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INVESTMENT IN

REAL ESTATE

PRESENTATION FOR ISLAMIC WEALTH AND ASSET


MANAGEMENT
(IFE 750)
PREPARED BY

PREPARED FOR :

AGENDA

INTRODUCTION - DEFINITION
INTRODUCTION- DEFINITION UNDER MALAYSIAN LAWS
INTRODUCTION- ISLAMIC VIEWS
CHARACTERISTIC OF REAL ESTATE
PRICE DETERMINATION
REAL ESTATE CYCLES
CASE STUDY ON MARKET CYCLE OF MAJOR REAL
ESTATE IN KUALA LUMPUR (1970 -2000)
RISK ELEMENTS
LAW RELATING TO REAL ESTATES
PROCESS OF ACQUIRING PROPERTY
I-REIT / REIT
CASE STUDY : WOULD YOU LIVE HERE?
CONCLUSION

INTRODUCTION - DEFINITION
OXFORD STUDENTS DICTIONARY SECOND EDITION,
2007 DEFINES THE FOLLOWING TERMS
PROPERTY AS LAND AND BUILDING;
LAND AS SOLID PART ON THE SURFACE OF THE
EARTH; AND
REAL ESTATE AS PROPERTY IN FORM OF LAND AND
BUILDING
REAL ESTATE IS A LEGAL TERM WHICH COVER THE
LAND AND ANY PERMANENT FIXTURES AFFIXED ON IT
SUCH AS BUILDING, MACHINERY OR PLANT. IT ALSO
CALL REALTY.
PEOPLE HAVE VARIOUS REASONS FOR ACQUIRING OR
OWNING PROPERTY SUCH AS PLACE TO LIVE,
INVESTMENTS,
BUSINESSES,
SPECULATION
OR
GENERATING INCOME SUCH AS REITS, RENTAL OR
EVEN
TIME
SHARING
CONCEPT
(MOSTLY
FOR
VACATION BUSINESS PURPOSES).

INTRODUCTION- DEFINITION
UNDER MALAYSIAN LAWS

SECTION 2 OF THE REAL PROPERTY GAIN TAX ACT


1976 (ACT 169) REAL PROPERTY MEANS ANY LAND SITUATED IN
MALAYSIA AND ANY INTEREST, OPTION OR OTHER
RIGHT IN OR OVER SUCH LAND.

SECTION 5 OF THE NATIONAL LAND CODE 1965 (ACT


56)
LAND INCLUDES(A)THAT SURFACE OF THE EARTH AND ALL
SUBSTANCES FORMING THAT SURFACE;
(B)
THE EARTH BELOW THE SURFACE AND ALL
SUBSTANCES THEREIN;
(C)
ALL VEGETATION AND OTHER NATURAL
PRODUCTS, WHETHER OR NOT REQUIRING THE
PERIODICAL APPLICATION OF LABOUR TO THEIR
PRODUCTION, AND WHETHER ON OR BELOW THE
SURFACE;
(D)
ALL THINGS ATTACHED TO THE EARTH OR

INTRODUCTION- ISLAMIC VIEWS


PROPERTY IS RELATED TO THE PILLARS FOR
MAQASID SHARIAH, WHICH IS LIVES (NAFS) AND
THEIR WEALTH (MAL).
UTHMAN IBN AFFAN REPORTED: THE PROPHET,
PEACE AND BLESSINGS BE UPON HIM, SAID
THERE IS NO RIGHT FOR THE SON OF ADAM
EXCEPT IN THESE THINGS: A HOUSE IN WHICH
HE LIVES, A GARMENT TO COVER HIS
NAKEDNESS, A PIECE OF BREAD AND WATER.
SOURCE: SUNAN AT-TIRMIDHI 2341
5

CHARACTERISTIC OF REAL
ESTATE
CHARACTERISTIC OF
REAL ESTATE

PHYSICAL

ECONOMIC

1.IMMOBILITY
2.SIZE
3.
HETEROGEN
EOUS
4.DURABILITY
OR
PERPERTUAL
ITY
5.LONG
DEVELOPME
NT OR
COMPLETIO
N TIME
6.PROPERTY

1.INTEREST
AND RIGHTS
2.DECENTRALI
SED MARKET
3.HEDGE
AGAINST
INFLATION
4.LARGE
TRANSACTIO
N COSTS OR
INVISIBLE
5.SUPPLY LAG
6.CYCLICAL
VALUES

LEGAL

1.VARYING
LEGISLATION
S AND LAW
2.COMPLICATE
D
TRANSACTIO
N
PROCEDURE
S
3.
STATUTORIA
L CHARGES

OTHERS
LACK
OF
PUBLIC
INFORMATION
ON THE PRICE
INFORMATION
ONLY
AVAILABLE AT
THE
AUTHORITY
AND HARDLY
ACCESSIBLE
BY PUBLIC
BROUCHER

CHARACTERISTIC OF REAL
ESTATE
PHYSICAL CHARACTERISTIC
IMMOBILI
TY

IMMOVEA
BLE
NO
PHYSICAL
MARKET
PLACE
SPATIAL
FIXTY

SIZE

COULD
BE VERY
HUGE
SURFACE
OF THE
EARTH

HETEROGENE
OUS

DURABILITY
OR
PERPERTUALI
TY

LONG
DEVELOPM
ENT OR
COMPLETIO
N TIME

PROPERTY
MANAGEME
NT

INDIVIDUALLY
UNIQUE

LONG
LASTING FOR
YEARS/
CENTURIES

LAND
AQUISATIO
N

VARIOUS
MATTERS
RELATED
TO
PROPERTY :
TAXES,
LEGAL
FEES,
MAINTENA
NCE

VARIOUS
FACTOR
AFFECT THE
PRICE

INDESTRUCT
ABLE
SUITABLE
FOR HABITAT

DEVELOPM
ENT
CERTIFICAT
E OF
FITNESS
FOR
OCCUPANC
Y
24 36
MONTHS

NEED
PROPERTY
MANAGERS

CHARACTERISTIC OF REAL
ESTATE
ECONOMIC CHARACTERISTIC
INTEREST
AND
RIGHTS

DECENTRAL
ISED
MARKET

OWNERSH
IP
PROVED
IN TITLE
DEEDS

TRANSACTI
ON
THROUGH
PROPERTY
AGENT

BETTER
THAN
STOCKS
AND
SHARES

REGISTER
ED AND
BENEFICIA
L
INTEREST

NO
CENTRALISE
D MARKET

DIFFERENT
PROPERTY
TYPES,
HAVE
DIFFERENT
HEDGE
CHARACTER
ISTIC

CREATE
INCOME
AND SAVE
MONEY

ONLY HAVE
EXPOS
EG: MAPEX

HEDGE
AGAINST
INFLATION

LARGE
TRANSACTI
ON COSTS
OR
INVISIBLE

SUPPLY LAG

INVOLVES
LARGE
COST I.E
FEES FOR
LAWYERS,
AGENT,
LAND
OFFICE,
RENOVATIO
N

LONG TIME
FOR
ACQUIRING
PROCESS
SUCH AS
APPROVAL
FROM
AUTHORITY,
FINANCING,
DESIGNING

AQUIRING
PROPERTY
THORUGH
BONDS,
SUKUK,
SHARES,
RIETS

DISEQUILIBR
IUM IN THE
SHORT RUN
RELATIVELY
LESS LIQUID

CYCLICAL
VALUES

AFFECTED
BY (a) GLOBAL
AND
LOCAL
ECONOM
Y
(b) GOV.
POLICIES
OPEN TO
SPECULATI
ON

CHARACTERISTIC OF REAL
ESTATE
LEGAL CHARACTERISTIC
VARYING
LEGISLATIONS AND
LAW
SUBJECT TO
VARIOUS
LEGISLATION SUCH
AS
NATIONAL LAND
CODE 1965
REAL PROPERTY
GAINS TAX ACT 1976
CONTRACT ACT 1950
AFFECT VARIOUS
ASPECT OF REAL
PROPERTY SUCH AS

VALUE, USAGE,
RESTRICTION ETC

COMPLICATED
TRANSACTION
PROCEDURES
INVOLVES SO MANY
PROCESS THAT REQUIRE
A STRICT LEGAL
COMPLIANCE FOR
AQUIRING PROPERTY
SUCH

STATUTORIAL CHARGES

SUBJECT TO VARIOUS
STATUTORIAL CHARGES
SUCH AS
QUIT RENT,
ASSESSMENT, BUILDING
MANAGEMENT FEES

DISCHARGE OF CHARGE
REGISTRATION OF
OWNERSHIP
CONSENT FROM STATE
AUTHORITY

MALAYSIAN PROPERTY
EXPOSITION (MAPEX)

10

PRICE DETERMINATION
THE SUPPLY AND DEMAND OF PROPERTY IS
INELASTIC
INELASTICIN
INNATURE
SUPPLY
INELASTIC IN DEMAND
PHYSICAL NATURE OF THE
LAND ITSELF, THE PLANNING
LAWS AND SECURITY OF
TENURE.

NECESSARY FUNDS TO
FINANCE THE PURCHASE
POTENTIAL INCOME DERIVE
FROM THE PROPERTY

MOTIVES TO OWN PROPERTY


(I) OCCUPANCY
(II) INVESTMENT LONG TERM
(III)
SPECULATION SHORT TERM
(IV)
DEVELOPMENT
DETERMINATION
PRICE
MECHANISM
VENDOR/DEVELOPER AND PURCHASER

11

PRICE DETERMINATION
FACTORS INFLUENCING PRICE OF PROPERTY
I. THE STATE OF THE GENERAL ECONOMY.
II. CHANGES IN THE STRUCTURE OF THE ECONOMY AND THE
ORGANIZATION OF BUSINESSES
III. THE PRODUCTIVITY OF THE PROPERTY. I.E PRICE PER
SQUARE FEET
IV. GOVERNMENT INTERVENTION.
V. CHANGE IN THE TRANSPORT FACILITIES AND OTHER
FACILITIES
VI. ALTERATIONS IN THE SIZE AND STRUCTURE OF THE
POPULATION
SPACE MARKET AND ASSET MARKET IN TERM OF PURPOSE :

SPACE MARKET

ASSET MARKET

PURCHASE REAL ESTATE FOR


FUNCTIONAL USE OF THE
PROPERTY I.E. TO LIVE OR
WORK.
IT
DOES
NOT
GENERATE INCOME

PURCHASE REAL ESTATE


FOR
INVESTMENT
AND
ECONOMICAL
PROFIT
TO
GENERATE INCOME SUCH AS
RENTAL.

12

PRICE DETERMINATION
TYPES OF REAL ESTATE
MARKET
OPEN MARKET
(SUPPLY AND DEMAND)

1.
2.
3.
4.
5.

ECONOMIC FACTORS
GEOGRAPHICAL
POPULATION
PHYSICAL ASPECT
TECHNOLOGICAL
OR
BUILDING METHOD
6. FASHIONS AND
TRENDS
7. OCCUPANCY STATUS
8. DEVELOPMENT
APPROVAL
9. TENURE AND TITLE
10.CONDITIONS OR
RESTRICTIONS

CONTROLLED MARKET
(SUBJECT TO INFLUENCE &
DEMAND AND SUPPLY)
1.GOVERNMENT
POLICIES
2.NEW ECONOMIC
PLAN : QUOTA ON
ETHNIC GROUP
PURCHASERS
3.PR1MA

13

PRICE DETERMINATION
OPEN MARKET
ECONOMIC
FACTORS

REGIONAL : SUBJECT TO FISCAL AND MONETORY


POLICIES SUCH AS SUPPLY OF MONEY AND INTEREST
RATE, EMPLOYMENT RATE
INTERNATIONAL : EXCHANGE RATE WOULD AFFECT
PRICE OF MATERIAL AND RAW RESOURCES

GEOGRAPHI
CAL

LOCATION : PEOPLE PREFER TO LIVE NEAR WORK


PLACE,
UNIVERSITIES,
SHOPPING
COMPLEXES,
MOSQUE.
TOPOGRAPHY : HILLTOP, FLATLAND,SLOPE AREA.
CLIMATE: NOT VERY SIGNIFICANT IN MALAYSIA,
FLOOD PRONE AREA
COMMUNICATIONS : GOOD RECEPTION AREAS
SERVICES : ADD ON SERVICES, GYM, SECURITY,
POOL,EXTRA CAR PARK AND PUBLIC AMENITIES

POPULATION

INCREASE OF POPULATION AFFECT PROPERTY


PRICE :
1.MAINTAIN AMPLE UNDEVELOP LAND
2.INCREASE ESTABLISHED PUBLIC AMENITIES

PHYSICAL
ASPECT

DESIGN, MATERIAL QUALITY,


TECHNOLOGY CONSTRUCTION

TECHNOLOGI

NEW

TECHNOLOGY

INVOLVES

SPACE,

FACILITIES,

EXPERTIES

FROM

14

PR1MA
PERBADANAN
PR1MA
MALAYSIA
WAS
ESTABLISHED UNDER THE
PR1MA ACT 2012 TO PLAN,
DEVELOP, CONSTRUCT AND
MAINTAIN
HIGH-QUALITY
HOUSING WITH LIFESTYLE
CONCEPTS
FOR
MIDDLEINCOME HOUSEHOLDS IN
KEY URBAN CENTRES.
PR1MA HOMES COME IN
VARIOUS TYPES AND SIZES
WITHIN
AN
INTEGRATED
COMMUNITY;
SENSIBLY
DESIGNED
TO
SUIT
DIFFERENT
HOUSEHOLD
NEEDS. PRICED BETWEEN
RM100,000 TO RM400,000,
YOU CAN NOW OWN A HOME
THAT IS WELL WITHIN YOUR
REACH. EARMARKED FOR
DEVELOPMENT
IN
KEY

15

INDUSTRIAL BUILDING SYSTEM


(IBS)

16

EVOLUTION OF CONSTRUCTION
DRAWING

Paper
Paper
Scale
Scale rule,
rule,
technical
technical
pen,
pen,
pencils,
pencils,
compasses
compasses

Auto
Auto CAD
CAD
Catia
Catia
Pro/ENGINE
Pro/ENGINE
ER
ER
CMS
CMS
intelliCAD
intelliCAD
Turbo
Turbo CAD
CAD
Vectorwork
Vectorwork
ss

Sketch-up
Sketch-up
Solid
Solid Work
Work
Revit
Revit
Architectur
Architectur
e
e
Fusion
Fusion 360
360

Revit
Revit
Architecture
Architecture
ArchiCAD
ArchiCAD
Revit
Revit Structure
Structure
Naviswork
Naviswork
Cost-X
Cost-X
Tekla
Tekla BIM
BIM sight
sight

(Bently Systems, 2014; Bryde et al., 2013)

17

PRICE DETERMINATION
OPEN MARKET
FASHIONS
AND
TRENDS

OCCUPANC
Y STATUS

DEVELOPM
ENT
APPROVAL
TENURE

HIGH QUALITY MATERIAL AND WORKMANSHIP


DEMAND FOR HIGHER PRICE. REAL ESTATE
ALSO APPLIES THE PRINCIPLE WHEN DEMAND
SURPASSES SUPPLY, PRICE OF THE PROPERTY
WOULD INCREASE.
OCCUPANCY AFFECT BUSINESS AND COMMERCIAL
DEVELOPMENT
SELLERS MARKET : MARKET IS IN UP TREND AND
PROPERTY PRICE IS HIGH. SELLER CHOOSE THE
PURCHASER OR TENANT
BUYERS MARKET : MARKET IS IN DOWN TREND AND
PROPERTY PRICE IS DROP. SELLER SEEK PURCHASER OR
TENANT
DEVELOPMENT APPROVAL FROM AUTHORITY WOULD
STIMULATE LOCAL ECONOMY. DEVELOPER WILL
DEVELOP ADJACENT AREA.
FREEHOLD LAND : HIGHER PRICE
LEASE HOLD LAND : LESSER PRICE (30, 60 AND 99
YEARS)

TITLE
LEGALLY BINDING CONDITIONS ATTACHED BY
CONDITION AUTHORITY TO THE PROPERTY EG. AGRICULTURAL

18

PRICE DETERMINATION
CONTROLLED MARKET
GOVERNM
ENT
POLICIES

IN
THE
CURRENT
LEGISLATION,
EVERY
NEW
RESIDENTIAL DEVELOPMENT REQUIRES A MINIMUM OF
30 PER CENT OF LOW OR LOW MEDIUM COST LANDED
OR FLATTED RESIDENTIALS WITH A MAXIMUM PRICE
OF RM42,OOO.OO. THE GOVERNMENT HAS ASSUMED
THE ROLE OF PRICE DETERMINER, BARRING THE
INFLUENCE OF SUPPLY AND DEMAND IN THE OPEN
MARKET.

NEW
ECONOMIC
PLAN
:
QUOTA ON
ETHNIC
GROUP
PURCHASE
RS

1970S - NEW ECONOMIC PLAN (NEP) IS TO ERADICATE


POVERTY
AND
ENSURING
A
MORE BALANCED
DISTRIBUTION OF WEALTH IN THE SOCIETY. THUS, THE
QUOTA ON BUMIPUTRA PURCHASERS HAS BEEN
IMPOSED TO ENSURE THAT BUMIPUTRA BUYERS ENJOY
THE PRIVILEGE OF CHOOSING CERTAIN RESERVED
BURMIPUTRA UNITS AND ENTITLED TO 5 PER CENT - 10
PER CENT DISCOUNTS ON THE NORMAL SELLING
PRICE.

PR1MA

PERBADANAN PR1MA MALAYSIA WAS ESTABLISHED


UNDER THE PR1MA ACT 2012 TO PLAN, DEVELOP,
CONSTRUCT AND MAINTAIN HIGH-QUALITY HOUSING
WITH LIFESTYLE CONCEPTS FOR MIDDLE-INCOME

19

PRICE DETERMINATION
METHOD
OF
VALUATIO
N

EXPLANATORY STATEMENT

COMPARIS
ON

PROPERTIES COMPARED ARE SIMILAR AND IN THE


SAME AREA. IN COMPARING SOME FACTORS TO BE
TAKEN INTO ACCOUNT.
POSITION, SURROUNDING AREA, LOT LOCATION.

INVESTME
NT

PROPERTIES
THAT
HAVE
INCOME
PRODUCING
INVESTMENT OR FOR CALCULATION BY INVESTOR
SEEKS FOR NET INCOME. THE CAPITAL IS IN FORM OF
RENTAL.
EG. RENTAL PROPERTY, SHOPLOTS

COST

PROPERTIES WITH SPECIAL USAGE AND YET ARE NOT


USED FOR PROFIT MAKING. FOR EXAMPLE PROPERTY
OWNED BY PUBLIC AUTHORITIES SUCH AS SCHOOLS,
FIRE STATIONS, GOVERNMENT QUARTERS AND OTHER
PROPERTIES
WHICH
ARE
UNIQUE
AND
NOT
COMPARABLE IN THE MARKET. IT APPLY "DEPRECIATED
REPLACEMENT COST" (DCF) METHOD. AN ESTIMATE
MUST BE MADE OF THE COST OF REPLACING THE SITE
AND BUILDING AND THEN MAKING ANY NECESSARY

20

PRICE DETERMINATION
METHOD
OF
VALUATIO
N
PROFIT
(ACCOUNT
)

EXPLANATORY STATEMENT

COMPARABLE PROPERTY IS UNAVAILABLE,


RESTAURANTS, HOTELS OR THEATRES.

E.G

THE VALUATION MAY HAVE TO BE MADE PURELY BY


REFERENCE TO THE PROFITS WHICH A TENANT OF THE
BUSINESS ACUMEN COULD MAKE FROM OCCUPATION
OF THE PROPERTY. THIS INVOLVE AN EXAMINATION OF
THE ACCOUNTS TO DETERMINE TYPICAL FIGURES.
FROM THE GROSS RECEIPTS WOULD BE DEDUCTED
PURCHASES, ALL OTHER OPERATING COSTS AND
OVERHEAD COSTS INCLUDING AN ALLOWANCE FOR
INTEREST ON TENANT'S CAPITAL BUT EXCLUDING ANY
PAYMENTS ON THE PROPERTY
RESIDUAL

VALUING DEVELOPMENT SITES AND PROPERTIES


SUITABLE FOR REDEVELOPMENT BY ESTIMATING THE
PROJECT COST AND THE VALUE CREATED INCLUDING
NON IMPROVED PROPERTY

21

PRICE DETERMINATION
COMPARISON METHOD OF
VALUATION

22

PRICE DETERMINATION
THE INVESTMENT METHOD OF VALUATION

23

PRICE DETERMINATION
COST VALUE METHOD OF
VALUATION

24

PRICE DETERMINATION

THE PROFIT METHOD OF VALUATION

25

PRICE DETERMINATION
THE RESIDUAL METHOD OF VALUATION

26

REAL ESTATE CYCLES


GOVT.
INTERVENTION

GOVT.
GOVT.
INTERVENSTION
ISINTERVENSTION
TO ENSURE
IS TO ENSURE
THE
THE
COUNTRY
COUNTRYOF
STABILITY
STABILITY
OF
REAL
ESTATE
REAL ESTATE
MARKET
MARKET DUTY
EG:STAMP
EG:STAMP DUTY
EXEMPTION,
TAX
EXEMPTION,
TAX
RELIEF,LOW
RELIEF,LOW
INTEREST
RATE
INTEREST RATE
GOVT.
INTERVENTI
ON

27

SAMPLE OF TAX RELIEF

28

REAL ESTATE CYCLES


INTERNATIONAL

INFLUENC
E

WORLD ECONOMY IN CRISES, IT WILL AFFECT


THE FOREIGN EXCHANGE, THE PRICE OF RAW
MATERIAL WILL GO UP. THE CONSUMER PRICE
INDEX IS INCREASING WHICH INDICATE
INFLATION. THE PURCHASING POWER OF
CONSUMERS IS LOW.

(SYSTEMA REGIONAL
TIC RISK)
(I)

LOCAL ESTABLISHMENT MATURITY OF


THE REAL ESTATE MARKET. IT IS WHERE
SUPPLY IS BALANCE WITH DEMAND. THUS,
THE
PRICE
IS
STABLE
AND
LESS
FLUCTUATE.

(II)
POLITICAL STABILITY IT WILL AFFECT
THE COUNTRY ECONOMY AS A WHOLE AND
ENSURE THE ACTIVE AND PROSPEROUS

29

CASE STUDY ON MARKET CYCLE


OF MAJOR REAL ESTATE IN KUALA
LUMPUR (1970 -2000)
1970 1980
END OF 1970 : REAL PROPERTY PRICES RECOVERED FROM THE
PRICE WHICH FELL BY 30 PER CENT TO 50PER CENT DUE TO THE
13TH MAY 1969 ETHNIC RIOTS. (INSTABILITY OF POLITICS)
1971 TO 1973 : GOOD YEARS FOR THE PROPERTY MARKET.
DEMAND FOR RESIDENTIAL PROPERTIES INCREASED. THE
GOVERNMENT'S INCENTIVES IN TERMS OF HOUSING LOANS TO
CIVIL SERVANTS.
DEVELOPERS WERE HAVING A GOOD TIME AND PRICES ROSE BY
10 PER CENT TO 15 PER CENT YEARLY.
SPECULATION WAS ALSO RIFE AND INFLOW OF MONEY FROM
OVERSEAS TO THIS SECTOR WAS EVIDENT.
GOVERNMENT INTRODUCED THE LAND SPECULATION ACT TAXED
GAINS TO RESTRICT FOREIGN OWNERSHIP. THIS ACT WAS LATER
CHANGED TO THE REAL PROPERTY GAINS TAX ACT 1976.

30

CASE STUDY ON MARKET CYCLE


OF MAJOR REAL ESTATE IN KUALA
LUMPUR (1970 -2000)
1976 : THE WORLD RECESSION AND THE CYCLE DECLINED
UNTIL IT REACHED THE BOTTOM.
1978 : THE MARKET WAS BEARISH AND PRICES RISING
SLIGHTLY.
1979 : SAW SOME PICK- UP IN PRICES AND THIS TREND
IMPROVED UNTIL 1980.

1980 1990
1980 AND 1981 : AN UPWARD PROPERTY PRICE MOVEMENT IN
THE SECTORS OF OFFICE, RETAIL AS WELL AS RESIDENTIAL.
1983 : PRICES WERE ACTUALLY LEVEL AND THIS CAN BE SEEN
FROM OVERSUPPLIES OF OFFICE SPACE, RETAIL SPACE AND
HOUSING STOCK.
1984 : ACTIVITIES IN REAL ESTATE SLOWED DOWN DUE TO
OVER SUPPLY FOLLOWED BY A FEELING OF NO CONFIDENCE,
HIGH INTEREST RATE,
SLUGGISH WORLD COMMODITY
MARKETS AND RECESSION AND TIGHT LIQUIDITY SITUATION.

31

CASE STUDY ON MARKET CYCLE


OF MAJOR REAL ESTATE IN KUALA
LUMPUR (1970 -2000)
1984 TO 1987 : THE SHARE MARKET COLLAPSED DUE TO
SCANDALS OF CRIMINAL BREACH OF TRUST. FEW BANKS WOUND
UP.
1986 : THE GOVERNMENT MADE AN EFFORT TO ENCOURAGE
FOREIGN INVESTMENT IN MALAYSIA. OTHER EFFORTS WERE ALSO
MADE WHICH WERE TO PROMOTE MALAYSIA AS A TOURISM AND
INDUSTRIAL CENTER, BANKS WERE ASKED TO LOWER BASE
LENDING RATE AND AMENDMENT TO LAWS RELATED TO REAL
ESTATE.
1989 : MARKED THE BEGINNING OF ANOTHER BOOM IN THE
PROPERTY MARKET WHICH CONTINUED INTO 1990 AND 1991.

1990 2000
LAST QUARTER OF 1992 : SLOWING DOWN IN DEMAND IN THE
PROPERTY MARKET. OVERALL, THE VOLUME OF TRANSACTIONS
INCREASED BUT AT A REDUCED RATE. THIS SCENARIO CONTINUED
UNTIL 1993. THE PROPERTY MARKET SECTOR EXPERIENCED A
STRONG DEMAND UNTIL 1996.

32

CASE STUDY ON MARKET CYCLE


OF MAJOR REAL ESTATE IN KUALA
LUMPUR (1970 -2000)
1997 - 1998 : WAS A MIXED YEAR. THE SLOW
ECONOMY GROWTH OF THE PAST FEW YEARS WITH
UNCERTAINTIES. AND
PRICES AND RENTALS FELL
DRASTICALLY
AND
THE
MARKET
CONFIDENCE
WEAKENED.
1999 : THE ECONOMY WAS RECOVERING DUE TO THE
GOVERNMENT'S COMPREHENSIVE MEASURES AND
SHOWED A MORE OPTIMISTIC PROPERTY MARKET.

33

PRESENT CYCLE

34

RISK ELEMENTS
ECONOMIC
INVESTMENT
RISKS

BUILDINGS

LEGAL

INTERNATIO
NAL

EXPECTED
LAND
NORMAL
ACQUISITION
WEAR
&
REGIONAL
TEAR
EG:
DEVELOPME
CYCLE
AND UNEXPECTED NT OF KLIA
SUPPLY
NATURE'S
AND
DEMAND
ACTS
PUTRAJAYA
GOVERNMEN
T POLICY
VALUE
DEPRECIATIO
N

LACK
OF
MAINTENANC
E/
LOW
CONSTRUCTI
ON QUALITY

NEW ZONING
CAUSING THE
VALUE
TO
DROP
(IT
COULD
ALSO
INCREASE

GOVERNMEN
T POLICY

NEW
STRUCTURE
PLAN
THE
DEVELOPME
NT
BLUE
PRINT
PREPARED
BY
THE
LOCAL
AUTHORITY,
NORMALLY
FOR
A
PERIOD
OF
15
TO
20

35

RISK ELEMENTS

BUKIT ANTARABANGSA
SLOPE FAILURE WHICH OCCURRED ON 6
DECEMBER
2008
AT
BUKIT
ANTARABANGSA
HAS
CAUSED
MORTALITIES
AND
LOSS
OF
PROPERTIES
AS
MORE
THAN
20
HOUSES WERE FLATTENED. IT WAS
HEAVILY DOWNPOURED FOR A FEW
HOURS THAT INCREASED THE SOIL
SATURATION
AND
PLASTICITY
PROPERTIES. ANALYSIS OF PHYSICAL
SOILS PROPERTIES SHOWS THAT SOIL
TEXTURE WAS DOMINATED BY SANDY

HIGHLAND TOWERS
THE HIGHLAND TOWERS CONSIST
OF THREE 12-STOREY BLOCKS,
BUILT IN PHASES BETWEEN 1974
AND 1982 AT THE WESTERN BASE
OF A STEEPLY SLOPED HILL
WHICH WAS LATER TERRACED
EXTENSIVELY
IN
THE
EARLY
1980S. THEHIGHLAND TOWERS
COLLAPSEON
11
DECEMBER
1993 INTHE COLLAPSE OF BLOCK
ONE
OF
THE
APARTMENTS
CAUSED THE DEATHS OF 48
PEOPLE
AND
LED
TO
THE
COMPLETE EVACUATION OF THE
REMAINING TWO BLOCKS DUE TO
SAFETY CONCERNS.

36

LAW RELATING TO REAL ESTATES


THE MALAY STATES LAND LAW WAS BASED ON 'ADAT.
ALL LAND WAS VESTED IN THE RULER WHO IN RETURN
FOR A TENTH OF THE PRODUCE OF THE LAND AND
CERTAIN FORCED LABOUR SERVICES, GRANTED A RIGHT
TO HIS SUBJECTS TO OCCUPY AND CULTIVATE THE LAND.
UNDER BRITISH AND THE RESIDENCY SYSTEM OF
GOVERNMENT, PENANG AND MELAKA (THE STRAITS
SETTLEMENTS) AT FIRST ADOPTED ENGLISH LAND LAW
IN 1850 THE FEDERATED MALAY STATES, NAMELY
PAHANG, PERAK, NEGERI SEMBILAN AND SELANGOR
ADOPTED
VARIOUS
REGISTRATION
OF
TITLES
ENACTMENT WHICH WERE BASED ON TORRENT SYSTEM,
WHICH ESSENTIAL CONCEPT OF REGISTRATION WAS
NECESSARY TO PRODUCE A TITLE
IN 1928 IT BECAME THE ESTABLISED LAND CODE.
REGISTRATION WAS EVERYTHING UNDER THIS SYSTEM.

37

LAW RELATING TO REAL ESTATES


NATIONAL LAND
CODE 1965 (NLC)

1ST JANUARY 1965


THE PRINCIPAL LAND
LAW IN PENINSULAR
MALAYSIA.
ALL THE STATES IN
PENINSULAR
MALAYSIA,
HAVE
THEIR
OWN
RESPECTIVE
STATE
LAND RULES.
OBJECTIVE
TO
ENSURE UNIFORMITY
OF LAW AND POLICY
WITH RESPECT TO
LAND MATTERS .

TOWN AND
COUNTRY
PLANNING ACT
1976

LOCAL
GOVERNMENT ACT
1976

PLANNING FOR LAND


USE
IN
IT
FORMULATES
THE
POLICY
AND
GENERAL
PROPOSALS OF THE
LOCAL
PLANNING
AUTHORITY FOR THE
DEVELOPMENT AND
USE OF LAND IN THE
AREA.

ASSESSMENT TAX IS
COLLECTED BY THE
LOCAL AUTHORITIES
FOR THE PROVISION
OF SERVICES TO THE
RESIDENTS.
ASSESSMENT TAX IS
USUALLY COLLECTED
TWICE A YEAR WITH
A PENALTY FEE FOR
LATE PAYMENTS.

38

LAW RELATING TO REAL ESTATES


REAL PROPERTY
GAINS TAX (RPGT)

STAMP DUTY ACT


1949

INTRODUCED
IN
1975 AS TAX ON
CAPITAL
GAINS
FROM THE DISPOSAL
OF
PROPERTIES.
BOTH THE DISPOSER
AND THE ACQUIRER
OF AN ASSET MUST
GIVE
NOTICE
TO
INLAND
REVENUE
DEPARTMENT
(IRD)
WITHIN THIRTY DAYS
FOLLOWING
THE
CONCLUSION OF AN
AGREEMENT
FOR
THE DISPOSAL OF
THE ASSET

THE
ASSESSMENT
AND COLLECTION OF
STAMP DUTIES IS
SANCTIONED
BY
STATUTORY
LAW,
AND IS DESCRIBED
AS THE STAMP ACT
1949. STAMP DUTY
IS
LEVIED
ON
TRANSACTION
INVOLVING
LAND
MATTERS IN FORM
OF AD VALOREM

STRATA TITLE ACT


1985
1ST JUNE 1985.
LAW IN RELATION TO
STRATA TITLES
HOUSING
DEVELOPMENT
(CONTROL AND
LICENSING) ACT
1966
TO
PROVIDE
THE CONTROL
LICENSING OF
BUSINESS
HOUSING
DEVELOPMENT
PENINSULAR
MALAYSIA,
PROTECTION OF

FOR
AND
THE
OF
IN
THE
THE

39

PROCESS OF ACQUIRING
PROPERTY
DEVELOPER
VENDOR
1.DO
SEARCH
ON
THE
DEVELOPER TRACK RECORD
2.SIGN SALE AND PURCHASE &
PAY 10% DEPOSIT
LINK HOUSE 24 MONTHS
COMPLETION
APARTMENT 36 MONTHS
COMPLETION
3.GET FINANCING. REQUEST
FOR EXTENSION OF TIME
FROM DEVELOPER IF NOT
GETTING FINANCING IN TIME
4.REGISTER
FINANCING
SECURITY
DOC.
AND
TRANSFER OF PROPERTY AT
LAND OFFICE
5.DISBURSEMENT
OF
FINANCING FROM BANK TO
DEVELOPER
6.DO INSPECTION AFTER HAND
OVER
OF
VACANT
POSSESSION
7.DEFECT LIABILITY PERIOD

1.DO LAND SEARCH AT LAND


OFFICE
2.SIGN SALE AND PURCHASE
AGREEMENT & PAY 10%
DEPOSIT
3.REGISTER PRIVATE CAVEAT
4.GET FINANCING. REQUEST
FOR EXTENSION OF TIME
FROM
VENDOR
IF
NOT
GETTING FINANCING IN TIME
5.WITHDRAW
THE
PRIVATE
CAVEAT
6.
REGISTER
FINANCING
SECURITY
DOC.
AND
TRANSFER OF PROPERTY AT
LAND OFFICE
7.SETTLE THE BALANCE OF THE
PURCHASE PRICE

40

I-REIT / REIT

ISLAMIC REAL ESTATE INVESTMENT TRUSTS OR IREITS ARE COLLECTIVE INVESTMENT VEHICLES
(TYPICALLY IN THE FORM OF TRUST FUNDS) WHICH
POOL MONEY FROM INVESTORS AND USE THIS
POOLED CAPITAL TO BUY, MANAGE, AND SELL REAL
ESTATE, I-REITS PROVIDE A NEW INVESTMENT
OPPORTUNITY FOR THOSE WHO WISH TO INVEST IN
REAL ESTATE THROUGH SHARIAH-COMPL IANT
CAPITAL MARKET INSTRUMENTS.
THE
OBJECTIVE
IS
TO
OBTAIN
REASONABLE
INVESTMENT RETURNS GENERATED FROM THE
RENTAL INCOME ANY CAPITAL APPRECIATION WHICH
COMES FROM HOLDING THE REAL ESTATE OVER THE
UNIT HOLDERS WILL RECEIVE THEIR RETURNS IN THE
FOM OF OR DISTRIBUTION AND CAPITAL GAINS FOR
THE HOLDING PERIOD.
THE REAL ETATE THAT I-REITS INVEST IN, INCLUDES
RESIDENTIAL OR COMMERCIAL BUILDINGS, RETAIL OR
INDUSTRIAL LOTS, OR OTHER REAL ASETS, SUCH AS

41

I-REIT / REIT
THE FIRST ASIAN COUNTRY TO DEVELOP I-REIT IS
MALAYSIA. MALAYSIA DEVELOPS I-REIT AS A VALUABLE
INDIRECT REAL ESTATE INVESTMENT VEHICLE IN 1989.
ASIAN COUNTRIES LIKE JAPAN, SINGAPORE AND
KOREA ONLY NOW ARE BEGINNING TO ESTABLISH REIT
MARKETS AFTER THE CONSEQUENCE OF 1997 ASIAN
FINANCIAL
CRISIS.
THE
NUMBERS
OF
LISTED
PROPERTY COMPANIES HAVE DOUBLED IN NUMBERS
ON THE PROPERTY SECTOR OF THE KUALA LUMPUR
STOCK EXCHANGE (KLSE) NOWADAYS.
ARAB MALAYSIA FIRST PROPERTY WAS INTRODUCED
IN SEPTEMBER 1989. IT IS MALAYSIA'S PRIMARY REAL
ESTATE INVESTMENT TRUST WITH FURTHER REAL
ESTATE INVESTMENT TRUSTS AND FOLLOWS BY
AMANAHHARTA TANAH PNB IN DECEMBER 1990. NO
FURTHER REAL ESTATE INVESTMENT TRUSTS WERE
LISTED UNTIL AMANAH HARTA TANAH PNB2 IN 1997.

42

I-REIT / REIT

43

I-REIT / REIT

44

CASE STUDY : WOULD YOU LIVE


HERE?

45

CASE STUDY : WOULD YOU LIVE


HERE?

46

CASE STUDY : WOULD YOU LIVE


HERE?

47

CASE STUDY : WOULD YOU LIVE


HERE?
SELLING POINTS

COMPRISES 2 BLOCKS OF 26-STOREY TOWER,


V'RESIDENCE IS A LOW DENSITY RESIDENTIAL
DEVELOPMENT WITH A TOTAL OF MERELY 268
CONDOMINIUM UNITS SPRAWLING MORE THAN 4
ACRES LAND AND ADJACENT TO A 3 ACRES LAKE
PARK.
STRATEGICALLY
LOCATED
AT
THE
INTERNATIONALLY REKNOWNED CYBERJAYA CITY, THE
INTELLIGENT CITY AND THE HEART OF MULTIMEDIA
SUPER CORRIDOR OF MALAYSIA, IT IS EASILY
ACCESSIBLE TO THE MAJOR HIGHWAYS AND BYWAYS
LIKE SKVE, LDP, MAJU EXPRESSWAY, ELITE HIGHWAY
AND KL-SEREMBAN HIGHWAY. IT IS ALSO SITED
MERELY 2 KM AWAY FROM LIMKOKWING UNIVERSITY
COLLEGE OF CREATIVITY AND 5KM AWAY FROM MMU,
25KM FROM KLIA AND 30KM FROM KL CITY. WITH
ONLY 6 UNITS PER FLOOR IN EACH TOWER, THE
CONDOMINIUM UNITS ARE COME WITH THE CHOICES
OF BALCONY OR LANAI AND 3 TO 5 BEDROOMS

48

CASE STUDY : WOULD YOU LIVE


HERE?

PROJECT : VRESIDENCE
DEVELOPER : MACVILLA SDN. BHD.
STATUS OF LAND : LEASEHOLD 99 YEARS
ENCUMBRANCES : MALAYAN BANKING BERHAD
PRICE : RM600,000 TO RM1.8MILLION
7% DISCOUNT FOR BUMIPUTRA
268 UNITS OF CONDOMINIUM, 2 BLOCKS OF 26 STOREY
TOWER

CONSIDERATION BEFORE PURCHASING


1.THE BUILDING IS BUILT ON SLOPE AREA
2.268 UNITS IS CONSIDERED AS HIGH DENSITY AND
POPULATION
3.CLOSE TO ELECTRICITY GRID TRANSMISSION TOWER
4.ACCESS TO MAIN ROAD RELATIVELY NARROW AND ONE EXIT
ONLY
5.NEAR TO MOSQUE
6.COMMUNITY / FACILITIES
7.SURROUNDING AREA AND TYPES OF LAND EG: TIN MINING
LAND, RECLAIM AREA
8.COMMUNICATION COVERAGE

49

CONCLUSION
PRICE
OF
REAL
ESTATE
VARIES
ACCORDING TO THE LOCALITY, TYPES,
SURROUNDING
AREA,
COMMUNITY,
GOVT. POLICY AND OTHER FACTORS.
(RM42,000.00 USD 1 BIL AND
INFINITY)
THOUGH THE PRICE OF PROPERTY TEND
TO
RESPONSE
TO
ECONOMIC
DOWNTURN, BUT EVENTUALLY IT WILL
REBOUND.
REAL
ESTATE
SERVES
VARIOUS
FUNCTION AND PURPOSE
1. PLACE OF STAY
2. INVESTMENT
3. SECURITY FOR FINANCING
4. IBADAH SUCH AS WAQF, WASIYYAH,
INFAQ
5. PERSONAL SAFETY AND SECURITY
REAL ESTATE EXPOSED TO VARIOUS
RISK, THUS IT IS IMPORTANT TO TAKE
TRANSFER OF RISK MEASURE I.E
TAKAFUL

WORLDS LARGEST AND


MOST
EXPENSIVE
FAMILY
HOME
COMPLETED
THE ANTILLA IS IN FACT
A$1
BILLION
FAMILY
HOMEBUILT FOR INDIAS
RICHEST
MAN
(AND
FORBES FOURTH RICHEST
MAN) MUKESH AMBANI,
HIS WIFE, AND THREE
CHILDREN.
THE
TOWER
WOULD IN FACT HOLD 60STORIES.
THE
AMBANI

50

INVESTMENT IN REAL ESTATE IS


NOT NEWAND IT MAY LEAD TO
SOMETHING ELSE

51

52