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GIB1002

Introductory Real Estate


Development and Management
Sr Zulkifli Bin Esha
Lecture 1: Introduction to Real Estate

What is Real Estate


property consisting of land or/and buildings
Real estate is property comprised of land and the buildings on
it as well as the natural resources of the land including
uncultivated flora and fauna, farmed crops and livestock,
water and minerals. Although media often refers to the
"real estate market" from the perspective of residential living,
real estate can be grouped into three broad categories based
on its use: 1. residential, 2. commercial and 3. industrial.
Examples of residential real estate include undeveloped land,
houses, condominiums and townhomes; examples
of commercial real estate are office buildings, warehouses
and retail store buildings; and examples of industrial real
estate are factories, mines and farms.

What is Real Estate


Real estate refers to land, as well as any physical
property or improvements affixed to the land,
including houses, buildings, landscaping, fencing,
wells, etc.
Vacant land and residential lots, plus the houses,
outbuildings, decks, trees sewers and fixtures
within the boundaries of the property are
examples of real estate. Furniture, cars, paintings,
jewelery and boats are examples of personal
property rather than real estate.

Types of Real Estate


1. Residential
2. Commercial- retail store, shopping mall, office
buildings
3. Industrial
4. Agricultural
5. Special Property/RE

Real Estate Characteristics


Six Basic Characteristics of Property/RE
1. Immobile
2. Durable
3. Illiquid
4. High Transaction Costs
5. Consumption and Investment Goods
6. Heterogenous - Every individual property is
different

CHARACTERISTIC OF REAL ESTATE


CHARACTERISTIC OF REAL ESTATE
PHYSICAL

ECONOMIC

LEGAL

OTHERS

1. IMMOBILITY
2. SIZE
3. HETEROGENEOUS
4. DURABILITY OR
PERPERTUALITY
5. LONG
DEVELOPMENT
OR COMPLETION
TIME
6. PROPERTY
MANAGEMENT

1. INTEREST AND
RIGHTS
2. DECENTRALISED
MARKET
3. HEDGE AGAINST
INFLATION
4. LARGE
TRANSACTION
COSTS OR
INVISIBLE
5. SUPPLY LAG
6. CYCLICAL VALUES

1. VARYING
LEGISLATIONS
AND LAW
2. COMPLICATED
TRANSACTION
PROCEDURES
3. STATUTORIAL
CHARGES

LACK OF PUBLIC
INFORMATION ON
THE PRICE
INFORMATION
ONLY AVAILABLE
AT THE AUTHORITY
AND
HARDLY
ACCESSIBLE
BY
PUBLIC
BROUCHER PRICE
MAY BE DIFFERENT
FROM REAL PRICE
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CHARACTERISTIC OF REAL ESTATE


PHYSICAL CHARACTERISTIC
IMMOBILITY

IMMOVEABLE
NO PHYSICAL
MARKET
PLACE
SPATIAL FIXTY

SIZE

HETEROGENEOUS

COULD BE
VERY HUGE

INDIVIDUALLY
UNIQUE

SURFACE OF
THE EARTH

VARIOUS FACTOR
AFFECT THE PRICE

DURABILITY OR
PERPERTUALITY

LONG LASTING
FOR YEARS/
CENTURIES
INDESTRUCTABLE
SUITABLE FOR
HABITAT

LONG
DEVELOPMENT
OR
COMPLETION
TIME

PROPERTY
MANAGEMENT

LAND
AQUISATION

VARIOUS
MATTERS
RELATED TO
PROPERTY :
TAXES, LEGAL
FEES,
MAINTENANCE

DEVELOPMENT
CERTIFICATE OF
FITNESS FOR
OCCUPANCY
24 36
MONTHS

NEED
PROPERTY
MANAGERS

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CHARACTERISTIC OF REAL ESTATE


ECONOMIC CHARACTERISTIC
INTEREST
AND RIGHTS

OWNERSHIP
PROVED IN
TITLE DEEDS
REGISTERED
AND
BENEFICIAL
INTEREST
CREATE
INCOME AND
SAVE MONEY

DECENTRALISED
MARKET

HEDGE AGAINST
INFLATION

TRANSACTION
THROUGH
PROPERTY
AGENT

BETTER THAN
STOCKS AND
SHARES

NO
CENTRALISED
MARKET
ONLY HAVE
EXPOS
EG: MAPEX

DIFFERENT
PROPERTY
TYPES, HAVE
DIFFERENT
HEDGE
CHARACTERISTIC

LARGE
TRANSACTION
COSTS OR
INVISIBLE
INVOLVES
LARGE COST I.E
FEES FOR
LAWYERS,
AGENT, LAND
OFFICE,
RENOVATION
AQUIRING
PROPERTY
THORUGH
BONDS, SUKUK,
SHARES, RIETS
TOO EXPENSIVE
- OCCUPANCY

SUPPLY LAG

CYCLICAL
VALUES

LONG TIME FOR


ACQUIRING
PROCESS SUCH
AS APPROVAL
FROM
AUTHORITY,
FINANCING,
DESIGNING

AFFECTED BY -

DISEQUILIBRIUM
IN THE SHORT
RUN

OPEN TO
SPECULATION

(a) GLOBAL
AND LOCAL
ECONOMY
(b) GOV.
POLICIES

RELATIVELY LESS
LIQUID

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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

COMPLICATED TRANSACTION
PROCEDURES
INVOLVES SO MANY PROCESS
THAT REQUIRE A STRICT LEGAL
COMPLIANCE FOR AQUIRING
PROPERTY SUCH
DISCHARGE OF CHARGE
REGISTRATION OF OWNERSHIP
CONSENT FROM STATE
AUTHORITY

STATUTORIAL CHARGES

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

VALUE, USAGE, RESTRICTION


ETC

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What is land
Real property is most often thought of as a
piece of land on the surface of the earth,
including or excluding building and other
structures permanently attached to the
surface, above the surface or below the
surface.
Land is a valuable resource for mankind as life
depends on having land in which to live and
work

What is land
Land as the surface of the earth, the
materials beneath, the air above and all things
fixed to the soil. Land in modern
administration also includes resources like
marine environment, buildings, and all things
attached to it and under the surface.

Types of land ownership


Types of land titles/tenure in Malaysia

Freehold land:
You can enjoy ownership in perpetuity. Perpetuity
means that there is no time limit for the owner and the
freehold land lies with the title holder until he transfers
it to someone else. The owner of the land owns the
land, the building and anything that is on the
land. After which the land owner (which could be the
state government or another enterprise) will take legal
possession of it. Freehold is more preferable and
fetches a higher price.

Leasehold Land:
Leasehold is a form of property tenure where
one party buys the right to occupy land or a
building for a given length of time. This type of
land also belongs to the government and the
least last up to 99 years. At the expiry of the
term, the land reverts back to the
government. The lesser the number of years
left on the lease, the less valuable the land
becomes.

Freehold vs Leasehold
Leasehold land belongs to the state and is leased out to an
owner for a number of years. Towards the end of a lease,
owners are required to pay a fee to extend the duration of
the lease. Freehold land on the other hand belongs to the
owner (the purchaser) indefinitely.
Additionally, during a sale and purchase process, consent is
required from state authorities (Land Office) before the
transfer can proceed. The state can withhold approval for
any number of reasons. Due to this additional step, it can
take much longer to buy / sell a leasehold property.
For these reasons, freehold properties are usually more
expensive than similar spec leasehold properties.

Land Title in Malaysia


A land title is a legal document which proves
ownership or possession of a property,
whether it is land or buildings developed on
the land.
Generally, all land title records are kept at the
Land Office, or Registry.
Land titles are used to simplify the process of
transferring ownership, but can also play a
part in fraudulent land transactions.

Without a title
Properties with only individual titles (not logged
in the Registry) can be transferred with the use of
a DOA (Deed of Assignment) document.
This DOA assigns the sellers title and rights to the
buyer, and once the DOA is officially stamped the
buyer has legal rights to the title and property.
This title will not be a part of the Land
Office/Registry until it is officially registered.

The common land title in Malaysia


a) Town lease (TL) Generally the land classified
within town area. Leases are to be 99, 60 or 30
years.
b) Country lease (CL), also know as mixed zone
Land classified outside town area. Leases are to
be freehold, 999, 99 or 60 years.
c) Native title (NT) Land classified for native
own and is perpetual in basis. Their practical
bankable value for financing purposes are lower
than other form of leases due to their restriction
of dealing limited between natives.

d) Malay Reserve Land classified for Malay


own and is perpetual in basis, their practical
bankable value is as what NT is.
Malay Reserve Land is a land that cannot be sold to other races, even
foreigners except for Malays or Bumiputra. In conventional sense, it is
generally considered that all Malays are Bumiputra and that all Bumiputra
are Malay. It is land exclusively meant for Malays and Bumiputra. This type
of land posted lower investment return as compared to freehold and
leasehold property as it can only be transfer among Malays and Bumiputra
and limit its marketing prospects.

e) Field Register (FR) Land classified under NT. It


is a temporary title which land office has yet to
issue the final title.
f) Provisional Lease (PL) Provisional title issue
during the time of Her Majesty. Any land with PL
are to be recommended to be re-surveyor prior
to development and normally converted into CL.
g) Temporary Occupation Lease (TOL) As stated,
it is a lease granted by state goverment to lease
the land to you for certain amount of years with
certain amount of annual rent.

Generally, land are being categorised for usage as below before


the title was issued.
a) Agricultural
Falls into the title of Native Title, Malay Reserve, Country
Lease and Provisional Lease. Generally agricultural usage is
the major category.
b) Residential
Falls into Malay Reserve, Country Lease and Town Lease. This
has higher bankable value than agricultural but less than both
below.
c) Commercial
Falls into Country Lease and Town Lease.
d) Industrial
Falls into Country Lease and Town Lease.
e) Others
Usage such as extraction of timber, sand, rock, minerals etc.
Falls into Temporary Occupation Lease.

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
11. PARTIES INVOLVED

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

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