more respectable 7.2% per annum. If we include dividend income, the return will be in the range of 9%-plus per year for an average Malaysian share.

Shares — better return, higher risk

The comparison indicates that the return of stock market investment was as good as that of property investment. In certain cases and during certain periods, it can be even better than property investment.

However, if risk is taken into consideration, the risk-adjusted return of property investment could be better than stock market investment given that the volatility of stock prices is very high whereas property prices are more stable.

Besides price performance, there are many other issues which need to be considered as well. Table 2 shows a comparison between these two asset classes. There are obvious advantages of investing in properties — stable prices, high gearing, a good collaterised asset, steady flow of incomes, etc. But there are also many disadvantages in property investment such as lumpy investment, not easily divisible, higher transaction cost, longer duration taken to complete a transaction, etc.

Those investing in the stock market would agree that investing in stocks and shares is so much easier and one can get in or out of the market fairly fast. Property proponents, on the other hand, find investing in the stock market too volatile. Their hearts could "go up and down with the stock market gyration every day".

Both are equally good

In fact, properties and stocks are equally good investment. The high leverage of property investment can provide good capital gain over time. The limited supply of well-located properties will ensure steady appreciation in value. The inefficiency in property market also provides many opportunities.

On the other hand, equities investment provides the liquidity and excitement. Shares are like quasi cash, whenever there is an urgent need for money one can sell some shares, but that is not possible in the case of property investment. Investing in good stocks can be very profitable and it does not lose out to investing in property market. There are many blue-chip investments which yield substantial capital gains over time. Genting, Public Bank, IOI Corporation are some of the familiar names around.

is no conflict between property and share investment as each of them provides good return and in fact they complement each other. Property can be kept as long-term investment while shares can be held as medium- to long-term investment.

By Ang Kok Heng

Indefeasibility means impossible to be defeated

THE term indefeasibility means that something is impossible to be ‘defeated’ or made void.
Where fraud or forgery is involved in the transfer of land titles, legal systems around the world adopt either one of two principles – “immediate” or “deferred” indefeasibility. Which one is practised depends on the laws of the respective countries.

Immediate indefeasibility is a situation where a transferred title is valid, regardless of any element of fraud or forgery involved. Countries such as Australia or Canada practise this, and their respective governments have in place a fund that compensates victims of such cases.
Deferred indefeasibility, on the other hand, only protects a subsequent purchaser to a title that is defeasible. Therefore, if one party obtains a title where fraud or forgery is involved, this title can be defeated.

However, if this same party sells it to another purchaser who buys it on good faith, that title is considered to be indefeasible. The indefeasibility therefore “defers” across one transfer of title (the one where fraud or forgery is involved) to the next purchaser who buys it in good faith.
Indefeasibility under the National Land Code 1965
The relevant parts that concern the principle of indefeasibility in Malaysia is spelt out in Section 340 of the NLC as follows (omissions made for brevity)

Section 340. Registration to confer indefeasible title or interest, except in certain circumstances.
(1) The title or interest of any person or body ... shall, subject to the following provisions of this section, be indefeasible.
(2) The title or interest ... shall not be indefeasible -
(a) in any case of fraud or
misrepresentation ... or
(b) where registration was
obtained by forgery ... or
(c) ...

(3) Where the title or interest of any person or body is defeasible by ... circumstances specified in sub-section (2)-
(a) it shall be liable to be set
aside ... to whom it may
subsequently be transferred; and
(b) any interest subsequently
granted thereout shall be
liable to be set aside ... :

Provided that nothing in this sub-section shall affect any title or interest acquired by any purchaser in good faith and for valuable consideration....

(4) ... Briefly explained, 340(1) says that all titles are indefeasible, and 340(2) states that fraud or forgery, amongst other things, can render the title defeasible.
340(3) states that if a defeasible title – as explained in the 340(2) – is sold to a subsequent purchaser, it remains defeasible.

However, 340(3) has something known as a proviso (an exception to the rule), and it says that if the subsequent purchaser buys it in good faith, (i.e., thinking that the title was valid and the deal fully legitimate) and paid for it (in money or otherwise), then the title will be indefeasible, and he gets to keep the land – and this essentially spells out the concept of ‘differed indefeasibility'.
The point of contention here is that the proviso appears to limit itself to ‘this sub-section', which might be taken to apply to 340(3) only.

Many legal practitioners and academicians are of the opinion that the Federal Court did not arrive at the correct decision in Adorna Properties Sdn Bhd v Boonsom Boonyanit.
According to assistant professor Dr Sharifah Zubaidah Syed Abdul Kader, there appears to be nothing wrong in the way S340 of the NLC is worded.

“The law is fine, but it is how the judges have interpreted it. If you were to read the Court of Appeal's decision, it appears that the Federal Court made its decision on the wrong premise. There was no reason for it to depart from the practice of differed indefeasibility,” she opines.

Report by the star 23rd Dec 2007

How fraudulent land transfers take place

PUTTING himself in the shoes of a fraudster, National House Buyers Association (HBA) honorary secretary-general Chang Kim Loong reckons there are many parties involved in fraudulent land transfers.

“There is a lot of work to be done, but it is not something that is impossible,” said Chang, adding that there was a lot of monetary gain for the fraudsters.
Very likely, involved parties would include the related parties (vendor and buyers) and their respective lawyers, the land office, the land valuation department and the stamping office. And usually these transfers take a very short time.
“When the transaction takes two to three weeks, there is something fishy,” he said adding that a “conservative” transaction would take anything from six to nine months.
Chang says that usually idle land owned by foreigners or senior citizens is targeted. The fraudsters would find out details of a plot of land from the land office and survey department.
The fraudsters then either forge the title deed or get a replacement by pretending to be the owner of the land.
They would conveniently lodge a police report. The land office would then need the police report sworn with a statutory declaration and pay a requisite fee (about RM300) for the replacement title deed, which usually takes four to six months to obtain after the requisite gazetting.
Once the deed is obtained, the land is ready to be sold.
“You should be suspicious if it is a cash only deal or the land is being sold below value,” said Chang. If a bank loan is taken to finance the purchase, the bank's lawyers will also conduct relevant searches to determine the vendor is not a bankrupt as well as a valuation report on that landed property.
“When it is time to present to the land office registration, the lawyers do another search to ensure that no documents prohibiting the dealings such as a caveat or a prohibitory order,” said Chang.
When it comes to selling the land, all that is needed is the seller's and buyer's identity cards, the original copy of the Grant/ title deed, up-to-date quit rent bills and assessment receipts, which have to be provided by the seller.
Certified true quit rent receipts can be obtained from the land office for a fee of RM10. Before the final purchase, the stamping office sends the Memorandum of Transfer (MOT) to the nearest valuation department which adjudicates the value of the property and imposes the stamp duty, which is to be paid to the stamping office.
The last item is paying the requisite registration fee to the land office after the buyer shows proof of a paid stamping fee.
“With so many cases being lodged, the prosecution and investigators should be able to work out the modus operandi of the fraudsters,” said Chang adding that he was disappointed with the number of arrests made pertaining to the cases.

By RASHVINJEET S. BEDI -the star 23rd Dec 2007

Land scams on the rise

Landowners beware! Your property is at risk. There has been a rising number of land scams in recent years, especially in the Klang Valley. Worse, the scams are targeting higher-value land too.
Government statistics revealed in Parliament recently showed that there were 16 land scams recorded in 2001, 19 in 2002, 22 in 2003, 32 in 2004, 35 in 2005 and 80 last year.

Police statistics also showed that last year the value of land involved in the scams was almost RM4.9mil. This year, up till October, the value of the land was more than RM10.4mil.
Only four people were arrested over the offences last year and just one this year.
National House Buyers Association secretary Chang Kim Loong expressed concern over increasing incidences of land scams and the high number of unsolved cases.

“This could lead to a loss of confidence in the Malaysian property market,” he said.
Chang urged the Government to initiate an insurance scheme to indemnify anyone who suffers loss due to fraudulent land transfer.
Commercial Crimes Investigation Department legal / inspectorate division principal assistant director ACP Tan Kok Liang said that in certain cases it was difficult to get evidence against the perpetrators because they used other people's identity.

The most recent case involves Taiwanese businessman Chen Wei Pin, who found that a private caveat had been entered on his land by a director of Zen Zaman Sdn Bhd, claiming that Chen had sold the land to his company. Chen denied any such transaction.
His plight was brought up by the MCA Public Service and Complaints Department, which has received 18 such complaints involving land worth RM30mil in the past five years.
Assistant professor Dr Sharifah Zubaidah Syed Abdul Kader of the Public Law Department of the International Islamic University Malaysia said the law did not fully protect landowners, especially in cases of forgery.
“Even if they are able to prove the title is theirs, they can still lose their land. The court will inevitably rule against them as long as it can be proven that the purchaser had bought the land on good faith,” she added.
Roger Tan, the Bar Council's Conveyancing Practice Committee chairman, said the onus had fallen on landowners to conduct regular checks on their land title.

By JOSEPH LOH - thestar 23rd Dec 2007

Land Scams- in Malaysia

With the growing number of land scams and increased value of property involved, serious measures, including by the law, are urgently needed to overcome the problems.

WHEN Taiwanese businessman Chen Wei Pin, 56, acquired a piece of land in the heart of Kuala Lumpur in 1990, he never expected to be a victim of land fraud.
He was shocked to learn that the Land Office’s computerised records showed that a private caveat had been entered by a director of a company, claiming that Chen had sold the land to his company.

Chen denies any knowledge of the transaction and although he holds the original title to his land, attempts to retrieve records of his ownership at the Land Office have proved unsuccessful. There is also no memorandum of transfer on the sale to the private company. He has since lodged a report with the Anti-Corruption-Agency (ACA).

Chen’s case is not isolated; there have been numerous other cases of land fraud. In a parliamentary session recently, Deputy Internal Security Minister Datuk Johari Baharum said that 16 cases were recorded in 2001, 19 in 2002, 22 in 2003, 32 in 2004, 35 in 2005 and 40 in 2006. There were 16 cases in the first five months of this year.

Police statistics however reveal that in 2006, there were 80 cases involving land worth RM4,874,567.30, while this year (up to October) there have been 49 cases involving land worth RM10,402,559.00 (See table on Page 29).

MCA Public Services and Complaints Department, meanwhile, has received 18 such complaints involving land worth RM30mil in the past five years.

The department's legal adviser Datuk Theng Book believes that such cases are on the rise.
“After publicising Chen’s case, we received many more calls from lawyers about this problem. Many of these cases seem to happen in KL and Selangor where the value of land is high,” he said.

“We are concerned over the numerous unsolved cases. There is a problem; just how are we going to solve the problem then?” said National House Buyers Association Secretary-General Chang Kim Loong.

The situation where a landowner can lose his land even though he holds a good title is a direct result of the Federal Court's decision in Adorna Properties Sdn Bhd v Boonsom Boonyanit. This case concerned the interpretation of the law as laid out in Section 340 of the National Land Code (NLC) 1965 (see sidebar).

In this now-infamous case, Boonsom Boonyanit, a Thai national, owned some land in Penang. She eventually discovered that an impostor claiming to be her – and with supporting identification documents as well as statutory declarations – had declared that she had lost the original title and managed to obtain a replacement title from the land office.
The impostor subsequently sold the land to Adorna Properties, who bought it on good faith, and did not suspect that there was anything amiss in the transaction.
When Boonyanit sued for the return of the land at the Penang High Court, she was unsuccessful. She appealed to the Court of Appeal (COA), which decided in her favour. However, Adorna Properties then made an appeal to the Federal Court, and won. In essence, Boonyanit – who has since passed away – lost her land without receiving a single sen for it.
Because it was a decision of the highest court in the land, it has to be followed by every other (lower) court in the country. A subsequent attempt to overturn the previous decision, made by Boonyanit's estate, was also defeated in the Federal Court.
As a result of this case, assistant professor Dr Sharifah Zubaidah Syed Abdul Kader of the Public Law Department of the International Islamic University Malaysia said: “The law now does not protect landowners – especially in cases of forgery. Even if they are able to prove the title is theirs, they can still lose their land. The court will inevitably rule against them as long as it can be proven that the purchaser bought it on good faith.”

Roger Tan, the Malaysian Bar Council’s Conveyancing Practice Committee chairman, agreed with this “The Adorna Properties decision has wreaked havoc on every landowner in this country. It not only puts a landowner at risk of losing his property to fraudsters and forgers, but also when the landowner loses his land to these crooks, he loses everything without any compensation or remedy.”

The root of the problem, according to Tan, is that, “lawyers have always interpreted S340 as outlining the principle of ‘differed indefeasibility’. Our NLC is based on this concept, and this decision has affected that.”

What is more perplexing, said Tan, is that the Federal Court had another chance to review the law after a recent COA case in July this year (Au Meng Nam & Another v Ung Yak Chew & Others). The COA essentially did not follow the Federal Court's decision in Adorna Properties, and reverted the title back to the original owners. But when the purchasers applied for leave to appeal to the Federal Court, it was denied.

“They should have granted leave and then dealt with the Adorna case. However, they refused to confront it.”
As a result of the current situation, the Bar Council submitted a memorandum to the Natural Resources and Environment Minister Datuk Seri Azmi Khalid that listed proposed amendments to the relevant sections of the NLC on July 24.

, an amendment bill to the NLC was passed in the last Dewan Rakyat sitting, which concluded on Dec 19.
“The NLC amendments did not deal with this issue, and the Bar Council is disappointed with this. Also, there appears to be no urgency on the part of the government to look into it,” Tan commented.

He further stated, “We want to make it clear that the principle under section 340 is that of deferred and not immediate indefeasibility.”
Given the current position of the law, Tan advised that precautions be taken.
“The dealings usually involve lawyers, and they must be both diligent and vigilant. They should do a search before they advise their clients to purchase the property or release the money.”
To that effect, Tan said, the Bar Council is in the process of changing its solicitor account rules to ensure that all withdrawals from the clients' accounts are made by cheque and not by cash so as to ensure it can be traced.

“Proposals have been made and we hope to have the rule implemented by next year,” he informed.
But until the NLC is amended or the Federal Court reviews its decision, the responsibility is on landowners to ensure that title to their property has not been transferred without their knowledge.

“Do regular searches every three months or so, which costs less than RM100 per search. And it is best to go through lawyers whenever they buy or sell property,” Tan advised.
Chang hopes that an insurance scheme backed by the government is initiated.
“Indemnify anyone who loses in fraudulent land transfer. The land office is a government agency and the government should be responsible if its house is not in order,” said Chang adding that special squad by the Land and Mines department to identify weaknesses in the national computerised land registration system be set up.

Chang hopes that it doesn't reach a stage where the Land Office makes buyers sign a letter of indemnity, just as how the Road and Transport Department (JPJ) does when people buy used cars.
“This means that you are cannot sue JPJ if they make a mistake such as recording the wrong chassis number for instance. I am just worried that this will apply to property as well one of these days,” said Chang.

Theng, meanwhile, urges the police to set up a special task force made up of forensic and conveyance experts to look into the problem.
Commercial Crimes Investigation Department legal/inspectorate division principal assistant director ACP Tan Kok Liang at the 14th Malaysian Law Conference had suggested using fingerprinting during land and property transactions as it offered a unique security feature to prevent fraud and to identify impostors.

urges the government and relevant agencies to solve the problem as soon as possible.
“It will lead to serious loss of confidence in Malaysian property market and potential investors may well find it easier to invest in property elsewhere,” he said.
The Land and Mines Department was not available for comment.

By JOSEPH LOH and RASHVINJEET S. BEDI - the star 23rd Dec 207