New ideas to beat higher costs

KUALA LUMPUR: The rising cost of building materials provide the best opportunity for developers to be innovative and seek other alternatives to overcome the current situation.

The Institution of Surveyors, Malaysia (ISM) former president Datuk Abdullah Thalith Md Thani said new ideas needed to be injected for developers to cover higher costs.

Abdullah Thalith Md Thani

“Developers need to find ways to tackle the rising costs by focusing more on research and development (R&D). Engineers also need to look for alternatives building materials to tackle this problem,” he told a press conference here yesterday.

The press conference was to announce the 19th National Real Estate Convention (NREC) to be held on Aug 26-27 in Petaling Jaya.

The convention is jointly organised by the International Real Estate Federation (FIABCI), ISM and Association of Valuers and Property Consultants in Private Practice Malaysia.

FIABCI Malaysia president Datuk Richard Fong said the convention would address current issues faced by the real estate industry and strategies to counter them.

“The current construction costs have increased by about 30%. Now it's either build smaller houses at the same price or increase the price for better quality houses,” he said.

However, this was the good time to buy houses as developers would surely increase the prices for new project launches, he said.

The theme for this year's convention is “ Real Estate Leadership - Strategies for the 21st Century”.

NREC is expected to attract 600 delegates from Malaysia and around the region.

Registration is RM599 per person and includes convention materials, tea breaks and lunch.

By The Star

Developers holding back projects amid rising costs

The housing sector will suffer from a lack of new products as developers are holding back projects amid rising costs.

The number of projects abandoned by developers may also rise as they are not able to sustain the development cost, said the Malaysian head of Fiabci, an international real estate federation.

"While some developers are increasing selling price by 30 per cent due to higher costs, others may build smaller homes, or one third of the current size and maintain prices, to remain profitable," said Datuk Richard Fong, who is also Glomac Bhd group executive vice-chairman.


Fong: A slowdown in the housing sector will have a cascading effect

Fong was briefing the media on the upcoming 19th Real Estate Convention Conference (NREC 2008).

Besides cement price, which has gone up by 50 per cent in the last three months, and steel, which has doubled to RM4,000 per tonne, developers are burdened with more expensive copper wires, cables and transport charges.

"Some developers are taking the stand to postpone launches until prices stabilise," he added.

Fong said a slowdown in the housing sector, which encompasses 140 sub-sectors, will have a cascading effect on real estate, engineers, architects and consultants.

Banks and transport firms will also suffer unless the market improves, he said.

"The market is still sound. It's a good time to buy houses which have been launched as the next time a developer launches a new project, it will cost 30 per cent more," added Fong.

Institution of Surveyors Malaysia immediate past-president Datuk S.R. Abdullah Thalith Md Thani said new launches will slow down unless prices in the secondary real market rises, encouraging developers to launch again.

"The current scenario is an opportunity for the industry to innovate. In these challenging times, the government should revise the quota for low-cost housing and Bumiputera ownership," he said.

"The country is not facing a recession but cash flow problem," he added.

NREC 2008, which will be held at One World Hotel from August 26 to August 27, is organised by Fiabci, ISM and the Association of Valuers and Property Consultants in Private Practice, Malaysia.

It will address current industry concerns and strategies, among others.

More than 600 local and foreign delegates are due to attend the event, which will be launched by Minister of Housing and Local Government Datuk Ong Ka Chuan.

By New Straits Times (by Sharen Kaur)

Gamuda’s earnings to take a hit

PETALING JAYA: Gamuda Bhd’s earnings growth will be affected by lower domestic property sales and tougher competition for jobs in the construction sector, both locally and abroad.

MIMB Investment Bank in a report said escalating prices of raw materials, such as steel, would affect the operating cost of Gamuda and grind down its profit margin.

“Gamuda may not be able to reload its order book as well to maintain its construction earnings growth due to the grim outlook for the sector currently,” the report said.

Gamuda registered positive growth as net profit in the third quarter ended April 30 increased to RM76.7mil on revenue of RM562.3mil compared with RM45mil and RM297.3mil respectively in the previous corresponding period.

The company attributed the better performance to higher contributions from all divisions, namely construction, property and infrastructure concessions.

Going forward, MIMB noted that to sustain its earnings, Gamuda needed to have a strong balance sheet to hedge or even stock up raw materials.

On a positive note, Gamuda’s electrified double-tracking project from Ipoh to Padang Besar was running on schedule, it said, adding that 75% of its contract works and services had been awarded to various subcontractors and suppliers.

“However, Gamuda is still finalising the concession and power purchase agreement for its hydropower dam project in Laos,” MIMB said.

On the Vietnamese front, MIMB noted that Gamuda was confident of the long-term growth of its economy and the long-term viability of its projects there remained unaffected despite the current inflationary pressures and its currency crisis.

The company has a total land bank of 1,400 acres in Vietnam with a gross development value of RM12bil.

Gamuda’s share price had plunged more than 45% since March on concerns relating to Vietnam’s unstable economy. It closed at RM2.43 yesterday from a high of RM3.54 in early March.

Aseambankers in its report said Gamuda was significantly undervalued since the plunge, and maintained its “buy” recommendation on the counter with a target price of RM2.90.

Meanwhile, MIMB said the counter was due for a price correction since its sharp drop and maintained its “buy” call with a target price of RM3.04.

By The Star (by Laalitha Hunt)

CapitaLand sets up US$1b China fund

SINGAPORE: CapitaLand Ltd, Southeast Asia's biggest developer by sales, said it set up a US$1 billion (RM3.23 billion) private equity fund to invest in properties in Chinese cities.

The Raffles City China Fund will initially own the developer's 55.9 per cent stake in the Raffles City development in Shanghai and buy the three Raffles City projects that are being developed in Beijing, Chengdu and Hangzhou, it said in a statement to the Singapore stock exchange. The assets are valued at about US$2 billion, CapitaLand said.

CapitaLand, which owns more than 70 malls and developed homes in cities such as Shanghai and Beijing, made close to 30 per cent of its revenue in China last year, up from 20 per cent in 2006. China's economy may grow 10.1 per cent this year, following the 11.9 per cent growth in 2007 that was the fastest in 13 years, according to economist estimates in a Bloomberg survey.

By Bloomberg

Iskandar Malaysia woos RM33m investments

ISKANDAR Malaysia has attracted RM33 billion investments so far or 70 per cent of the RM47 billion needed to develop the region, the Dewan Rakyat was told today.

Deputy Minister in the Prime Minister’s Department SK Devamany said the government had provided “adequate and comfortable” infrastructures to woo more foreign investors to invest in the area.

The government had allocated RM4.3 billion to finance infrastructure projects in Iskandar, he said when tabling the Supplementary Supply Bill 2008 at committee stage.

Devamany also said projects approved for implementation at the East Coast Economic Region (ECER) have started operations.

Among them are agropolitant projects to eradicate poverty in the agriculture sector and setting up of the Centre for Academic Excellence at Universiti Malaysia Kelantan to stimulate human capital development.

Projects at other development corridors were still at planning stage, he said.

Devamany said the government would ensure development plans for all the corridors were implemented well to generate economic activities and woo investments to the areas.

The government had set aside RM173.2 million to meet the operational expenditures of the Iskandar Regional Development Authority, Northern Economic Development Council and East Coast Economic Regional Development Council besides financing the Managed Portal Services project, expanding rukun tetangga sectors and voluntary patrol scheme, added the Cameron Highlands MP.

By Bernama

Asian shopping mall operators meet to tackle issues

ASIA'S shopping complex operators will meet on October 29 to discuss current and future shopping trends and find ways on how to tackle the various challenges.

Malaysian Association for Shopping and Highrise Complex Management president Joyce Yap said among issues facing mall operators include rising inflation, dwindling tourist arrivals, rising costs, poor sales, staff-pinching and intense competition among Asia's shopping complex operators.

"Malaysia's 200,000 shopping tenants, for example, are not sure about the impact of the recent political uncertainty which could lead to a drop in tourist arrivals and shopping activities.

"We will get a clearer picture once the Mega Sales, which started on July 5 ends on September 5," Yap told Business Times in Kuala Lumpur yesterday after a preview of the upcoming conference.

Organised by the Council of Asian Shopping Centres, the three-day conference, which will be held at One World Hotel, Petaling Jaya, will be launched by Tourism Deputy Minister Datuk Seri Sulaiman Abdul Rahman.

Council members include the shopping centre associations of Malaysia, Singapore, Indonesia, Hong Kong, China and the Philippines.

During the conference, working papers will also be delivered by speakers like Limkokwing University of Creative Technology founder Tan Sri Dr Lim Kok Wing, AirAsia group chief executive Datuk Seri Tony Fernandes and Metro Kajang Group managing director Datuk Eddy Chen.

By New Straits Time (by Zaidi Isham Ismail)