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16June2011|SectorReport
PropertySector
MaintainNEUTRAL
EnBlocRedevelopment:AnupcomingtrendinurbanMalaysia

InourreporttitledEnBlocRedevelopment:AfuturetrendinurbanMalaysia?dated6May2011,wepointed
out the opportunities that exist in various strategically located low-cost housing areas, particularly those
within a 7km radius of Kuala Lumpur city centre, which are practically sitting on property gold-mines. We
believe these low-cost projects in the neighbourhoods of Pandan, Sentul, Setapak, Keramat, Pantai Dalam,
CherasandSalakSouthareripeforenblocredevelopment.

KUALALUMPURGETSITSENBLOCREDEVELOPMENTPROJECT

En bloc redevelopment in Cheras. The Federal Territory Minister, Datuk Raja Nong Chik, earlier this month
announced an en bloc redevelopment of (1) Sri Johor, Sri Pulau Pinang, Sri Melaka low-cost apartments, and (2)
Taman Ikan Emas low-cost houses in Cheras, Kuala Lumpur.The initial phase of the 53-hectare project is slated to
begininthesecondhalfofthisyear.

PROJECTSITE:CHERASENBLOCREDEVELOPMENT

Improve neighbourhood quality and liveability. The main objective of the en bloc redevelopment project is to
rejuvenatetheold,dilapidatedpublichousingarea.Theareawillbemodernizedwithbetterdesignedandbuiltquality
homes as well as improved public facilities and landscaping. The en bloc redevelopment will also not only enhance
the neighbourhood liveability and quality of public housing in Kuala Lumpur but it will also help to beautify the city
fringelandscape inline withtheconcept ofGreater KL.Moreover,itallowsthe existingresidentstobenefitfromthe
rise in the value of their lands but without having to sell their property outright. The en bloc redevelopment offers
opportunitytoupgradetonewandbetterqualityhomesinthesameneighbourhood.Thisarrangementissuchthatthe
affectedresidentscanremainclosetotheirfamiliarsurroundingsandpreservethelongstandingcommunityties.

Minimaldisruptiontotheexistingresidents.Duringitsinitialphase,theCherasenblocredevelopmentprojectwill
involve the construction of quality homes totaling 1,255 units which would be completed in three years. None of the
existing residents will be affected during the project implementation. The initial phase of the multi-phases
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redevelopment project will be constructed on a vacant land in the vicinity of existing apartments and homes. Hence
theoldbuildingswillbedemolishedonlyuponthecompletionofthenewunits.

New apartment of between 800-900 sq feet. Datuk Raja Nong Chik said eventually all 858 homeowners will each
receiveanewapartmentofbetween800-900sqfeetdependingonthesizeoftheirexistingunit.Meanwhile,all4,810
existing renters will each be offered to purchase a new apartment or to rent it from DBKL at prevailing prices. The
currentsellingpriceandmonthlyrentalrateareRM42,000andRM124,respectively.

Affordable apartments for young executives, first house buyers. It would also undertake apartment housing
developmentintheareaforyoungexecutives,firsthousebuyerswitheachunittoaffordablypricedatnotmorethan
RM300,000andwithabuilt-upareaofatleast800sqfeet.Underthesubsequentphase,itwilldevelopacommercial
and residential centre. The whole project will take around 15 years to complete. The total redevelopment value is
estimatedatRM2.8billion.DBKLhasappointedSPSetia(Neutral,TP:RM4.33)asthedeveloperforthisproject.

WHITHERTHEENBLOCREDEVELOPMENTINURBANMALAYSIA?

An unanswered question. What would happen if any of the 858 existing homeowners in the Cheras en bloc
redevelopmentprojectdecidedtorejecttheofferfornewapartmentsinlieuoftheirexistingones?

Requiredlawstofacilitateenblocredevelopment:TheSingaporeexperience.ThegovernmentofSingaporehas
powertocarryouttheenblocredevelopmentundertheLandAcquisitionsActwhichinvokestheprincipleofeminent
domain (i.e. an action of the state to seize, or expropriate, or seize rights in private property, with due monetary
compensation even without the owner's consent) to undertake the urban redevelopment projects. Moreover, the
amendments to the Land Titles Act passed in 1999 allowed housing estates to be sold against some of the owners'
will if the majority of the owners ruled against them. However this has attracted controversy as it raised concerns of
majoritarianism.Neverthelessitisanacceptablesolutioninviewofitsgreatergoodtothesociety.

Urgent need to get the laws right. Hence we believe the main obstacle that may hamper the growth of en bloc
redevelopmentinMalaysiaisthelackofrequiredlawsthatfacilitateitsimplementation.Inthisregards,theMalaysian
governmentwillneedtoeitherintroducenewlawsormakenecessaryamendmenttotheexistinglawsinorderforthe
economyandmoreimportantlytheresidentstobenefitfromtheenblocredevelopmentproject.

Thepotentialwinners.Propertydeveloperswithtrackrecordsindevelopinghigh-riseresidentialprojectsshallhave
the upper hands in en bloc redevelopment project. Apart from SP Setia, companies such as UEM Land (via its
subsidiarySunrise)(Neutral,TP:RM2.70)andMahSing(Buy,TP:RM2.90)areamongtheotherpotentialwinners.

SyedMuhammedKifni
smkifni@midf.com.my
03-21738383

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