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REAL ESTATE
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
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
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
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
GEOGRAPHI
CAL
POPULATION
PHYSICAL
ASPECT
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
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
17
PRICE DETERMINATION
OPEN MARKET
FASHIONS
AND
TRENDS
OCCUPANC
Y STATUS
DEVELOPM
ENT
APPROVAL
TENURE
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
PR1MA
19
PRICE DETERMINATION
METHOD
OF
VALUATIO
N
EXPLANATORY STATEMENT
COMPARIS
ON
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
20
PRICE DETERMINATION
METHOD
OF
VALUATIO
N
PROFIT
(ACCOUNT
)
EXPLANATORY STATEMENT
E.G
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
25
PRICE DETERMINATION
THE RESIDUAL METHOD OF VALUATION
26
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
28
INFLUENC
E
(SYSTEMA REGIONAL
TIC RISK)
(I)
(II)
POLITICAL STABILITY IT WILL AFFECT
THE COUNTRY ECONOMY AS A WHOLE AND
ENSURE THE ACTIVE AND PROSPEROUS
29
30
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
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
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
37
TOWN AND
COUNTRY
PLANNING ACT
1976
LOCAL
GOVERNMENT ACT
1976
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
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
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
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
45
46
47
48
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
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
50
51
52