Published December 21, 2010

EduCity well on its way to becoming M'sia's education hub

It is targeted at being the base for at least seven higher education institutes

By MALMINDERJIT SINGH

EDUCATION is increasingly becoming an important sector for economic growth, and like many of Asia's economies, Malaysia too is positioning itself as an educational hub in the region.

One does not have to travel very far from Singapore, itself an educational centre, to reach EduCity at Iskandar, Malaysia's hope as a hub for higher education.

Situated within Iskandar Malaysia, which is a government-initiated development zone announced in 2006 to increase investment in the country, EduCity is spread over 123 hectares of land and is targeted at being the base for at least seven higher-educational institutes.

At present, Newcastle University Medicine (NUMed) Malaysia is the one institution that has already begun building its physical presence, a RM90 million (S$37 million) campus, in EduCity and its success will be a benchmark that is likely to attract more institutions and students there.

'The building will be completed by May next year (2011) and handed over to us. It will be fully functional by then and include the facilities that staff and students need,' stated Chris Brink, vice-chancellor of the university.

Prof Brink explained that the institution admitted 20 students last year as part of the first cohort of NUMed and followed this with another 44 students for the second cohort in September this year.

Since the facilities at NUMed are not ready yet, Prof Brink clarified that these students are currently undertaking their pre- clinical studies at the Newcastle campus.

For the next intake in September 2011, Prof Brink expects a full complement of 100 students - all to be based at the NUMed campus in EduCity.

Besides the medical programme, Newcastle University also announced in October a plan to broaden its curriculum offering to include biomedical sciences degrees and a postgraduate education programme.

'We will start taking on the biomedical and postgraduate students in 2012 with a view of expanding the total student population at our EduCity campus to 1,000 students by 2017,' Prof Brink said.

Prof Brink hinted that the university was keen on expanding its relationship with EduCity and its presence there. 'The infrastructure has been put in place for EduCity to grow as a regional education hub and NUMed Malaysia is primed for long-term success in Asia,' he stated.

Prof Brink added that the university would certainly also look toward developing a research presence in EduCity over time and this will include establishing working relationships with the hospitals in the region.

Khairil Anwar Ahmad, chief executive of Education@Iskandar, said: 'NUMed Malaysia is a reflection of the value private sector partnerships play in the development of Malaysia, advocating knowledge sharing and skills transfer, as well as the creation of employment and business opportunities for the community. Iskandar Investment remains committed to forging new international partnerships as we strive to create value for our partners, businesses, and the nation.'

Besides NUMed, EduCity will also include a campus for the Netherlands Maritime Institute of Technology, which will commence at the initial location in Kotaraya, Johor Bahru in 2011, before the institute moves to its permanent campus in the Multi-Varsity Enterprise Building in EduCity by 2012, and a campus for the Management Development Institute of Singapore, which will open in 2013.

Singapore-based Raffles Education is conducting a feasibility study to develop Raffles University which will offer undergraduate programmes in business, technology, arts and design, health science, education, and social science specialisations.

Mr Khairil said he would soon announce the signing of a deal with a 'prominent UK university for an engineering school', reported the New York Times.

The report also quoted him as saying that Iskandar Investment had recently signed a memorandum of understanding with an American film school with a view toward setting up a partnership with a local private university and is also in negotiation with an Australian hospitality school.

'Hopefully a deal should be announced next year,' Mr Khairil said, according to the report.

'We had originally planned for EduCity to host 12,000 students when it's completed,' Mr Khairil said. 'But judging by the response, I think we will end up with 16,000 students.'

Tuesday December 21, 2010

Tax on property rentals

Tax Insights by Kang Beng Hoe

IF you own a property that you rent out, you should know that besides the prospect for ongoing income and capital appreciation, such investments offer deductions which can reduce the income tax on your profits.

However, what type of property investor are you? If you have been actively looking for housing properties to purchase and selling them at a profit, you may not be a passive investor. It is likely that you could be regarded as a property dealer or trader.

The profits derived by a property trader are taxed as income from a business whereas that derived by passive investor is treated as a capital gain and will be subject to a 5% real property gains tax if the property was held for less that five years. If held longer, there will be no tax.

The law to determine whether you are a property trader is imprecise and the outcome can depend on a subjective evaluation of the relevant facts.

For example, does it mean that if you have sold a property within a two-year period, you will be a property dealer? Not necessarily, since it depends on your intention when you acquired that property and the reason why you sold it.

The sale of a second property will reduce the strength of a claim that you are not a property dealer but again, there may be reasons to enable you to argue otherwise.

Rent received in advance

The money that you receive for rent is generally considered taxable in the year you receive it, even when it is not due or earned. You should therefore include advance payments of rent as income even though they are not due.

Tenant-paid expenses

Expenses paid by your tenant are considered income to you. This would include, say, an emergency repair to an air conditioner while you are out of town. You can then deduct the repair payment as a rental expense.

Trade for services

Your tenant might offer his services in exchange for rent. You must include as income a fair market value of his services.

For example, if your tenant, an accountant, agrees to help you prepare your accounts in exchange for two months rent, you must include the two months rent as income even though you did not actually receive the money.

Security deposits

Such deposits are not taxable on you when you receive them if the intent is to refund the money to the tenant at the end of the lease. If the tenant breaches his lease terms, then you are entitled to use the deposit to make good any defects in the property and return the balance to the tenant.

You must include the amount used to repair the defect as income and at the same time claim the amount spent as a deductible expense.

Repairs and improvements

Owners of rental properties should not assume that anything done on the property is a tax-deductible expense. The tax law looks at it quite differently.

A repair keeps your rental property in good condition and is therefore deductible in the year you incur the expense.

Improvements, on the other hand, will add value to your property and the costs are not deductible. Improvements could include a new patio, a garage or a new roof.

From a tax standpoint, you should carry out repairs as the need arises rather than wait until the problem becomes such as to require extensive renovations where elements of improvements would invariably be present. If you bought a dilapidated property and immediately incurred repair expenses on it, these “initial” repairs are not deductible, being of a capital nature.

Mortgage and other expenses

Expenses incurred to obtain a mortgage are not deductible. These could be appraisal fees, commissions or legal fees.

When you start making your mortgage payments, the amounts paid relating to your rental property will only be deductible to the extent of the interest portion. This would be ascertainable from the annual statement, which your bank will send you.

You will also be able to deduct the cost of insurance on the rental property as well as assessments and quit rent.

Rental as a business

The Inland Revenue Board (IRB), in its public ruling, states that “Where in conjunction with the letting of a property, a person also provides ancillary or support services/facilities, the letting can be considered a business source of income ” The consequence is that you are entitled to claim “capital allowances” on any plant and machinery used in the business of letting.

These could include air conditioners, refrigerators as well as furniture and fittings. Should the tax-deductible expenses in any one year exceed the rental income, then the excess being a business loss can be carried forward.

Keep good records

The IRB can be reasonable (based on the law) in deciding on the items you can deduct but you need to show them that you have adequate records of the expenses. Always be prepared to back up your claims.

Kang Beng Hoe is an executive director of Taxand Malaysia Sdn Bhd, a member of the Taxand organisation of independent tax firms worldwide. The views expressed do not necessarily represent those of the firm. Readers should seek specific professional advice before acting on the views.

Published June 29, 2010

MDIS to set up campus in Iskandar

RM300m, 30-acre education facility could be the largest campus in EduCity

By PAULINE NG
IN KUALA LUMPUR

THE Management Development Institute of Singapore (MDIS) yesterday signed a deal to establish a 30-acre campus in Iskandar Malaysia. Its RM300 million (S$128 million) investment is the first major one by a Singaporean group in the special economic zone.

Landmark deal: Ms Arlida and Dr Theyvendran exchanging documents at the signing ceremony in Kuala Lumpur yesterday. Others, from left, are Singapore's High Commissioner to Malaysia TJasudasen, Mr Mohamed Khaled and MDIS president Eric Kuan

The decision to set up a private university college in the area called EduCity@Iskandar is also significant in that it comes on the heels of closer bilateral relations between the two countries.

MDIS's commitment took 18 months of 'rigorous efforts', its secretary-general R Theyvendran said, with the final impetus provided by last month's momentous agreement between the leaders of both countries to resolve a number of long-standing issues, including the land in Singapore that is held by Malaysia's KTM.

Even so, the not-for-profit professional institute sees the 'great potential' which the market for education in Malaysia represents, given the estimated 800,000 students enrolled in higher education across the country. Moreover, Malaysia is host to some 50,000 international students.

MDIS signed an agreement yesterday with Education@Iskandar Sdn Bhd in Kuala Lumpur which was witnessed by Malaysia's Higher Education Minister Mohamed Khaled Nordin.

Its campus could well be the largest in EduCity, and MDIS's commitment will provide a timely boost to Iskandar Malaysia as well as aid its aspirations to become a regional education hub.

It is the third institute to commit to EduCity after Newcastle University Medicine Malaysia and the Netherlands' Maritime Institute of Technology, which are scheduled to open in 2011 and 2012 respectively. Marlborough College Malaysia will open its doors near EduCity in 2012. Another Singapore group, Raffles Education Corporation, is currently conducting a feasibility study before it makes a decision.

Education@Iskandar chairman Arlida Ariff described the MDIS deal as a 'landmark agreement which reflects the immense potential for synergy between Singapore and Malaysia'.

Although Singapore investors are among the southern state's biggest, their investments are mainly in small and medium-sized industries, mostly manufacturing.

Ms Arlida, who is also the chief executive of Iskandar Investment, the master planner for the economic zone, said eight campuses were planned for EduCity and that negotiations are currently underway with an engineering institute. Dedicated campuses for dental, infocomm technology and multimedia institutes are also in the works.

As with its Singapore campus, MDIS - which currently has 13,000 students from 70 countries at its six-acre site - expects locals to comprise 70-75 per cent of the student population.

Dr Theyvendran said the RM300 million investment includes the land and building costs. Construction is to commence next year and the first phase of the 'eco and disabled-friendly' campus is expected to be completed by 2013. Initially, it would have the capacity to accommodate 2,000 students, rising to 5,000 in the second phase in 2018 and to 10,000 after the completion of the third and final phase in 2023.

Students from its three campuses - MDIS has another 10-acre campus in Tashkent, Uzbekistan - would be allowed twinning options to enable them to obtain 'a transnational education'.

The Malaysian campus would be funded by MDIS's cash reserves and operated under a Malaysia-incorporated private limited company to be wholly owned by MDIS International Pte Ltd. But a local partner could be invited to value add, Dr Theyvendran said.

Initial courses to be offered are business management, mass communication, information technology and digital media, and travel & tourism.

Articles of Law by BHAG SINGH | June 29, 2010

Landlords and bills

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Should the landlord be held responsible if his tenant defaults in the payment of utility bills?

A landlord may be envied for being a property owner who generates income for himself by letting out his premises. Apart from the fact that to be a landlord, one needs to have financial resources or at least access to them, the role is not without its problems.

Tenants who are in breach of their obligations are sometimes threatened with having their supply of water and electricity disconnected. In the absence of express and specific provisions, this approach is not advisable.

Whilst the landlord may be perceived to be in a better position because he can choose his tenants, he is more exposed to risks. The landlord’s obligation is only in the form of handing over possession of premises when the tenancy commences.

But it is the tenant’s obligations to the landlord to pay the rental and upkeep the property which is more difficult to enforce. If the tenant runs into arrears of rental, causes damage to the premises or leaves without paying for the utilities, there is nothing to hold him on except to sue him.

Non-payment of electricity bills is one area where tenants have left landlords in the lurch. When this happens, landlords are held responsible by the supplier and cannot reconnect supply for new tenants or sell their property without paying up their bills.

Supply disruption
If it is the tenant who has not paid the electricity bill, is it right for the landlord to be held responsible? A landlord will feel aggrieved at having to settle the unpaid electricity bill. Whilst the supplier concerned may expect payment from the landlord before resuming supply, such decisions are dependent on whom the electricity was supplied to. Was it supplied to the tenant who was the occupant or the landlord who is the owner?

The Electricity Act 1990 states in its preamble that it is “an Act to provide for the appointment and functions of a Director-General of Electricity Supply, the supply of electricity at reasonable prices, the licensing of electrical installations and the control of electrical installations ... and for purposes connected therewith.”

Following this, it is provided by Section 24(1) that a licensee, meaning the supplier, shall upon being required to do so by the owner or occupier of any premises, provide supply of electricity to the premises. As such the supplier knows whom it is supplying electricity to.

Upon receipt of a request seeking supply of electricity, the supplier is duty-bound to supply electricity but the supplier can specify the payment required and any security that must be given. In view of this, if the person who seeks the supply is the tenant and not the landlord, the supply contract would in such circumstances be with the tenant as would be the rights and obligations.

In addition to the security required and given, Section 28(2) of the Act empowers the supplier, where the security is insufficient, to increase the security. Failing to comply with this is a ground for disconnecting the supply. Therefore, adequate provisions exist to safeguard the supplier.

As the supplier has an opportunity to protect itself against unpaid bills by taking an adequate deposit, it would not be fair to hold the landlord responsible and withhold supply because of the tenant’s default. This is especially so where the supplier has through its own negligence, allowed the debt to pile up.

Owner’s request
However, the contract is usually in the name of the property owner, who is the landlord. A clause in the tenancy agreement makes it obligatory for the tenant to pay the electricity charges and other utility bills. This, for all it is worth, is merely an internal arrangement between the landlord and the tenant.

As far as the supplier is concerned, the arrangement is with the landlord. If electricity bills are not paid, the supplier is entitled to recover them from the landlord. If payment is not made, it is not wrong for the supplier to discontinue supply or refuse to resume supply.

Unpaid bills is a matter between the landlord and the tenant; it does not concern the supply authority. It is for the landlord to pay up and then seek recovery from the previous tenant. Whether he wishes to rent out the premises again is of no consequence.

Hence, the landlord must be aware that electricity bills are paid promptly. Monitoring can be done by including an appropriate clause in the tenancy agreement.

The tenant can be required to provide the landlord with evidence of payment of the electricity bills of the preceding month together with the rental for the current month. Failure to do so could be made a ground for terminating the tenancy.

The electricity deposit should not be a nominal sum. It should reflect an amount that is a reasonable estimate based on the expected usage so as to provide adequate security.

There should also be a clause to vary the electricity deposit. Thus if it appears that the electricity consumption per month is more than what was earlier anticipated, it could be increased in the light of higher usage so as to be meaningful.

Conclusion
To the supplier, the landlord is a sure source of payment. If the landlord is not made to pay, the supplier may not be able to recover the arrears as the previous tenants may no longer be around and the same may happen with future tenants.

But one must not forget the provisions empowering the supplier to obtain security. If it can have an adequate sum as deposit to cover defaults, and exercise its power to discontinue supply, it can minimise problems with unpaid bills.

If the supplier wishes to make the landlord responsible in any event, then at the time of supply the landlord should be made a party to the supply agreement.

However, in the absence of a contractual relationship with the landlord, it appears to be neither fair nor equitable to compel him to pay when the supply contract is with the tenant.

For those who feel aggrieved, Section 30(4) of the Act provides an option in that the matter could be referred to the Director-General of Electricity Supply for determination of such disputes. Pending the determination, the supplier is required to continue providing supply.

http://www.starproperty.my/PropertyGuide/Legal/5513/0/0

By COMMENT
By RAYMOND ROY TIRUCHELVAM | Jun 12, 2010

Mortgage or loan term insurance

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IN times of old, when we buy a property, it was meant for stay, as the term owner-occupied. Slowly, this was extended, when people bought properties for investment purposes. Realising this venture as a business, financial institutions, which usually finance these investments, started assessing the risks associated with it. Hence the birth of the loan or mortgage related insurance coverage.

Today, in Malaysian there are two main types of housing loan related insurance coverage, called MRTA (mortgage reducing term assurance) and MLTA (mortgage level term assurance). The former was the first to be offered, but both protect the loan borrower against death or total permanent disability (TPD). Basically, in the event of loss of life or TPD (or in some instances also covering critical illness, depending on the terms) the policy will cover the remaining payment obligation due under the housing loan to the bank.

The main differentiation factor lies in the offerings and coverage categories, whereby MRTA acts like a life insurance, the premium is lost in the end, but for MLTA it acts as a term policy, whereby there is cash-back in the event of no claim. Furthermore, the MRTA is a reducing balance coverage, that pays back in accordance with a reducing balance schedule, and at the end of the tenor the payable sum is zero. This is not the same for MLTA whereby the coverage is fixed from start, meaning the person gets cash-back mounting to the sum insured.

While it is easy to see, which options stands out the better, we need to further analyse two more factors. Firstly, it involves the fact that the premium for the MLTA is much higher. This can go to 10 times higher in totality compared to a MRTA premium. Which brings us to the second factor, which is the purpose. The purpose of the home mortgage insurance, if we can remember, is to cover us against TPD and death, whereby our family is not burdened with the financing. If we seek to find a reasonable cost approach and in the MRTA instance, to be financed by the bank via lump sum payment capitalised into the loan, then the choice is obvious.

Let us take an example in order to show the details. Thirty-year old Vaniza Carlos is buying a RM125,000 property, and is taking up a 30-year term 80% loan financing package. She is faced with the option of choosing a loan insurance package, and her friendly insurance agent Cryced sets out the terms as per Table 1.

Which will be your pick?

Just for analysis purposes, in order to equate the total cost of the MLTA to current value (to bring it to MRTA equivalent), using the NPV approach at 10% discount rate (method of derivation which was featured in my previous article), the NPV value works out to about RM9,950, which is effectively only about 3 times higher than the cost for MLTA. Year 2020 is 10 years into the loan agreement, where the outstanding loan sum would have reduced to about 75% of original sum.

Nevertheless, under the bancassurance umbrella, there are many types of term life policies which are not directly linked to the property but offers similar risk coverage. Bancassurance is defined as insurance business being provided by banks of financial institutions. This term was coined after banks started merging with insurance companies, and in combination started offering products with dual, loan and risk coverage facilities, among others. But do be careful, as MRTA and MLTA usually covers main critical illnesses (albeit limited from the full list of known 36 critical illnesses), whereas term life policies differs.

It is interesting to note that banks are now insuring this “business venture” or property investment, and if this can be extended to say a business of setting up a restaurant with an initial cost of RM100,000, with the same terms being applied. Food for thought, isn’t it?

Raymond Roy Tiruchelvam … “I forget what I was taught, I only remember what I learnt” is a business planner with SABIC group of companies

Tuesday April 27, 2010

Helpless landlords

ARTICLES OF LAW
By BHAG SINGH

Although there are provisions to allow landlords to recover overdue rental, there are limitations, too.

NOT everybody can afford to purchase a property to live in or to operate a business. Hence renting becomes a viable option for many. Renting involves the creation of a relationship between the landlord and the tenant. This may be created formally or informally, whether or not in writing.

The essence of the relationship is that for the agreed term, the tenant is entitled to enjoy the said possession. The landlord in return gets the rent.

If the tenant fails in his primary obligation, there will be cause for concern. If the tenant moves out, at least the landlord can mitigate his loss by renting it out to someone else. But the tenant may choose to stay, yet not pay rent.

Many a landlord in such a situation will feel frustrated. Going to the courts can be time-consuming and costly. Would it not be easier to just go in and chase the tenant out? Or could one not just disconnect the electricity and water supply?

Remedies

A landlord has three distinct remedies against a tenant in arrears with his rent. He may levy distress upon the tenant’s goods, which ultimately he may sell to pay off such arrears as remain unpaid.

Apart from that, he may sue the tenant on the covenant to pay rent, or he may seek to terminate the tenancy through forfeiture.

In addition, for any period for which he cannot claim rent, the landlord can get the liquidated damages, which would include claims for compensation for use and occupation, or an action for mesne profits.

Once the relationship of landlord and tenant has been created, the rights and obligations of the parties inter se will be governed by its terms subject to the general law. As the arrangement is a contract, its terms are enforceable between the parties in much the same way as any contract.

One of the rights conferred on the tenant is the landlord’s covenant that “the tenant paying the rent hereby reserved and performing and observing the several covenants on his part herein contained shall peaceably hold and enjoy the demised premises during the said term without any interruption by the landlord or any person rightfully claiming under or in trust for him.”

Distress

The right to distrain is an ancient remedy which may be described as the right to take another’s goods without legal process as a pledge for the satisfaction of a debt or claim. It is a remedy not confined to the law of landlord and tenant.

The Distress Act 1951 provides for this. It involves the application for a Warrant of Distress addressed to the bailiff directing the latter to forthwith distrain any removable property found by him on the premises named in the distress warrant.

The plus side of a warrant of distress is that it is obtained ex parte, meaning that the application to the court does not have to be served on the tenant before an order is made. The tenant will only know when the bailiff turns up at the premises to seize the property.

However, it must be noted that the purpose is primarily for the landlord to recover rent and not to get back possession of the premises. Once the goods have been seized and disposed of, the tenancy, unless terminated, continues.

Distress is not for recovery of possession. However, possession may be obtained where the premises are abandoned and there is no sufficient property seized with which the arrears can be paid. If so, an application can be made to authorise the bailiff to enter the premises and take possession.

Even then, the bailiff must in such cases affix in a conspicuous place or on the premises, a notice that possession thereof will be delivered to the landlord, unless within 10 days a judge, on the application of any person interested, otherwise orders.

Forfeiture and re-entry

There are instances where the landlord may seek to terminate the tenancy by forfeiture in exercise of a right to re-enter reserved expressly under the tenancy in the case of non-payment of rent. This could read as follows:

“If the rents hereby reserved ... shall be unpaid for (twenty-one) days after becoming payable it ... shall be lawful for the landlord at any time thereafter to re-enter upon the demised premises or any part thereof in the name of the whole.”

Of course, such a covenant may be enlarged in its scope to allow similar action to be taken in case of other breaches. Whilst this is an option on paper, the landlord’s right could be frustrated by other matters.

Where an effort to re-enter the premises is physically resisted, this could have a potential to cause a breach of the peace. In such a case, Section 99 of the Civil Procedure Code comes into play. A magistrate can act, if satisfied from a police report that a dispute is likely to cause a breach of the peace.

He can order the parties concerned to attend before him and put in written statements their respective claims with regard to possession of the premises in dispute.

He can thus make an assessment on which party should remain in possession. If the magistrate decides that one of the parties is in actual possession, an order declaring such party to be entitled to retain possession until evicted in due course of law, can be made.

Conclusion

Even where the tenant does not resist the re-entry because he is not present or otherwise, it would be prudent to make an inventory on what is found. Being accompanied by an independent party could be helpful against future claims by the tenant that some valuable property has gone missing.

There is, of course, the other aspect of cutting off electricity and water supply to the premises. Whether one is entitled to do so will depend not only on practical considerations but also on how the tenancy agreement is worded as well as the stage and point of time at which such action is taken.

Apart from the contract terms, one may also need to consider whether incorporation of such provisions permitting discontinuation of a utility is enforceable as it is contrary to public policy. This aspect could be the subject of a separate discussion.

Monday April 26, 2010

More foreign investors targeted for Nusajaya

By ZAZALI MUSA
zaza@thestar.com.my

UEM Land MD says good progress being made there

GELANG PATAH: UEM Land Holdings Bhd is targeting more international investors to participate in the development of Nusajaya this year.

Its managing director Datuk Wan Abdullah Wan Ibrahim said the company was eyeing investors from China, India, Europe, Singapore, South Korea and the United States.

“Nusajaya is progressing well and moving on the right track and we are confident of keeping the momentum going as planned,’’ Abdullah told StarBiz.

He was speaking at the launch of “Green Programme”, a collaboration between UEM Land and Universiti Kebangsaan Malaysia at SK Taman Nusa Perintis 1, near here on Saturday.

The Green Programme is outlined under the Nusajaya Green Plan launched in December last year to ensure a sustainable development of the country’s first economic growth corridor.

»Nusajaya will have enough content to attract investors and residents« DATUK WAN ABDULLAH WAN IBRAHIM

Abdullah said the company was unfazed by the Dubai World saga and now the Greece debt crisis as the two were unlikely to affect the global economy.

“Even during the global economic slowdown in the last two years, Nusajaya attracted interest from both local and foreign investors,’’ he added.

Abdullah said the company believed there were always opportunitie,s even during times of economic uncertainty, as there were investors and individuals with funds.

He said the company’s high-end residential projects, East Ledang and Horizon Hills, a joint venture between UEM Land and Gamuda Bhd, had attracted a large number of foreign buyers.

Abdullah said foreigners made up 65% and 56% of the buyers at East Ledang and Horizon Hills respectively and that the projects had recorded good take-up rates.

UEM Land is the master developer of the 9,308ha Nusajaya, the key driver of Iskandar Malaysia which was launched on Nov 4, 2006.

Nusajaya comprises eight catalyst developments – Kota Iskandar (Johor State New Administrative Centre), Southern Industrial and Logistic Clusters, Puteri Harbour Waterfront Development, EduCity, Medical City, International Destination Resort and Nusajaya Residences.

Nusajaya is one of five flagship development zones in Iskandar. The other four are the JB City Centre, Western Gate Development, Eastern Gate Development and Senai-Kulai.

Abdullah said works on infrastructure and several development projects in Nusajaya were on schedule and were expected to be completed in the next three to five years.

These include the RM1.4bil Coastal Highway linking Johor Baru city centre to Nusajaya, Asia’s first Legoland Theme Park, Indoor Theme Park @ Puteri Harbour, Marlborough College, Newcastle University Medical Faculty and Pinewood Studios.

“On completion of these projects, Nusajaya will have enough content to attract investors and residents,’’ he said.

Abdullah said it would be much easier to convince and attract investors to Nusajaya as they could witness the developments taking place.

He said another contributing factor was that Iskandar received continuous support and commitment from the Federal and Johor governments.

“The support from the Federal and Johor governments is important to ensure the success of Iskandar, which in turn will ensure that Nusajaya succeeds too,’’ Abdullah said.

He said other stakeholders, namely Iskandar Regional Development Authority and Khazanah Nasional Bhd-backed Iskandar Investment Bhd, also played crucial role in determining Nusajaya’s success.

Abdullah said its close proximity to Singapore was another added advantage for Nusajaya as it would not only able to attract Singaporean investors but also expatriates and multinational corporations there.

“As the master developer, UEM Land has an enormous task to ensure that Nusajaya succeeds and looking at its progress, we are well on our way to achieving it,’’ he said.

Tue Apr 06, 2010

GMG Global: a Wilmar in the making?
By VEN SREENIVASAN

A SOFT-COMMODITY giant with exposure to high-growth markets and commanding a premium over its peers because of its deep vertical integration which delivers a higher return on equity (ROE), more stable margins and stronger cash flows.

That is how Morgan Stanley described palm- oil giant Wilmar International in a 45-page report on March 26.

But this could turn out to be an apt description of mainboard-listed GMG Global as well three years down the road, or perhaps sooner.

Listed in 1999, GMG is the only pure natural rubber play on the Singapore Exchange (SGX). It has some 43,000 hectares of rubber plantation land in the African countries of Cameroon and Cote d'Ivoire (Ivory Coast), only half of which is now under cultivation. It has also bought into two processing plants in Kalimantan, Indonesia, with a total capacity of 55,000 tonnes.

In all, GMG produced some 75,000 tonnes of natural rubber last year. This will rise to over 100,000 tonnes this year, or two-thirds of existing capacity.

In October 2008, Chinese state-owned enterprise Sinochem Corp bought a 51 per cent stake in GMG for $265 million averaging 26.5 cents per share. Last year, it picked up its share of a $100 million rights issue, effectively bringing down its price in GMG to 17 cents per share.

Sinochem is a Tier 1 state-owned enterprise (SOE). It is also China's 10th largest company by revenue, a component stock of the Shanghai Stock Exchange index, and a Fortune Global 500 company for 17 years. With assets of more than 20 billion yuan (S$4.1 billion), it is also China's largest rubber player, supplying some 300,000 tonnes last year to 150 end-users, including multinational companies in the country. The company - which also supplied 100,000 tonnes of synthetic rubber to the Chinese domestic market in 2009 - currently controls over 10.5 per cent of the Chinese market for natural rubber (for scale comparison: the second biggest player supplies just 3 per cent). It wants to raise its market share to 15 per cent.

Meanwhile, China's thirst for natural rubber has grown an average of 10 per cent annually. Last year, it consumed 2.9 million tonnes, or almost 30 per cent of global natural rubber output. The only domestic rubber supply is some 500,000 tonnes from Hainan, in southern China. The rest is imported. The price of natural rubber has risen to its highest levels since mid-2008. Not surprisingly, China considers natural rubber a strategic asset.

This places Sinochem in a unique position. It also gives GMG a unique role as Sinochem's global platform for the production, procurement and trading of natural rubber. On its part, GMG has already expressed its ambition to be among the world's largest vertically integrated natural rubber players within the next 3-5 years. But to do so, its production will have to rise five-fold.

Unlisted Lee Rubber, with its long track record, already produces some 500,000 tonnes a year. GMG has to match that.

With over $160 million of cash in the kitty and virtually no debt, the company has the means to scale up. It has already bought into a second processing plant in Kalimantan this year and is on the lookout for more. Also, only half of its 42,000 hectares of plantation land in Africa is currently planted.

But GMG has to move beyond just production and output; it has to execute its vertical integration strategy, a la Wilmar. This means scaling up its rubber trading capabilities.

Fortunately, it has a powerful parent in Sino- chem which can help make all this happen. For comparison, there is no pure listed rubber play against which GMG can be benchmarked. But there are other soft-commodity players in palm oil which have similarities. Wilmar (with a market capitalisation of some $42 billion) has a price-book value of 2.7 times. Indofood Agri ($2.2 billion) is trading at 2.2 times book. GMG ($330 million) is trading at just 1.2 times book.

Back to Morgan Stanley's report.

Just over four years ago, the newly restructured Wilmar was trading at 80 cents per share. Today, the stock is up some nine-fold. Yet Morgan Stanley reckons it is still undervalued, and has a price target of $8.00 on the stock.

GMG is not a Wilmar; at least not yet. But it has the resources, cash, market and parentage to get there. It's a question of execution

Monday April 26, 2010

Rubber prices reach new highs

By HANIM ADNAN
nem@thestar.com.my

Rise in global demand, tight supply among factors

PETALING JAYA: Rubber is one of the hottest commodities traded so far this year with price rallies seen in most international rubber exchanges.

Tyre-grade Standard Malaysian Rubber (SMR 20) has also been hitting new highs particularly in the past three months and currently trading above the RM10,600 per tonne level.

According to Association of Natural Rubber Producing Countries (ANRPC) director-general Prof Djoko Said Damardjati, tightness in rubber supply would remain an issue amid an upsurge in demand from China and India for their booming auto and tyre manufacturing industries.

“Severe drought, the current wintering season as well as active replanting activities in most major producing countries could affect rubber output.

“Even the preliminary estimates from members of ANRPC indicate that the global rubber supply is unlikely to rise above 6% this year,” he told StarBiz recently.

ANRPC had earlier estimate that global rubber production could reach 9.5 milllion tonnes this year, up by about 6.3% from last year’s 8.9 million tonnes.

Djoko also expected rubber supply to remain tight until 2011. A large extent of existing yielding trees in major producing countries were planted in 1980s.

“Most of the trees planted have reached declining yield phase, thus the age composition of the existing yielding area is unfavourable for yield improvement,” he added.

Djoko noted that Indonesia and Malaysia had undertaken active replanting activities since 2005.

“I believe rubber prices will remain firm for quite some time until supply recovers, possibly by early 2012.”

Apart from the buoyant demand and drought-ridden supply, he said other factors influencing the rubber market included the weakening US dollar, volatility in yen and the increasing crude oil prices.

Members of the ANRPC countries account for about 94% of the total world natural rubber production.

Interestingly, more than 45% of global consumption of natural rubber is in China, India and Malaysia, which are the major consuming countries in the ANRPC.

ANRPC in its latest report said imports from China during January to February surged 63% for natural rubber and 118% for compound rubber compared with the same period last year.

During the same period, India posted a 17% increase in natural rubber consumption, given the large-scale capacity in its auto tyre manufacturing operation.

Meanwhile, Hwang DBS Vickers Research has also raised its 2010-2012 forecast rubber prices by 39% to 44% as its previous forecasts had not taken into account the price recovery on the back of stronger crude oil prices.

The brokerage said: “We believe strong demand recovery for the automotive sector in China and supply constraint due to ongoing conversions to oil palm and the wintering season between February and April would contribute to the jump in rubber prices.Our assumptions are factoring in 29% lower prices in the second half of 2010 compared with the first half.”

One analyst with a local stockbroking firm said the recent automobile industry statistics unveiled that the pick-up in the auto sector in China and the United States had been strong.

The automobile industry is the single biggest user of latex, easily consuming about 70% of the world latex production.

While some might argue that the price upsurge could be short-term given the traditional low supply wintering season, however, many feel that the current price hike was a reflection of strong demand.

“Even with a possible price reduction down the line, natural rubber prices are unlikely to ease to the low levels of December 2008 and January 2009,” he added.

Wednesday April 14, 2010

Tips on how to file your income tax and claim exemptions

By Dr Choong Kwan Fatt

EVERY employee when filing the tax return (Form BE) for year of assessment (YA) 2009 on April 30 has to understand the concept of income exemption, deduction and relief in order to maximise the tax benefits available under the Income Tax Act 1967 prior to paying the legally required amount of income tax.

Income Exemption: Generally, any amount paid by the employer to the employee in relation to having or exercising an employment will be taxed. This refers to employment income such as salary, bonus, gratuity, commission, allowance, director fees and many other forms of remunerations as stated in section 13(1) of the Act.

The Government, however, would from time to time legislate through the Act or gazette order (PU(A) Orders) on the category of income paid by the employer where tax exemption will be granted. This means that such income will be excluded from the income tax computation.

In short, the phrase “income exemption” refers to employment income that is excluded from taxability.

Deduction: Employee can only deduct expenses incurred in carrying out the employee’s duties provided allowance has been received from the employer. This generally refers to travelling allowance, entertainment allowance and meal allowance.

Income tax only imposes tax on net income, ie. after deduction of the required expenses incurred in discharging the performance of the employee’s duties. The amount to be taxed is mathematically computed as follows:

With effect from YA 2008, payments by the employer to the employee in the form of child care allowance, payment of traditional medicine and maternity expenses constitute tax exempt income to the employee. The amount paid in relation to these expenses by the employer is tax deductible against his business income and yet not taxable in the hands of employees.

The relationship between the employer and the employee is illustrated in the above table.

If the employee incurred on his/her own child care, medical expenses on traditional medicine or maternity expenses, these expenses are not deductible from the employment income due to the followings:

● no allowance has been received from the employer on these items;

● it is not related to the carrying on of the employee’s work;

● it represents personal expenses which are not permissible under the Act.

The Act only permits the deduction of expenses provided it is incurred “wholly and exclusively” (the sole objective test) in discharging the performance of employees duties as stated in section 33 of the Act.

Tax Planning: Since the expenses are tax deductible to employer, it would be tax efficient for the employee to forgo their bonus in exchange for these benefits as child care allowance, medical expenses on traditional medicine and maternity expenses that are given by the employer to the employee are tax exempt on the employee’s hand.

Alternatively, employer may consider providing these benefits to the employee at the additional cost to the business but it gives employee loyalty to the firm in long run.

Tax relief: The Act provides a list of items deductible from any income earned by a resident individual in order to relief him/her from tax burden. These expenses are essential to provide welfare to an individual and are given to any resident individual irrespective whether he/she is earning business income, employment income or investment income. The resident individual refers to an individual who has been staying in Malaysia for at least six months.

Click
here for the complete article by tax consultant Dr Choong Kwai Fatt from the Faculty of Business, Universiti Malaya, as he takes you through the basic issues on how to file your tax returns before the April 30 deadline.

http://biz.thestar.com.my/news/story.asp?file=/2010/4/14/business/6027384&sec=business

By Michael Tan | Mar 29, 2010

How to squeeze your housing loans to maximize your returns?

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First things first, decide. Are you planning to make money or save money in properties? If you answered “Saving money from properties”, this article may not be suitable for you. I’m here to share with you how you can use your property loan to make money for yourself. In fact, I know some people who have such proficiency at earning via this method, that they have retired within 5 years of starting!

With the information I am about to share with you, doubtless some will disagree. And to take all potential variables into consideration would be an endless task, however, should you use this method with care, you should be able to maximize your returns from your loans and make tons of money from your property while still keeping it!

To understand how this works, let’s go through a couple of basics. In general, does a property appreciate or depreciate in price? Now, how about a property loan? The answers are quite obvious; a property should, one hopes, appreciate in value whilst your regular monthly payments will reduce the amount outstanding on the loan secured against it.

So looking at the diagram above, how can you make money from your loan? As your property appreciates in price, and your loan reduces, the amount of equity (in other words, cash) in your property increases. In this situation, there is an easy way to access that tied-up capital: refinancing. The banks will also be aware if your property has increased in value, and the majority will be more than happy to increase the loan amount on it for you, assuming that you can demonstrate you can afford the increased loan, and there is sufficient equity in the property. This way, you still own the property and are able to cash out some money from it. Ideally, it would be best not to increase the loan tenure whilst refinancing, even if the new monthly payments are a little higher, as this will end up costing you more in the long run.

Here’s an example of how this works. Let’s take a property worth RM300K, with a loan of RM270K. We assume that the property does NOT appreciate with time. The illustration below is with a fix loan of 6% p.a.

Looking at the table below, you can easily take out RM20,000 every 5 years. However, you should only do this for your investment properties which are bringing you good rental yields. If you are able to rent your property out for 7% and above, you can be rest assured that your tenants will be paying for your profits while you are cashing out on your property at least every 5 years.

However, there is never a guarantee that property prices will ALWAYS go up, so it is never wise to overextend yourself completely. The clever investor will always keep a rainy day fund to ride out dips in the markets.

With that in mind, Happy Investing!

Property Details 0 yrs 5 yrs 10yrs 15yrs 20yrs 25yrs 30yrs A. Property Value 300,000 300,000 300,000 300,000 300,000 300,000 300,000 B. Down Payment (10%) 30,000 30,000 30,000 30,000 30,000 30,000 30,000 C. Balance (A – B) 270,000 270,000 270,000 270,000 270,000 270,000 270,000 Financing Details D. 25yrs Loan 270,000 243,000 206,000 157,000 90,000 0 - Unrealized Capital (C – D) 0 27,000 64,000 113,000 180,000 270,000 - E. 30yrs Loan 270,000 251,000 226,000 192,000 146,000 84,000

Thursday March 25, 2010

Investment income – is it taxable?

By PAULINE TAM

KPMG CHAT

talkback@kpmg.com.my

IT IS the time of the year when some of us may feel uneasy as the deadline for filing our personal income tax return gets nearer. You may drag your feet when having to complete the return form (Form B or Form BE as the case may be) and procrastinate till the last minute as obviously paying taxes is not as exciting as receiving money from your investments.

After having received money from your investments in say, shares and property, have you considered whether the receipts are taxable?

Dividend income

In general, people are under the impression that dividend income is not required to be reported in the tax return. This is only true provided the dividend income is tax exempt as in the case where the dividend that is received is either a single tier dividend or is paid out of the exempt profits of the dividend-paying company. In the case where you received dividends where income tax has been deducted at source, such dividend income is taxable and consequently has to be declared in your income tax return.

Depending on your level of taxable income, you may actually obtain a tax refund from the Inland Revenue Board (IRB) if your tax bracket is at 24% or below.

Generally, the tax deducted by the company on the taxable dividend is at the rate of 25%. On the other hand, if your tax bracket is at 27%, then you are required to pay the 2% differential to the IRB.

In order to determine whether your dividend income is taxable or otherwise, you can look at the dividend vouchers. However, one common mistake in the reporting of taxable dividend income is where the actual amount received is declared as opposed to the gross dividend income, as stated in the dividend voucher.

Rental income

The other common investment income is rental income. Reporting of rental income would be simple if only the gross rental received without claiming deduction for expenses incurred in deriving the rental income was reported. As a smart investor with diversified investments, every penny saved or earned would be additional funding for your next investment.

Therefore, you should claim all the permissible expenses against the gross rental income. The permissible expenses would include assessment, quit rent, service charges, sinking fund contributions, fire insurance and property loan interest. In the case of a bank loan taken to finance a property which generated rental income, one has to remember that it is only the loan interest that is deductible and not the entire loan repayment amount.

Other rental-related expenses such as property agent’s commission and repairs may be deductible against the rental income. However, you would need to scrutinise such expenses in detail to establish if they are indeed deductible.

In the case of the property agent’s commission, where the property owned is being rented out for the first time, the commission paid for securing the first tenant would not qualify for a tax deduction. Subsequent commission paid to the property agent for securing tenants for the same property (after the first tenancy) would be deductible. Likewise, not all repair expenses incurred on the property could be deducted against the rental income.

If you were to repair a leaking roof and install a canopy at the verandah of the house at the request of the tenant, the expense incurred on the canopy would not be deductible as it would not be regarded as repairs and maintenance expense although the repair of the roof should qualify for a deduction.

Some points to take note of

Bearing in mind the penalty that can be imposed by the IRB in the event of an understatement of income in the tax return, you would have to be careful when determining the types of expenses to claim against your investment income. It is important that you do not make a claim for otherwise eligible expenses if you do not have the supporting documents to justify your claims.

If you have a property jointly owned with your spouse, the rental income will be taxed based on your share in the property. Correspondingly, your spouse would have to report the rental income based on his or her share in the property.

Where you and your spouse have investment income, you may be thinking of whether you should be filing for separate assessments or opting for a combined assessment. For most couples, a combined assessment is not beneficial as the combined income would push the tax rate to a higher bracket.

Further, a separate assessment would allow each person to claim the personal relief of RM8,000 whereas a combined assessment would only allow the person to claim either a wife or husband relief of RM3,000 in addition to the personal relief of RM8,000.

This would mean a loss of relief of RM5,000.

■ Pauline Tam is executive director, KPMG Tax Services Sdn Bhd.

Monday February 22, 2010

How to pay less personal tax

By ANG WEINA

THE 2009 tax-filing season for individuals has arrived. For many of us, April 30 will be just another day (perhaps accompanied by scrambling for our just-in-time filing) to settle our dues with the Inland Revenue Board by submitting the Form e-BE and paying any balance tax.

Before clicking the button to complete the e-filing, take a second look at the figures keyed in. Is the amount of tax calculated the lowest it can be? Here are some tips on saving tax that would not get you in trouble with the law.

1. Know your income: What is taxable and what is not.

Gone are the days when you agonise over the delay in receiving your Form EA from your employer. It is now a law for employers to issue the Form EA to their employees no later than the end of February. The key point to note is not all income in your Form EA is taxable! Scrutinise all the items in Form EA to see if there is any which should be tax-free. For example:

Travelling allowances

If you receive travelling allowance, up to RM2,400 for your travels from home to office is tax-free. What this means is if you receive an allowance of RM12,000 for such travel, you can deduct RM2,400 and only RM9,600 is taxable. Further, travelling allowance of up to RM6,000 for official duties is tax-exempt.

Meal, parking and childcare allowances

Many employees receive these allowances, do you? You would be happy to know that you can enjoy such perks with no worries about paying tax thereon (up to RM2,400 in the case of childcare allowance).

2. Make the most of all tax-free benefits.

Medical benefits

Medical benefits for traditional medicine including ayurvedic, plus maternity benefits are also tax-free.

Interest subsidies

Your employer may have subsidised interest on your housing, car and education loans. In the past, these subsidies would be taxable on you. Now you would be glad to know such interest subsidies are tax-exempt (so long as the total loans do not exceed RM300,000).

Broadband and telephone benefits

Who can leave home without the iPhone, Blackberry or PDAs nowadays? Getting such a device from your employer plus reimbursement for broadband and telephone bills are tax-free. So take advantage and enjoy the latest gadgets and services.

3. Know your limits.

Just as in drinking and driving, stay within the limits to avoid any trouble or triggering tax.

If you have enjoyed any staff benefits like discounts on your company’s goods or services and kept within the RM1,000 a year limit, you should enjoy tax exemption thereon.

Did you receive a small token from your employer on your achievements in service excellence, innovation or productivity which brought on a smile? Don’t blame your employer if they kept the awards below RM2,000 as no tax should be levied on you. Neither is the award for your long service with the company (for more than 10 years) forgotten. As long as your employer kept the value of all awards to you within the RM2,000 limit, the smile should remain on you.

4. Look for more tax-free income.

Bank interest income

You will note a subtle difference in your bank statement nowadays as it no longer shows the amount of tax withheld. Bank interest income is now tax-exempt.

Dividends

Dividends need not be entirely taxable. Have a good look at the dividend voucher. If it states that the dividend is “tax-exempt”, then it is not taxable anymore.

5. Gain more deductions.

Purchase of sports equipment

If the slimming fad has caught on with you, keep the receipts of your purchases of any sports equipment. A claim of up to RM300 is a small incentive to shape those curves and muscles in a big way!

Have receipts or evidence to support more deductions

Medical expenses for your parents certified by a medical practitioner (restricted to RM5,000);

Medical expenses for serious diseases for self, spouse or child (up to RM5,000), including a complete medical examination for self, spouse or child limited to RM500;

Basic supporting equipment for disabled self, spouse, child or parents (ceiling of RM5,000);

Disabled person (self) (RM6,000);

Disabled husband/wife (RM3,500);

Education fee (self) up to tertiary level for the purpose of acquiring law, accounting, Islamic financing, technical, vocational, industrial, scientific or technological skills or qualifications for a masters or doctorate level, undertaken for the purpose of acquiring any skill or qualification (limited to RM5,000);

Purchase of books/journals/magazines/similar publications for self, spouse or child (up to RM1,000);

Net deposit in National Education Savings Scheme (ceiling of RM3,000);

Purchase of personal computer for individual (maximum deduction of RM3,000 allowed once every three years);

Premiums on life insurance plus EPF and other approved fund contributions (subject to RM6,000 restriction);

Premiums for education or medical insurance (restricted to RM3,000);

Relief of up to RM10,000 on the housing loan interest paid (conditions apply);

Payment of alimony to former wife (maximum total deduction for wife and alimony payment is RM3,000);

Zakat other than monthly zakat deduction from salary; and

Fees/levy paid by a holder of an employment pass, visit pass (temporary employment) or work pass.

The rule of the “game” of keeping your tax liability to the minimum when preparing your tax return Form e-BE is to do it right within the law. For a start, make the website of the Inland Revenue Board, www.hasil.gov.my, one of your favourites from now until April 30 to access its easy to read guides. Happy e-filing!

● Ang Weina is executive director and global employer services leader with the tax practice of Deloitte Malaysia.

http://biz.thestar.com.my/news/story.asp?file=/2010/2/22/business/5708847&sec=business

Nov 26, 2009

Is it time to hedge mortgage bets?

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Malaysian born British trained mortgage consultant Jonathan Yip gives his views on mortgages… JONATHAN YIP

For many, a mortgage – which is simply paid every month and then forgotten about – is their largest financial commitment. Consumers have the option to choose either the fixed or floating rate mortgage.

In the constantly-evolving finance market, it is always important to understand the potential future consequences of decisions made today. This way, educated decisions can be made in response to the economic climate as and when it changes.

Most home loans will normally fall into one of two broad categories: the fixed rate or floating rate mortgage. There may be countless different packages with many differing features, but they still fall under these two categories.

Fixed rate loans
Fixed rate mortgages do exactly what they suggest; the interest rate is fixed, which means that monthly payments are fixed as well.

In Malaysia, insurance institutions offer these loans. For most of them, the interest rate is fixed for the entire mortgage term. Therefore, a borrower is not only protected from any interest rate fluctuations in the open market, but he also knows exactly what his monthly installment is for the entire lifetime of the loan.

However, most lenders will tie the borrower to the product for a set period (usually around 5 years) by way of a penalty. Hence, if the decision is made to redeem the mortgage within the first 5 years, a penalty is imposed. It is generally calculated with a formula that takes into account the remaining term of the loan and the amount repaid.

The downside is that if interest rates in the open market fall, there is no benefit since the rate is locked.

Floating rate loans
Floating rate mortgages are a variable loan that typically tracks the BLR (base lending rate). It can either track higher or lower than the base rate. Most, if not all floating rate loans are currently tracking below the BLR, roughly in the region of BLR -1.8%.

In most cases, the loan will continue to track at the same margin for the entire loan term (although some banks may attract new business by offering an extremely low floating rate, which increases after the first few years).

Floating rate mortgages can also be pegged against the 3 month KLIBOR (the Kuala Lumpur Inter-Bank Offered Rate), which is the interest rate banks use when lending each other. However, this method is relatively unusual.

Floating rate mortgages can be influenced by changes in the economy: roughly speaking, if demand increases resulting in an upward inflationary pressure, monetary policy dictates that the BLR increases. This may mean the borrower’s monthly payments will significantly increase. On a positive note, interest rates could fall too and the borrower will pay lower monthly installments.

At present, the fixed rate interests are just under 5% while floating rates are around the 3.8% mark. So the golden question is whether to fix or float?

To fix or to float?
There are numerous factors to take into account when deciding which type of mortgage to go for. At first glance, the floating rate package seems much better because a difference of more than 1% will certainly have a large impact on monthly payments. There is obviously a significant difference in price, but it is worth remembering that the BLR is at an all time low.

Market watchers believe that the BLR rates could increase and this means that opting for a floating rate could be more of a gamble instead.

Secondly, the risk-to-reward ratio should be taken into consideration. Irrespective of economic conditions, it is obvious that a 3.8% floating rate can only fall by a maximum of 3.8%, while there is no limit to its increase. If however, the BLR is at 9%, then the potential reward for taking a floating rate is much greater as it could fall much further. However at present, it is at the all time low of 5.55%.

Also, a mortgage commitment is not just for a few months. On average, it is around 3-5 years. So, while floating rates are especially cheap at the moment, it is difficult foresee that the fixed interest rate will fall below 5%.

Even if the BLR stays low for the next 5 years, and therefore (with future hindsight) the fixed rates of today are undesirable in comparison to current floating rates, the peace of mind one gets from a fixed rate should be enough to prevent the average risk-averse borrower from worrying about what they could have “gained” if they settled for a floating rate mortgage.

http://starproperty.my/PropertyGuide/Finance/769/0/0

Mar 9, 2010

Property investment: Opportunities at property auctions

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While property auctions used to be looked at with disdain, the situation has changed in recent years. The proclamation for sale notices in newspapers used to be small and almost inconspicuous, but today they are in full colour and often spread across three to five pages.

So, what brought about this change? I believe that the public has woken up to the fact that they can get good deals from property auctions. For example, a few years ago, I bought a double-storey link house in Subang Jaya at an auction for RM220,000 and then sold it seven months later for RM280,000. A few friends did even better. One bought an apartment in KL worth RM180,000 for just RM96,000 and another bought a house worth RM350,000 for RM240,000. These are just a few examples that I know of. There are certainly more exciting and grander stories out there.

So even if you have never considered property auction, you do some research on the subject matter. The potential of making money from property auctions is indeed there. However, there are many aspects that you must first learn before venturing into property auctions.

Firstly, there are hundreds of properties being auctioned every month. In other words, the supply is huge, but there will be some gems among them. You can locate details of property auctions from newspapers and the Internet. Turn to the classifieds pages in the newspapers, and you should find the proclamation for sale notices. As for the Internet, you can check updated property auction listing in this website or do a quick online search on ‘property auctions Malaysia’ and hundreds of links will be displayed.

You should always bear in mind two key factors below before investing.

• Price
Always compare the market price to the auction price as a property being auctioned at the market price isn’t an ideal investment. You might as well purchase that said property from the open market as there will be less problems that way.

• Location
If the property is in a poor location, you should not invest in it even if it is available at a low price. There is much truth to the saying – location, location, location. You might’ve purchased it for a bargain, but if there are no buyers, the price could remain low for a long period of time.

Usually, there are only about ten percent of properties from auctions that you can consider. While the percentage is low, the numbers is certainly adequate. For example, ten percent of two hundred listings is twenty. Surely there are one or two good deals from that number.

Return to this website soon as I will be revealing more tips in the next article.

http://starproperty.my/PropertyGuide/Finance/2886/0/0

By Venus Hew | Sep 8, 2009

5 Tips to Speedy Home Rental

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Are you in a hurry to rent out your home? StarProperty speaks to an industry expert on some tips and guides to help you in getting the tenants you want, the fastest way.

1. Knowing who to target
In short, it means knowing your target market and trying your best to cater to your potential tenants' needs. However, bear in mind that target market will also depend on the type of property, size and the location you are offering.

In terms of property and size, studio units are typically associated with students or young working executives. As they are relatively small, studio units are used by people who do not need larger living arrangements, particularly those who are single. "Renting bigger homes may be unnecessary and well above their budget", says Tang Chee Meng, Chief Operating Officer of Henry Butcher Marketing Sdn Bhd.

Whereas for families with children, landed terraced houses or condominiums with 2 to 3 rooms appeal more to them than the studio units. Apart from that, a majority of them also prefer unfurnished homes as they are at liberty to plan out the interiors according to their style.

On the aspect of location, if you are renting out a condominium within the expatriate-populated Mont' Kiara, it is highly likely your tenants are expatriates i.e. the Japanese and Koreans who fancy condominium lifestyle in the area.

"Therefore, landlords who know exactly the group of people they are targeting and furnish their homes according to their needs, will benefit from those who do not", Tang notes.

2. Physical rules still count
Now knowing who you are targeting, are you spending enough effort to make your home appeal to your potential tenants? Henry Butcher's Tang says it is important to make certain that your home looks not only presentable but appears "attractive" to potential tenants who will call in to view your home.

Though the definition of “attractive” is subjective to each individual, it comes back to the fundamental rule - who are you targeting? If your target market is expatriates, it may be good to fully or partially furnish your home and provide the necessary furniture and fittings such as the air conditioner, fridge, washing machine, gas stove set and perhaps, even a microwave.

However, as mentioned above, if you are targeting families, it is best not to furnish your home to allow flexibility. “Not all dresses will look good on everyone, so make sure you dress up your home based on your targeted tenants' preference", says Tang.

3. Don't procrastinate: Help-and-do-it-yourself
The cliché of "good things do not just fall from the sky" also means you must not procrastinate in looking for the right tenant. Tenants do not come right knocking on your door, instead you have to look for them. There are a few ways to help yourself to reach out to the mass market and ultimately, your targeted tenants.

The most popular and cheapest way is to advertise via the internet, says Tang. Home owners can register themselves in various property websites (those offering free membership registrations) to post their properties for rent, while some of them use Facebook and Twitter to spread the word of mouth through friends. However, Tang comments that this method is used mostly by the younger home owners who are more internet savvy.

If you happen to own a property near a university/college, one option would be to post notices around either the university/college or within popular student hang-outs, upon approval. In targeting expatriates, Tang suggests you could advertise in their (e.g. Japanese) community newspapers.

4. Appointing a real estate agent- pros & cons
If you have done all the above and still to no avail, you now have to seriously think of engaging a real estate agent to assist you. This is practical especially for those who cannot afford the time.

To engage an agent will also mean passing on the unnecessary burden, inconvenience and risk of being robbed. Also, you don't have to entertain calls at odd hours of the day from potential tenants to view your home. By having an agent, these hassles can be avoided while you carry on with your day-to-day routine.

For first-time home owners, the experienced agents can guide them on tenancy agreement issues and appropriate market rental rates. Tang says a good agent will not ask you to lower your asking rent right away unless it is really above market rates.

Having said that, Tang advises that it is better to appoint a principal agent in marketing your home rental (specify deadline) as this will give the agent a sense of responsibility for quick rental. One obvious downside is how fast you rent out your property will very much depend on the agent's marketing skills.

The tricky part is when agents are not the genuine ones, the so-called "part-time coffee shop agents". There are cases, though minimal, whereby these agents abscond with the initial deposit paid by tenants. One way to reduce the risk, as Tang says, is finding out the license number, commonly known as E-number (issued by the Board of Valuers, Appraisers and Estate Agents Malaysia) of the agent you are dealing with. For some agents who are employed by the licensed real estate agencies, but without the E-numbers, you are advised to do some background check on them first.

5. Your “golden rule” to undercut competition
It is always advisable to do your homework and market research thoroughly to assess the appropriate asking rents based on what you can offer to tenants. But, what if you have not had any potential tenant after sitting on a fence of tight cash flow budget for several months?

As the last resort, Tang says he will use the golden rule - to undercut competition. With a minimum asking rent in mind, you are mentally prepared to accept a much lower rent. Though this may be your last weapon, it may prove to be one of the fastest ways to lure your tenant within the shortest period of time. Don't believe? Try it!

http://starproperty.my/PropertyGuide/Gadgets/394/0/0

Feb 1, 2010

Ask Azizi: Rental rate dilemma

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Dear Azizi Ali,

I am a little overwhelmed after reading some of your books including Millionaire Landlord. However, I’m now really interested to venture into the property business and have done my homework. I still have one question, though.

I'm living in Penang and want to purchase an apartment that is more than 10 years old. I intend to rent it out but am not sure how much I should charge the tenant. Let’s say the monthly rent 10 years ago is RM500 and the current rate is around RM900. How much should I charge knowing that the other landlords are probably charging the old rate?

Your advice is much appreciated. Thank you.

Willi Thae
Pulau Pinang

Dear Willi,

First, it is normal to feel overwhelmed when you learn something new. There appears to be so many new things to learn and master. However, if you keep at it, you should be able to handle most, if not all, of the new knowledge. In time, everything will fall into place.

Seeing that you are new to this, I must add that you need to educate yourself further. Apart from referring to the books you have read, you should also attend talks and seminars or talk to people who are already successful property investors. The more knowledge you gain, the higher your chances are of making it big.

In answer to your question, I understand that there are tenants still paying RM500 despite the current rental rate of RM900. This could be because they have been there for many years and the landlord did not raise the rent.

All properties should reflect their current rental rate. This usually means a higher rate as the years go by. If the rate doesn’t increase, something is not right with (a) the property, (b) the landlord or (c) both!

So you should charge the current rental rate of RM900 per month. In fact, the other landlords should also charge the current rate (plus or minus a few ringgit). It makes no economic sense for a landlord to charge a rate that is 10 or 20 years old. How is he going to make money? And if he is losing money, why did he buy the property in the first place?

If you think it will be difficult to get RM900 for the unit, my advice is to not buy the apartment! Look for another one that will enable you to charge its current rental rate. There are plenty of properties in Malaysia. Surely you can find one that will help you build wealth.

http://starproperty.my/PropertyGuide/Finance/2063/0/0