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Investment in real estate and propert

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Investment in real estate and propert

  1. 1. 1 PRESENTATION FOR ISLAMIC WEALTH AND ASSET MANAGEMENT (IFE 750) PREPARED BY : PREPARED FOR :
  2. 2. 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 2
  3. 3. INTRODUCTION- DEFINITION OXFORD STUDENT’S 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). • BEING ONE OF INVESTMENT INSTRUMENT, INVESTMENT IN REAL ESTATE WOULD REQUIRE CAPITAL, MANAGEMENT AND EXPOSE TO RISKS. 3
  4. 4. INTRODUCTION-DEFINITIONUNDER MALAYSIANLAWS • 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 PERMANENTLY FASTENED TO ANYTHING ATTACHED TO THE EARTH, WHETHER ON OR BELOW THE SURFACE; AND (E) LAND COVERED BY WATER;”. 4
  5. 5. INTRODUCTION-ISLAMICVIEWS • 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
  6. 6. ECONOMIC CHARACTERISTICOF REALESTATE CHARACTERISTIC OF REAL ESTATE PHYSICAL 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 6
  7. 7. PHYSICAL CHARACTERISTIC IMMOBILITY SIZE HETEROGENEOUS DURABILITY OR PERPERTUALITY LONG DEVELOPMENT OR COMPLETION TIME PROPERTY MANAGEMENT IMMOVEABLE NO PHYSICAL MARKET PLACE SPATIAL FIXTY COULD BE VERY HUGE SURFACE OF THE EARTH INDIVIDUALLY UNIQUE VARIOUS FACTOR AFFECT THE PRICE LONG LASTING FOR YEARS/ CENTURIES INDESTRUCTABLE SUITABLE FOR HABITAT LAND AQUISATION DEVELOPMENT CERTIFICATE OF FITNESS FOR OCCUPANCY 24 – 36 MONTHS VARIOUS MATTERS RELATED TO PROPERTY : TAXES, LEGAL FEES, MAINTENANCE NEED PROPERTY MANAGERS CHARACTERISTICOF REALESTATE 7
  8. 8. CHARACTERISTICOF REALESTATE ECONOMIC CHARACTERISTIC INTEREST AND RIGHTS DECENTRALISED MARKET HEDGE AGAINST INFLATION LARGE TRANSACTION COSTS OR INVISIBLE SUPPLY LAG CYCLICAL VALUES OWNERSHIP PROVED IN TITLE DEEDS REGISTERED AND BENEFICIAL INTEREST CREATE INCOME AND SAVE MONEY TRANSACTION THROUGH PROPERTY AGENT NO CENTRALISED MARKET ONLY HAVE EXPOS EG: MAPEX BETTER THAN STOCKS AND SHARES DIFFERENT PROPERTY TYPES, HAVE DIFFERENT HEDGE CHARACTERISTIC INVOLVES LARGE COST I.E FEES FOR LAWYERS, AGENT, LAND OFFICE, RENOVATION AQUIRING PROPERTY THORUGH BONDS, SUKUK, SHARES, RIETS TOO EXPENSIVE - OCCUPANCY LONG TIME FOR ACQUIRING PROCESS SUCH AS APPROVAL FROM AUTHORITY, FINANCING, DESIGNING DISEQUILIBRIUM IN THE SHORT RUN RELATIVELY LESS LIQUID AFFECTED BY - (a) GLOBAL AND LOCAL ECONOMY (b) GOV. POLICIES OPEN TO SPECULATION 8
  9. 9. CHARACTERISTICOF REALESTATE LEGAL CHARACTERISTIC VARYING LEGISLATIONS AND LAW COMPLICATED TRANSACTION PROCEDURES STATUTORIAL CHARGES 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 INVOLVES SO MANY PROCESS THAT REQUIRE A STRICT LEGAL COMPLIANCE FOR AQUIRING PROPERTY SUCH – DISCHARGE OF CHARGE REGISTRATION OF OWNERSHIP CONSENT FROM STATE AUTHORITY SUBJECT TO VARIOUS STATUTORIAL CHARGES SUCH AS– QUIT RENT, ASSESSMENT, BUILDING MANAGEMENT FEES 9
  10. 10. MALAYSIANPROPERTYEXPOSITION (MAPEX) 10
  11. 11. • THE SUPPLY AND DEMAND OF PROPERTY IS INELASTIC IN NATURE • MOTIVES TO OWN PROPERTY (I) OCCUPANCY (II) INVESTMENT – LONG TERM (III) SPECULATION – SHORT TERM (IV) DEVELOPMENT • DETERMINATION PRICE MECHANISM – VENDOR/DEVELOPER AND PURCHASER PRICEDETERMINATION INELASTIC IN 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 11
  12. 12. 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 : PRICEDETERMINATION 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
  13. 13. TYPES OF REAL ESTATE MARKET 1. ECONOMIC FACTORS 2. GEOGRAPHICAL 3. POPULATION 4. PHYSICAL ASPECT 5. 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 PRICEDETERMINATION OPEN MARKET (SUPPLY AND DEMAND) CONTROLLED MARKET (SUBJECT TO INFLUENCE & DEMAND AND SUPPLY) 1. GOVERNMENT POLICIES 2. NEW ECONOMIC PLAN : QUOTA ON ETHNIC GROUP PURCHASERS 3. PR1MA 13
  14. 14. PRICEDETERMINATION 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 GEOGRAPHICAL 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, SPACE, FACILITIES, TECHNOLOGY CONSTRUCTION TECHNOLOGICAL OR BUILDING METHOD NEW TECHNOLOGY INVOLVES EXPERTIES FROM OVERSEAS, THUS INCREASE COST E.G : GREEN BUILDING, INDUSTRY BUILDING SYSYTEM (IBS) AND BUILDING INFORMATION MANGEMENT (BIM) TECHNOLOGY. 14
  15. 15. 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 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 STRATEGIC URBAN AREAS NATIONWIDE, PR1MA IS OPEN TO ALL MALAYSIANS WITH A MONTHLY HOUSEHOLD INCOME BETWEEN RM2,500 TO RM10,000. 15
  16. 16. INDUSTRIALBUILDING SYSTEM(IBS) 16
  17. 17. EVOLUTIONOFCONSTRUCTIONDRAWING (Bently Systems, 2014; Bryde et al., 2013) 2D Drawing 2D CAD 3D Visualisation BIM • Paper • Scale rule, • technical pen, • pencils, • compasses • Auto CAD • Catia • Pro/ENGINEER • CMS intelliCAD • Turbo CAD • Vectorworks • Sketch-up • Solid Work • Revit Architecture • Fusion 360 • Revit Architecture • ArchiCAD • Revit Structure • Naviswork • Cost-X • Tekla BIM sight 17
  18. 18. PRICEDETERMINATION OPEN MARKET FASHIONS AND TRENDS 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 STATUS 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 DEVELOPMENT APPROVAL FROM AUTHORITY WOULD STIMULATE LOCAL ECONOMY. DEVELOPER WILL DEVELOP ADJACENT AREA. TENURE FREEHOLD LAND : HIGHER PRICE LEASE HOLD LAND : LESSER PRICE (30, 60 AND 99 YEARS) TITLE CONDITIONS / RESTRICTIONS LEGALLY BINDING CONDITIONS ATTACHED BY AUTHORITY TO THE PROPERTY EG. AGRICULTURAL LAND, MALAYS RESERVE PARTIES INVOLVE VALUER OR PROPERTY CONSULTANT : PROVIDING PROFESSIONAL OPINION OF THE MARKET VALUE OF THE PROPERTY REAL ESTATE AGENTS : SOURCE INFORMATION OF PRICE AND DO NEGOTIATION BETWEEN VENDOR AND PURCHASER 18
  19. 19. CONTROLLED MARKET GOVERNMENT 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 PURCHASERS 1970’S - 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 HOUSEHOLDS IN KEY URBAN CENTRES. PRICEDETERMINATION 19
  20. 20. PRICEDETERMINATION METHOD OF VALUATION EXPLANATORY STATEMENT COMPARISON PROPERTIES COMPARED ARE SIMILAR AND IN THE SAME AREA. IN COMPARING SOME FACTORS TO BE TAKEN INTO ACCOUNT. POSITION, SURROUNDING AREA, LOT LOCATION. INVESTMENT 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 ALLOWANCE FOR DEPRECIATION. THE SITE MUST BE VALUED BY REFERENCE TO THE CONCEPT OF OPPORTUNITY COST. 20
  21. 21. PRICEDETERMINATION METHOD OF VALUATION EXPLANATORY STATEMENT PROFIT (ACCOUNT) COMPARABLE PROPERTY IS UNAVAILABLE, E.G : RESTAURANTS, HOTELS OR THEATRES. 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
  22. 22. PRICEDETERMINATION COMPARISON METHOD OF VALUATION 22
  23. 23. PRICEDETERMINATION THE INVESTMENT METHOD OF VALUATION 23
  24. 24. PRICEDETERMINATION COST VALUE METHOD OF VALUATION 24
  25. 25. PRICEDETERMINATION THE PROFIT METHOD OF VALUATION 25
  26. 26. PRICEDETERMINATION THE RESIDUAL METHOD OF VALUATION 26
  27. 27. REALESTATECYCLES THE PRICE STILL HIGH ALTHOUGH THE SELL OF REAL ESTATE IS SLOWING DURING THE FINANCIAL CRASH IT WILL AFFECT THE REAL ESTATE PRICE BUT IT NOT UP TO THE CRASH. HIGH VACANCY OF PROPERTY AND MANY FORECLOSURE PROCEEDING POPULATION GROWTH, INDUSTRIAL DEVELOPMENT, GOVT. SERVICES REQUIRE FOR PROPERTY SUPPLY. NEED TIME FOR CONSTRUCTION. PRICE ARE HIGH PHASE WHERE PROPERTY OUTNUMBERED RESIDENT. AT PEAK, REAL ESTATE PRICE AT SLOWER PHASE GOVT. INTERVENTION GOVT. INTERVENTION GOVT. INTERVENSTION IS TO ENSURE THE COUNTRY STABILITY OF REAL ESTATE MARKET EG:STAMP DUTY EXEMPTION, TAX RELIEF,LOW INTEREST RATE 27
  28. 28. SAMPLEOF TAXRELIEF 28
  29. 29. INFLUENCE (SYSTEMATIC RISK) INTERNATIONAL 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. REGIONAL (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 ECONOMY OF THE COUNTRY. REALESTATECYCLES 29
  30. 30. CASESTUDYON MARKET CYCLE OF MAJORREALESTATEIN KUALALUMPUR (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
  31. 31. • 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. CASESTUDYON MARKET CYCLE OF MAJORREALESTATEIN KUALALUMPUR (1970 -2000) 31
  32. 32. • 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. CASESTUDYON MARKET CYCLE OF MAJORREALESTATEIN KUALALUMPUR (1970 -2000) 32
  33. 33. • 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. CASESTUDYON MARKET CYCLE OF MAJORREALESTATEIN KUALALUMPUR (1970 -2000) 33
  34. 34. PRESENTCYCLE 34
  35. 35. RISKELEMENTS ECONOMIC INVESTMENT RISKS BUILDINGS LEGAL GOVERNMENT POLICY INTERNATIONAL REGIONAL CYCLE AND SUPPLY DEMAND GOVERNMENT POLICY VALUE DEPRECIATION EXPECTED NORMAL WEAR & TEAR UNEXPECTED NATURE'S ACTS LACK OF MAINTENANCE/ LOW CONSTRUCTION QUALITY LAND ACQUISITION EG: DEVELOPMENT OF KLIA AND PUTRAJAYA NEW ZONING CAUSING THE VALUE TO DROP (IT COULD ALSO INCREASE THE VALUE) NEW STRUCTURE PLAN THE DEVELOPMENT BLUE PRINT PREPARED BY THE LOCAL AUTHORITY, NORMALLY FOR A PERIOD OF 15 TO 20 YEARS. 35
  36. 36. RISKELEMENTS 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. THE HIGHLAND TOWERS COLLAPSE ON 11 DECEMBER 1993 IN THE 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. 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 SOIL WITH RELATIVELY HIGH PERCENTAGE OF SAND. 36
  37. 37. LAW RELATINGTO REALESTATES • 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
  38. 38. NATIONAL LAND CODE 1965 (NLC) TOWN AND COUNTRY PLANNING ACT 1976 LOCAL GOVERNMENT ACT 1976 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 . DOES NOT APPLY TO SABAH & SARAWAK 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. LAW RELATINGTO REALESTATES 38
  39. 39. REAL PROPERTY GAINS TAX (RPGT) STAMP DUTY ACT 1949 STRATA TITLE ACT 1985 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 1ST JUNE 1985. LAW IN RELATION TO STRATA TITLES HOUSING DEVELOPMENT (CONTROL AND LICENSING) ACT 1966 TO PROVIDE FOR THE CONTROL AND LICENSING OF THE BUSINESS OF HOUSING DEVELOPMENT IN PENINSULAR MALAYSIA, THE PROTECTION OF THE INTEREST OF PURCHASER LAW RELATINGTO REALESTATES 39
  40. 40. PROCESSOF ACQUIRINGPROPERTY 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 – 12 MONTHS 8. IF DELAY FOR COMPLETION – FILE COMPLAINT AT HOUSING TRIBUNAL 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
  41. 41. I-REIT / REIT 41 • ISLAMIC REAL ESTATE INVESTMENT TRUSTS OR I-REITS 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 SHARES IN PUBLIC-LISTED PROPERFY COMPANIES AND LISTED OR UNLISTED ISLAMIC SECURITIES OF PROPERTY COMPANIES. • THE WORKINGS OF I-REITS ARE I IKE ANY OTHER TRUST FUND
  42. 42. • 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. 43. 43 I-REIT / REIT
  44. 44. 44 I-REIT / REIT
  45. 45. CASESTUDY: WOULDYOU LIVE HERE? 45
  46. 46. CASESTUDY: WOULDYOU LIVE HERE? 46
  47. 47. CASESTUDY: WOULDYOU LIVE HERE? 47
  48. 48. 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 DESIGN RANGING FROM 1,373 SQ.FT. IN BUILT-UP AREA AS WELL AS THE SKY GARDEN IN THE ALTERNATE FLOOR. WHAT'S MORE, IT ALSO COMES WITH SPECTACULAR AND FACINATING SKYLINE VIEWS OF PUTRAJAYA AND CYBERJAYA. CASESTUDY: WOULDYOU LIVE HERE? 48
  49. 49. • 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 9.EXPOSURE TO SUN LIGHT CASESTUDY: WOULDYOU LIVE HERE? 49
  50. 50. 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 • PERSONAL ADVISE : BUY PROPERTY FIRST… 50 WORLD’S LARGEST AND MOST EXPENSIVE FAMILY HOME COMPLETED THE ANTILLA IS IN FACT A $1 BILLION FAMILY HOME BUILT FOR INDIA’S RICHEST MAN (AND FORBES’ FOURTH RICHEST MAN) MUKESH AMBANI, HIS WIFE, AND THREE CHILDREN. THE TOWER WOULD IN FACT HOLD 60-STORIES. THE AMBANI FAMILY HAS EMPLOYED A STAFF OF 600 TO TEND TO THE HOME!
  51. 51. INVESTMENT IN REAL ESTATE IS NOT NEW…AND IT MAY LEAD TO SOMETHING ELSE 51
  52. 52. 52

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