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.

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.

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

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