Investment in real estate property

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1PRESENTATION FOR ISLAMIC WEALTH AND ASSET MANAGEMENT(IFE 750)

PREPARED BY:

PREPARED FOR :

INVESTMENT IN REAL ESTATE

AGENDAINTRODUCTION - DEFINITIONINTRODUCTION- DEFINITION UNDER MALAYSIAN LAWSINTRODUCTION- ISLAMIC VIEWSCHARACTERISTIC OF REAL ESTATEPRICE DETERMINATIONREAL ESTATE CYCLESCASE STUDY ON MARKET CYCLE OF MAJOR REAL ESTATE IN KUALA LUMPUR (1970 -2000)RISK ELEMENTSLAW RELATING TO REAL ESTATESPROCESS OF ACQUIRING PROPERTYI-REIT / REITCASE STUDY : WOULD YOU LIVE HERE?CONCLUSION2INTRODUCTION - DEFINITIONOXFORD STUDENTS DICTIONARY SECOND EDITION, 2007 DEFINES THE FOLLOWING TERMS PROPERTY AS LAND AND BUILDING;LAND AS SOLID PART ON THE SURFACE OF THE EARTH; ANDREAL ESTATE AS PROPERTY IN FORM OF LAND AND BUILDING

REAL ESTATE IS A LEGAL TERM WHICH COVER THE LAND AND ANY PERMANENT FIXTURES AFFIXED ON IT SUCH AS BUILDING, MACHINERY OR PLANT. IT ALSO CALL REALTY.

PEOPLE HAVE VARIOUS REASONS FOR ACQUIRING OR OWNING PROPERTY SUCH AS PLACE TO LIVE, INVESTMENTS, BUSINESSES, SPECULATION OR GENERATING INCOME SUCH AS REITS, RENTAL OR EVEN TIME SHARING CONCEPT (MOSTLY FOR VACATION BUSINESS PURPOSES).

BEING ONE OF INVESTMENT INSTRUMENT, INVESTMENT IN REAL ESTATE WOULD REQUIRE CAPITAL, MANAGEMENT AND EXPOSE TO RISKS.3INTRODUCTION- DEFINITION UNDER MALAYSIAN LAWSSECTION 2 OF THE REAL PROPERTY GAIN TAX ACT 1976 (ACT 169) -REAL PROPERTY MEANS ANY LAND SITUATED IN MALAYSIA AND ANY INTEREST, OPTION OR OTHER RIGHT IN OR OVER SUCH LAND.

SECTION 5 OF THE NATIONAL LAND CODE 1965 (ACT 56) LAND INCLUDES- (A)THAT SURFACE OF THE EARTH AND ALL SUBSTANCES FORMING THAT SURFACE; (B) THE EARTH BELOW THE SURFACE AND ALL SUBSTANCES THEREIN; (C) ALL VEGETATION AND OTHER NATURAL PRODUCTS, WHETHER OR NOT REQUIRING THE PERIODICAL APPLICATION OF LABOUR TO THEIR PRODUCTION, AND WHETHER ON OR BELOW THE SURFACE; (D) ALL THINGS ATTACHED TO THE EARTH OR PERMANENTLY FASTENED TO ANYTHING ATTACHED TO THE EARTH, WHETHER ON OR BELOW THE SURFACE; AND (E) LAND COVERED BY WATER;.

4INTRODUCTION- ISLAMIC VIEWSPROPERTY IS RELATED TO THE PILLARS FOR MAQASID SHARIAH, WHICH IS LIVES (NAFS) AND THEIR WEALTH (MAL).

UTHMAN IBN AFFAN REPORTED: THE PROPHET, PEACE AND BLESSINGS BE UPON HIM, SAID THERE IS NO RIGHT FOR THE SON OF ADAM EXCEPT IN THESE THINGS: A HOUSE IN WHICH HE LIVES, A GARMENT TO COVER HIS NAKEDNESS, A PIECE OF BREAD AND WATER.SOURCE: SUNAN AT-TIRMIDHI 2341

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ECONOMICCHARACTERISTIC OF REAL ESTATE

CHARACTERISTIC OF REAL ESTATEPHYSICALLEGALOTHERS1.IMMOBILITY2.SIZE3. HETEROGENEOUS4.DURABILITY OR PERPERTUALITY5.LONG DEVELOPMENT OR COMPLETION TIME6.PROPERTY MANAGEMENT

INTEREST AND RIGHTSDECENTRALISED MARKETHEDGE AGAINST INFLATIONLARGE TRANSACTION COSTS OR INVISIBLE SUPPLY LAGCYCLICAL VALUES1.VARYING LEGISLATIONS AND LAWCOMPLICATED TRANSACTION PROCEDURES STATUTORIAL CHARGES

LACK OF PUBLIC INFORMATION ON THE PRICE

INFORMATION ONLY AVAILABLE AT THE AUTHORITY AND HARDLY ACCESSIBLE BY PUBLIC

BROUCHER PRICE MAY BE DIFFERENT FROM REAL PRICE

6PHYSICAL CHARACTERISTICIMMOBILITY

SIZE

HETEROGENEOUS

DURABILITY OR PERPERTUALITYLONG DEVELOPMENT OR COMPLETION TIMEPROPERTY MANAGEMENTIMMOVEABLE

NO PHYSICAL MARKET PLACE

SPATIAL FIXTYCOULD BE VERY HUGE

SURFACE OF THE EARTHINDIVIDUALLYUNIQUE

VARIOUS FACTOR AFFECT THE PRICELONG LASTING FOR YEARS/CENTURIES

INDESTRUCTABLE

SUITABLE FOR HABITATLAND AQUISATION

DEVELOPMENT

CERTIFICATE OF FITNESS FOR OCCUPANCY

24 36 MONTHSVARIOUS MATTERS RELATED TO PROPERTY : TAXES, LEGAL FEES, MAINTENANCE

NEED PROPERTY MANAGERSCHARACTERISTIC OF REAL ESTATE7CHARACTERISTIC OF REAL ESTATEECONOMIC CHARACTERISTICINTEREST AND RIGHTS

DECENTRALISED MARKET

HEDGE AGAINST INFLATION

LARGE TRANSACTION COSTS OR INVISIBLE SUPPLY LAGCYCLICAL VALUESOWNERSHIP PROVED IN TITLE DEEDS

REGISTERED AND BENEFICIAL INTEREST

CREATE INCOME AND SAVE MONEYTRANSACTION THROUGH PROPERTY AGENT

NO CENTRALISED MARKET

ONLY HAVE EXPOSEG: MAPEXBETTER THAN STOCKS AND SHARES

DIFFERENT PROPERTY TYPES, HAVE DIFFERENT HEDGE CHARACTERISTIC INVOLVES LARGE COST I.EFEES FOR LAWYERS, AGENT, LAND OFFICE, RENOVATION

AQUIRING PROPERTY THORUGH BONDS, SUKUK, SHARES, RIETS

TOO EXPENSIVE - OCCUPANCY

LONG TIME FOR ACQUIRING PROCESS SUCH AS APPROVAL FROM AUTHORITY, FINANCING, DESIGNING

DISEQUILIBRIUM IN THE SHORT RUN

RELATIVELY LESS LIQUIDAFFECTED BY -

(a) GLOBAL AND LOCAL ECONOMY

(b) GOV. POLICIES

OPEN TO SPECULATION

8CHARACTERISTIC OF REAL ESTATELEGAL CHARACTERISTICVARYING LEGISLATIONS AND LAW

COMPLICATED TRANSACTION PROCEDURES

STATUTORIAL CHARGES

SUBJECT TO VARIOUS LEGISLATION SUCH AS

NATIONAL LAND CODE 1965REAL PROPERTY GAINS TAX ACT 1976CONTRACT ACT 1950

AFFECT VARIOUS ASPECT OF REAL PROPERTY SUCH AS

VALUE, USAGE, RESTRICTION ETCINVOLVES SO MANY PROCESS THAT REQUIRE A STRICT LEGAL COMPLIANCE FOR AQUIRING PROPERTY SUCH

DISCHARGE OF CHARGEREGISTRATION OF OWNERSHIPCONSENT FROM STATE AUTHORITYSUBJECT TO VARIOUS STATUTORIAL CHARGES SUCH AS

QUIT RENT, ASSESSMENT, BUILDING MANAGEMENT FEES9MALAYSIAN PROPERTY EXPOSITION (MAPEX)

10THE SUPPLY AND DEMAND OF PROPERTY IS INELASTIC IN NATURE

MOTIVES TO OWN PROPERTY (I)OCCUPANCY(II)INVESTMENT LONG TERM(III)SPECULATION SHORT TERM(IV)DEVELOPMENTDETERMINATION PRICE MECHANISM VENDOR/DEVELOPER AND PURCHASERPRICE DETERMINATION INELASTIC IN SUPPLY INELASTIC IN DEMANDPHYSICAL NATURE OF THE LAND ITSELF, THE PLANNING LAWS AND SECURITY OF TENURE.NECESSARY FUNDS TO FINANCE THE PURCHASEPOTENTIAL INCOME DERIVE FROM THE PROPERTY11FACTORS INFLUENCING PRICE OF PROPERTY THE STATE OF THE GENERAL ECONOMY. CHANGES IN THE STRUCTURE OF THE ECONOMY AND THE ORGANIZATION OF BUSINESSESTHE PRODUCTIVITY OF THE PROPERTY. I.E PRICE PER SQUARE FEETGOVERNMENT INTERVENTION.CHANGE IN THE TRANSPORT FACILITIES AND OTHER FACILITIESALTERATIONS IN THE SIZE AND STRUCTURE OF THE POPULATION

SPACE MARKET AND ASSET MARKET IN TERM OF PURPOSE :

PRICE DETERMINATIONSPACE MARKET ASSET MARKETPURCHASE REAL ESTATE FOR FUNCTIONAL USE OF THE PROPERTY I.E. TO LIVE OR WORK. IT DOES NOT GENERATE INCOMEPURCHASE REAL ESTATE FOR INVESTMENT AND ECONOMICAL PROFIT TO GENERATE INCOME SUCH AS RENTAL.12

TYPES OF REAL ESTATE MARKET1.ECONOMIC FACTORS2.GEOGRAPHICAL3.POPULATION4.PHYSICAL ASPECT5. TECHNOLOGICAL ORBUILDING METHOD6.FASHIONS AND TRENDS7.OCCUPANCY STATUS8.DEVELOPMENT APPROVALTENURE AND TITLECONDITIONS OR RESTRICTIONS11.PARTIES INVOLVED

PRICE DETERMINATIONOPEN MARKET(SUPPLY AND DEMAND)CONTROLLED MARKET(SUBJECT TO INFLUENCE & DEMAND AND SUPPLY)GOVERNMENT POLICIESNEW ECONOMIC PLAN : QUOTA ON ETHNIC GROUP PURCHASERSPR1MA

13PRICE DETERMINATIONOPEN MARKETECONOMIC FACTORSREGIONAL : SUBJECT TO FISCAL AND MONETORY POLICIES SUCH AS SUPPLY OF MONEY AND INTEREST RATE, EMPLOYMENT RATEINTERNATIONAL : EXCHANGE RATE WOULD AFFECT PRICE OF MATERIAL AND RAW RESOURCESGEOGRAPHICAL

LOCATION : PEOPLE PREFER TO LIVE NEAR WORK PLACE, UNIVERSITIES, SHOPPING COMPLEXES, MOSQUE.TOPOGRAPHY : HILLTOP, FLATLAND,SLOPE AREA.CLIMATE: NOT VERY SIGNIFICANT IN MALAYSIA, FLOOD PRONE AREACOMMUNICATIONS : GOOD RECEPTION AREASSERVICES : ADD ON SERVICES, GYM, SECURITY, POOL,EXTRA CAR PARK AND PUBLIC AMENITIESPOPULATION

INCREASE OF POPULATION AFFECT PROPERTY PRICE : 1.MAINTAIN AMPLE UNDEVELOP LAND2.INCREASE ESTABLISHED PUBLIC AMENITIESPHYSICAL ASPECT

DESIGN, MATERIAL QUALITY, SPACE, FACILITIES, TECHNOLOGY CONSTRUCTIONTECHNOLOGICAL ORBUILDING METHOD

NEW TECHNOLOGY INVOLVES EXPERTIES FROM OVERSEAS, THUS INCREASE COST E.G : GREEN BUILDING, INDUSTRY BUILDING SYSYTEM (IBS) AND BUILDING INFORMATION MANGEMENT (BIM) TECHNOLOGY.

14PR1MA

PERBADANAN PR1MA MALAYSIA WAS ESTABLISHED UNDER THE PR1MA ACT 2012 TO PLAN, DEVELOP, CONSTRUCT AND MAINTAIN HIGH-QUALITY HOUSING WITH LIFESTYLE CONCEPTS FOR MIDDLE-INCOME HOUSEHOLDS IN KEY URBAN CENTRES.

PR1MA HOMES COME IN VARIOUS TYPES AND SIZES WITHIN AN INTEGRATED COMMUNITY; SENSIBLY DESIGNED TO SUIT DIFFERENT HOUSEHOLD NEEDS. PRICED BETWEEN RM100,000 TO RM400,000, YOU CAN NOW OWN A HOME THAT IS WELL WITHIN YOUR REACH. EARMARKED FOR DEVELOPMENT IN KEY STRATEGIC URBAN AREAS NATIONWIDE, PR1MA IS OPEN TO ALL MALAYSIANS WITH A MONTHLY HOUSEHOLD INCOME BETWEEN RM2,500 TO RM10,000.15INDUSTRIAL BUILDING SYSTEM (IBS)

16EVOLUTION OF CONSTRUCTION DRAWING

(Bently Systems, 2014; Bryde et al., 2013)

PaperScale rule, technical pen, pencils, compassesAuto CADCatiaPro/ENGINEERCMS intelliCADTurbo CADVectorworksSketch-upSolid WorkRevit ArchitectureFusion 360Revit ArchitectureArchiCADRevit StructureNavisworkCost-XTekla BIM sight17PRICE DETERMINATIONOPEN MARKETFASHIONS AND TRENDSHIGH QUALITY MATERIAL AND WORKMANSHIP DEMAND FOR HIGHER PRICE. REAL ESTATE ALSO APPLIES THE PRINCIPLE WHEN DEMAND SURPASSES SUPPLY, PRICE OF THE PROPERTY WOULD INCREASE. OCCUPANCY STATUS

OCCUPANCY AFFECT BUSINESS AND COMMERCIAL DEVELOPMENTSELLERS MARKET : MARKET IS IN UP TREND AND PROPERTY PRICE IS HIGH. SELLER CHOOSE THE PURCHASER OR TENANTBUYERS MARKET : MARKET IS IN DOWN TREND AND PROPERTY PRICE IS DROP. SELLER SEEK PURCHASER OR TENANTDEVELOPMENT APPROVALDEVELOPMENT APPROVAL FROM AUTHORITY WOULD STIMULATE LOCAL ECONOMY. DEVELOPER WILL DEVELOP ADJACENT AREA. TENUREFREEHOLD LAND : HIGHER PRICELEASE HOLD LAND : LESSER PRICE (30, 60 AND 99 YEARS)TITLE CONDITIONS / RESTRICTIONSLEGALLY BINDING CONDITIONS ATTACHED BY AUTHORITY TO THE PROPERTY EG. AGRICULTURAL LAND, MALAYS RESERVEPARTIES INVOLVEVALUER OR PROPERTY CONSULTANT : PROVIDING PROFESSIONAL OPINION OF THE MARKET VALUE OF THE PROPERTYREAL ESTATE AGENTS : SOURCE INFORMATION OF PRICE AND DO NEGOTIATION BETWEEN VENDOR AND PURCHASER18CONTROLLED MARKETGOVERNMENT POLICIESIN THE CURRENT LEGISLATION, EVERY NEW RESIDENTIAL DEVELOPMENT REQUIRES A MINIMUM OF 30 PER CENT OF LOW OR LOW MEDIUM COST LANDED OR FLATTED RESIDENTIALS WITH A MAXIMUM PRICE OF RM42,OOO.OO. THE GOVERNMENT HAS ASSUMED THE ROLE OF PRICE DETERMINER, BARRING THE INFLUENCE OF SUPPLY AND DEMAND IN THE OPEN MARKET.NEW ECONOMIC PLAN : QUOTA ON ETHNIC GROUP PURCHASERS

1970S - NEW ECONOMIC PLAN (NEP) IS TO ERADICATE POVERTY AND ENSURING A MORE BALANCED DISTRIBUTION OF WEALTH IN THE SOCIETY. THUS, THE QUOTA ON BUMIPUTRA PURCHASERS HAS BEEN IMPOSED TO ENSURE THAT BUMIPUTRA BUYERS ENJOY THE PRIVILEGE OF CHOOSING CERTAIN RESERVED BURMIPUTRA UNITS AND ENTITLED TO 5 PER CENT - 10 PER CENT DISCOUNTS ON THE NORMAL SELLING PRICE. PR1MA

PERBADANAN PR1MA MALAYSIA WAS ESTABLISHED UNDER THE PR1MA ACT 2012 TO PLAN, DEVELOP, CONSTRUCT AND MAINTAIN HIGH-QUALITY HOUSING WITH LIFESTYLE CONCEPTS FOR MIDDLE-INCOME HOUSEHOLDS IN KEY URBAN CENTRES.PRICE DETERMINATION19PRICE DETERMINATIONMETHOD OF VALUATIONEXPLANATORY STATEMENTCOMPARISONPROPERTIES COMPARED ARE SIMILAR AND IN THE SAME AREA. IN COMPARING SOME FACTORS TO BE TAKEN INTO ACCOUNT.POSITION, SURROUNDING AREA, LOT LOCATION.INVESTMENTPROPERTIES THAT HAVE INCOME PRODUCING INVESTMENT OR FOR CALCULATION BY INVESTOR SEEKS FOR NET INCOME. THE CAPITAL IS IN FORM OF RENTAL.EG. RENTAL PROPERTY, SHOPLOTSCOSTPROPERTIES WITH SPECIAL USAGE AND YET ARE NOT USED FOR PROFIT MAKING. FOR EXAMPLE PROPERTY OWNED BY PUBLIC AUTHORITIES SUCH AS SCHOOLS, FIRE STATIONS, GOVERNMENT QUARTERS AND OTHER PROPERTIES WHICH ARE UNIQUE AND NOT COMPARABLE IN THE MARKET. IT APPLY "DEPRECIATED REPLACEMENT COST" (DCF) METHOD. AN ESTIMATE MUST BE MADE OF THE COST OF REPLACING THE SITE AND BUILDING AND THEN MAKING ANY NECESSARY ALLOWANCE FOR DEPRECIATION. THE SITE MUST BE VALUED BY REFERENCE TO THE CONCEPT OF OPPORTUNITY COST.20PRICE DETERMINATIONMETHOD OF VALUATIONEXPLANATORY STATEMENTPROFIT (ACCOUNT)COMPARABLE PROPERTY IS UNAVAILABLE, E.G : RESTAURANTS, HOTELS OR THEATRES.

THE VALUATION MAY HAVE TO BE MADE PURELY BY REFERENCE TO THE PROFITS WHICH A TENANT OF THE BUSINESS ACUMEN COULD MAKE FROM OCCUPATION OF THE PROPERTY. THIS INVOLVE AN EXAMINATION OF THE ACCOUNTS TO DETERMINE TYPICAL FIGURES. FROM THE GROSS RECEIPTS WOULD BE DEDUCTED PURCHASES, ALL OTHER OPERATING COSTS AND OVERHEAD COSTS INCLUDING AN ALLOWANCE FOR INTEREST ON TENANT'S CAPITAL BUT EXCLUDING ANY PAYMENTS ON THE PROPERTYRESIDUALVALUING DEVELOPMENT SITES AND PROPERTIES SUITABLE FOR REDEVELOPMENT BY ESTIMATING THE PROJECT COST AND THE VALUE CREATED INCLUDING NON IMPROVED PROPERTY

21PRICE DETERMINATIONCOMPARISON METHOD OF VALUATION

22PRICE DETERMINATION

THE INVESTMENT METHOD OF VALUATION23PRICE DETERMINATION

COST VALUE METHOD OF VALUATION

24PRICE DETERMINATION

THE PROFIT METHOD OF VALUATION

25PRICE DETERMINATION

THE RESIDUAL METHOD OF VALUATION26REAL ESTATE CYCLESGOVT. INTERVENTIONGOVT. INTERVENTIONGOVT. INTERVENSTION IS TO ENSURE THE COUNTRY STABILITY OF REAL ESTATE MARKETEG:STAMP DUTY EXEMPTION, TAX RELIEF,LOW INTEREST RATE

27SAMPLE OF TAX RELIEF

28INFLUENCE

(SYSTEMATIC RISK)INTERNATIONAL

WORLD ECONOMY IN CRISES, IT WILL AFFECT THE FOREIGN EXCHANGE, THE PRICE OF RAW MATERIAL WILL GO UP. THE CONSUMER PRICE INDEX IS INCREASING WHICH INDICATE INFLATION. THE PURCHASING POWER OF CONSUMERS IS LOW. REGIONAL

(I) LOCAL ESTABLISHMENT MATURITY OF THE REAL ESTATE MARKET. IT IS WHERE SUPPLY IS BALANCE WITH DEMAND. THUS, THE PRICE IS STABLE AND LESS FLUCTUATE.

(II)POLITICAL STABILITY IT WILL AFFECT THE COUNTRY ECONOMY AS A WHOLE AND ENSURE THE ACTIVE AND PROSPEROUS ECONOMY OF THE COUNTRY.

REAL ESTATE CYCLES29CASE STUDY ON MARKET CYCLE OF MAJOR REAL ESTATE IN KUALA LUMPUR (1970 -2000)1970 1980END OF 1970 : REAL PROPERTY PRICES RECOVERED FROM THE PRICE WHICH FELL BY 30 PER CENT TO 50PER CENT DUE TO THE 13TH MAY 1969 ETHNIC RIOTS. (INSTABILITY OF POLITICS) 1971 TO 1973 : GOOD YEARS FOR THE PROPERTY MARKET. DEMAND FOR RESIDENTIAL PROPERTIES INCREASED. THE GOVERNMENT'S INCENTIVES IN TERMS OF HOUSING LOANS TO CIVIL SERVANTS. DEVELOPERS WERE HAVING A GOOD TIME AND PRICES ROSE BY 10 PER CENT TO 15 PER CENT YEARLY. SPECULATION WAS ALSO RIFE AND INFLOW OF MONEY FROM OVERSEAS TO THIS SECTOR WAS EVIDENT. GOVERNMENT INTRODUCED THE LAND SPECULATION ACT TAXED GAINS TO RESTRICT FOREIGN OWNERSHIP. THIS ACT WAS LATER CHANGED TO THE REAL PROPERTY GAINS TAX ACT 1976.301976 : THE WORLD RECESSION AND THE CYCLE DECLINED UNTIL IT REACHED THE BOTTOM.1978 : THE MARKET WAS BEARISH AND PRICES RISING SLIGHTLY. 1979 : SAW SOME PICK- UP IN PRICES AND THIS TREND IMPROVED UNTIL 1980. 1980 19901980 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.

CASE STUDY ON MARKET CYCLE OF MAJOR REAL ESTATE IN KUALA LUMPUR (1970 -2000)311984 TO 1987 : THE SHARE MARKET COLLAPSED DUE TO SCANDALS OF CRIMINAL BREACH OF TRUST. FEW BANKS WOUND UP. 1986 : THE GOVERNMENT MADE AN EFFORT TO ENCOURAGE FOREIGN INVESTMENT IN MALAYSIA. OTHER EFFORTS WERE ALSO MADE WHICH WERE TO PROMOTE MALAYSIA AS A TOURISM AND INDUSTRIAL CENTER, BANKS WERE ASKED TO LOWER BASE LENDING RATE AND AMENDMENT TO LAWS RELATED TO REAL ESTATE.1989 : MARKED THE BEGINNING OF ANOTHER BOOM IN THE PROPERTY MARKET WHICH CONTINUED INTO 1990 AND 1991.1990 2000LAST 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.

CASE STUDY ON MARKET CYCLE OF MAJOR REAL ESTATE IN KUALA LUMPUR (1970 -2000)321997 - 1998 : WAS A MIXED YEAR. THE SLOW ECONOMY GROWTH OF THE PAST FEW YEARS WITH UNCERTAINTIES. AND PRICES AND RENTALS FELL DRASTICALLY AND THE MARKET CONFIDENCE WEAKENED. 1999 : THE ECONOMY WAS RECOVERING DUE TO THE GOVERNMENT'S COMPREHENSIVE MEASURES AND SHOWED A MORE OPTIMISTIC PROPERTY MARKET.CASE STUDY ON MARKET CYCLE OF MAJOR REAL ESTATE IN KUALA LUMPUR (1970 -2000)33PRESENT CYCLE

34RISK ELEMENTSECONOMIC INVESTMENT RISKSBUILDINGS

LEGALGOVERNMENT POLICY

INTERNATIONAL

REGIONAL

CYCLE AND SUPPLY DEMAND

GOVERNMENT POLICY

VALUE DEPRECIATIONEXPECTEDNORMAL WEAR & TEAR

UNEXPECTEDNATURE'S ACTS

LACK OF MAINTENANCE/ LOW CONSTRUCTION QUALITY

LAND ACQUISITION

EG: DEVELOPMENT OF KLIA AND PUTRAJAYA

NEW ZONING CAUSING THE VALUE TO DROP(IT COULD ALSO INCREASE THE VALUE)NEW STRUCTURE PLAN

THE DEVELOPMENT BLUE PRINT PREPARED BY THE LOCAL AUTHORITY, NORMALLY FOR A PERIOD OF 15 TO 20 YEARS. 35RISK ELEMENTS

HIGHLAND TOWERSTHE 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.BUKIT ANTARABANGSASLOPE FAILURE WHICH OCCURRED ON 6 DECEMBER 2008 AT BUKIT ANTARABANGSA HAS CAUSED MORTALITIES AND LOSS OF PROPERTIES AS MORE THAN 20 HOUSES WERE FLATTENED. IT WAS HEAVILY DOWNPOURED FOR A FEW HOURS THAT INCREASED THE SOIL SATURATION AND PLASTICITY PROPERTIES. ANALYSIS OF PHYSICAL SOILS PROPERTIES SHOWS THAT SOIL TEXTURE WAS DOMINATED BY SANDY SOIL WITH RELATIVELY HIGH PERCENTAGE OF SAND. 36LAW RELATING TO REAL ESTATESTHE MALAY STATES LAND LAW WAS BASED ON 'ADAT. ALL LAND WAS VESTED IN THE RULER WHO IN RETURN FOR A TENTH OF THE PRODUCE OF THE LAND AND CERTAIN FORCED LABOUR SERVICES, GRANTED A RIGHT TO HIS SUBJECTS TO OCCUPY AND CULTIVATE THE LAND.UNDER BRITISH AND THE RESIDENCY SYSTEM OF GOVERNMENT, PENANG AND MELAKA (THE STRAITS SETTLEMENTS) AT FIRST ADOPTED ENGLISH LAND LAW IN 1850 THE FEDERATED MALAY STATES, NAMELY PAHANG, PERAK, NEGERI SEMBILAN AND SELANGOR ADOPTED VARIOUS REGISTRATION OF TITLES ENACTMENT WHICH WERE BASED ON TORRENT SYSTEM, WHICH ESSENTIAL CONCEPT OF REGISTRATION WAS NECESSARY TO PRODUCE A TITLEIN 1928 IT BECAME THE ESTABLISED LAND CODE. REGISTRATION WAS EVERYTHING UNDER THIS SYSTEM.

37NATIONAL LAND CODE 1965 (NLC)TOWN AND COUNTRY PLANNING ACT 1976

LOCAL GOVERNMENT ACT 1976

1ST JANUARY 1965

THE PRINCIPAL LAND LAW IN PENINSULAR MALAYSIA. ALL THE STATES IN PENINSULAR MALAYSIA, HAVE THEIR OWN RESPECTIVE STATE LAND RULES.

OBJECTIVE TO ENSURE UNIFORMITY OF LAW AND POLICY WITH RESPECT TO LAND MATTERS .

DOES NOT APPLY TO SABAH & SARAWAKPLANNING FOR LAND USE IN IT FORMULATES THE POLICY AND GENERAL PROPOSALS OF THE LOCAL PLANNING AUTHORITY FOR THE DEVELOPMENT AND USE OF LAND IN THE AREA.

ASSESSMENT TAX IS COLLECTED BY THE LOCAL AUTHORITIES FOR THE PROVISION OF SERVICES TO THE RESIDENTS. ASSESSMENT TAX IS USUALLY COLLECTED TWICE A YEAR WITH A PENALTY FEE FOR LATE PAYMENTS.

LAW RELATING TO REAL ESTATES38REAL PROPERTY GAINS TAX (RPGT)STAMP DUTY ACT 1949

STRATA TITLE ACT 1985INTRODUCED 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 ASSETTHE ASSESSMENT AND COLLECTION OF STAMP DUTIES IS SANCTIONED BY STATUTORY LAW, AND IS DESCRIBED AS THE STAMP ACT 1949. STAMP DUTY IS LEVIED ON TRANSACTION INVOLVING LAND MATTERS IN FORM OF AD VALOREM

1ST JUNE 1985.

LAW IN RELATION TO STRATA TITLES

HOUSING DEVELOPMENT (CONTROL AND LICENSING) ACT 1966TO PROVIDE FOR THE CONTROL AND LICENSING OF THE BUSINESS OF HOUSING DEVELOPMENT IN PENINSULAR MALAYSIA, THE PROTECTION OF THE INTEREST OF PURCHASERLAW RELATING TO REAL ESTATES39PROCESS OF ACQUIRING PROPERTYDEVELOPERVENDOR1.DO SEARCH ON THE DEVELOPER TRACK RECORD2.SIGN SALE AND PURCHASE & PAY 10% DEPOSITLINK HOUSE 24 MONTHS COMPLETIONAPARTMENT 36 MONTHS COMPLETION3.GET FINANCING. REQUEST FOR EXTENSION OF TIME FROM DEVELOPER IF NOT GETTING FINANCING IN TIME4.REGISTER FINANCING SECURITY DOC. AND TRANSFER OF PROPERTY AT LAND OFFICE5.DISBURSEMENT OF FINANCING FROM BANK TO DEVELOPER 6.DO INSPECTION AFTER HAND OVER OF VACANT POSSESSION7.DEFECT LIABILITY PERIOD 12 MONTHS8.IF DELAY FOR COMPLETION FILE COMPLAINT AT HOUSING TRIBUNAL1.DO LAND SEARCH AT LAND OFFICE2.SIGN SALE AND PURCHASE AGREEMENT & PAY 10% DEPOSIT3.REGISTER PRIVATE CAVEAT4.GET FINANCING. REQUEST FOR EXTENSION OF TIME FROM VENDOR IF NOT GETTING FINANCING IN TIME5.WITHDRAW THE PRIVATE CAVEAT6. REGISTER FINANCING SECURITY DOC. AND TRANSFER OF PROPERTY AT LAND OFFICE7.SETTLE THE BALANCE OF THE PURCHASE PRICE

40I-REIT / REIT41ISLAMIC REAL ESTATE INVESTMENT TRUSTS OR I-REITS ARE COLLECTIVE INVESTMENT VEHICLES (TYPICALLY IN THE FORM OF TRUST FUNDS) WHICH POOL MONEY FROM INVESTORS AND USE THIS POOLED CAPITAL TO BUY, MANAGE, AND SELL REAL ESTATE, I-REITS PROVIDE A NEW INVESTMENT OPPORTUNITY FOR THOSE WHO WISH TO INVEST IN REAL ESTATE THROUGH SHARIAH-COMPL IANT CAPITAL MARKET INSTRUMENTS.

THE OBJECTIVE IS TO OBTAIN REASONABLE INVESTMENT RETURNS GENERATED FROM THE RENTAL INCOME ANY CAPITAL APPRECIATION WHICH COMES FROM HOLDING THE REAL ESTATE OVER THE

UNIT HOLDERS WILL RECEIVE THEIR RETURNS IN THE FOM OF OR DISTRIBUTION AND CAPITAL GAINS FOR THE HOLDING PERIOD.

THE REAL ETATE THAT I-REITS INVEST IN, INCLUDES RESIDENTIAL OR COMMERCIAL BUILDINGS, RETAIL OR INDUSTRIAL LOTS, OR OTHER REAL ASETS, SUCH AS SHARES IN PUBLIC-LISTED PROPERFY COMPANIES AND LISTED OR UNLISTED ISLAMIC SECURITIES OF PROPERTY COMPANIES.

THE WORKINGS OF I-REITS ARE I IKE ANY OTHER TRUST FUNDTHE 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. 42I-REIT / REIT43

I-REIT / REIT44

I-REIT / REITCASE STUDY : WOULD YOU LIVE HERE?

45CASE STUDY : WOULD YOU LIVE HERE?

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CASE STUDY : WOULD YOU LIVE HERE? 47SELLING POINTS

COMPRISES 2 BLOCKS OF 26-STOREY TOWER, V'RESIDENCE IS A LOW DENSITY RESIDENTIAL DEVELOPMENT WITH A TOTAL OF MERELY 268 CONDOMINIUM UNITS SPRAWLING MORE THAN 4 ACRES LAND AND ADJACENT TO A 3 ACRES LAKE PARK. STRATEGICALLY LOCATED AT THE INTERNATIONALLY REKNOWNED CYBERJAYA CITY, THE INTELLIGENT CITY AND THE HEART OF MULTIMEDIA SUPER CORRIDOR OF MALAYSIA, IT IS EASILY ACCESSIBLE TO THE MAJOR HIGHWAYS AND BYWAYS LIKE SKVE, LDP, MAJU EXPRESSWAY, ELITE HIGHWAY AND KL-SEREMBAN HIGHWAY. IT IS ALSO SITED MERELY 2 KM AWAY FROM LIMKOKWING UNIVERSITY COLLEGE OF CREATIVITY AND 5KM AWAY FROM MMU, 25KM FROM KLIA AND 30KM FROM KL CITY. WITH ONLY 6 UNITS PER FLOOR IN EACH TOWER, THE CONDOMINIUM UNITS ARE COME WITH THE CHOICES OF BALCONY OR LANAI AND 3 TO 5 BEDROOMS DESIGN RANGING FROM 1,373 SQ.FT. IN BUILT-UP AREA AS WELL AS THE SKY GARDEN IN THE ALTERNATE FLOOR. WHAT'S MORE, IT ALSO COMES WITH SPECTACULAR AND FACINATING SKYLINE VIEWS OF PUTRAJAYA AND CYBERJAYA.CASE STUDY : WOULD YOU LIVE HERE? 48PROJECT : VRESIDENCEDEVELOPER : MACVILLA SDN. BHD.STATUS OF LAND : LEASEHOLD 99 YEARSENCUMBRANCES : MALAYAN BANKING BERHADPRICE : RM600,000 TO RM1.8MILLION7% DISCOUNT FOR BUMIPUTRA268 UNITS OF CONDOMINIUM, 2 BLOCKS OF 26 STOREY TOWER

CONSIDERATION BEFORE PURCHASING1.THE BUILDING IS BUILT ON SLOPE AREA2.268 UNITS IS CONSIDERED AS HIGH DENSITY AND POPULATION3.CLOSE TO ELECTRICITY GRID TRANSMISSION TOWER4.ACCESS TO MAIN ROAD RELATIVELY NARROW AND ONE EXIT ONLY5.NEAR TO MOSQUE6.COMMUNITY / FACILITIES 7.SURROUNDING AREA AND TYPES OF LAND EG: TIN MINING LAND, RECLAIM AREA8.COMMUNICATION COVERAGE9.EXPOSURE TO SUN LIGHT

CASE STUDY : WOULD YOU LIVE HERE? 49CONCLUSIONPRICE 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 STAY2.INVESTMENT3.SECURITY FOR FINANCING4.IBADAH SUCH AS WAQF, WASIYYAH, INFAQ5.PERSONAL SAFETY AND SECURITYREAL ESTATE EXPOSED TO VARIOUS RISK, THUS IT IS IMPORTANT TO TAKE TRANSFER OF RISK MEASURE I.E TAKAFUL

PERSONAL ADVISE : BUY PROPERTY FIRST

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WORLDS LARGEST AND MOST EXPENSIVE FAMILY HOME COMPLETED

THE ANTILLA IS IN FACT A$1 BILLION FAMILY HOMEBUILT FOR INDIAS RICHEST MAN (AND FORBES FOURTH RICHEST MAN) MUKESH AMBANI, HIS WIFE, AND THREE CHILDREN. THE TOWER WOULD IN FACT HOLD 60-STORIES. THE AMBANI FAMILY HAS EMPLOYED A STAFF OF 600 TO TEND TO THE HOME!INVESTMENT IN REAL ESTATE IS NOT NEWAND IT MAY LEAD TO SOMETHING ELSE51

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