Name: Dato’ Ir. Steve Chong Yoon On
Position: Branch Chairman
Company: Johor Real Estate and Housing Developers Association (REHDA)
CIDB’s Construction Snapshot as of June 2019 indicated a drastic decrease in projects awarded by both private and public sectors, whereby in 2016; the private sector recorded RM206.8billion worth of projects but as of June 2019, only RM31.3billion was recorded. The numbers are a cause of concern and to address some of the issues, Johor Real Estate and Housing Developers Association (REHDA) Branch Chairman Dato’ Ir. Steve Chong Yoon On shared with The Iskandarian his views on what needs to be done.
What does the alarming numbers by the CIDB mean?
As of June 2019, only RM31.3billion private sector projects were being awarded. Assuming by the end of 2019, the figure doubles to RM62.6billion means that in comparison to 2016, the percentage of reduction in projects awarded is down by about 70%. These numbers tell us a number of things about the industry.
Do share with us what does the reduced numbers mean
The first thing that we can conclude is that the industry is contracting. We are not here to finger point at anyone but to share our concerns. The construction industry is the fourth largest economic driver of our country. Our industry also helps create over a hundred sub industries, therefore, if the numbers continue to drop, you will start seeing an economic slowdown, and you will hear about unemployment, businesses closing down, our Ringgit weakening and foreign direct investments will be affected.
Do you think that investor confidence is on the decline?
One of the reasons that REHDA is voicing its concerns is because we, the members feel that the investor confidence is heavily declining. We notice that some of the investors who came to Johor a few years ago are packing up and heading to Kuala Lumpur or their respective countries. This is something that needs to be addressed or it will create more uneasiness in the market.
What are some of the pertinent issues that need to be addressed?
I believe that one of the main issues that needs to be addressed is policy. Some of our policies are outdated and unsuitable for the current economic climate not only in Johor but nationwide. For an example in Johor, every housing project needs to have a 40% reserve for Bumiputra buyers but a research by UTM shows that the Bumiputra buyers who are keen and eligible to buy is less than 20%. This shows a mismatch between market’s need and enforced policy.
So imagine this, each new development that comes up, will have a pile of unsold Bumiputra units which we classify as non-productive. These units impede the developers’ cash flow and at the same time create a haven of houses for drug addicts to occupy and for vandalism and theft to occur as wires and cables of the uninhabited houses are stolen. The nuisance is that the wires are probably sold off for a few hundred Ringgit but the developers have to spend a lot more to reinstate the loss. This further disrupts our cash flow.
What about the minimum threshold on the acquisition of properties by foreign interests’ policy?
The minimum threshold for foreign buyer is set at RM1million and it is something that the government can review. It does not need to be a perpetual decision but it can be based on a case to case basis.
The faster we are able to sell our projects means we will have the cash flow to start the next project. The cash flow enables us to keep the industry afloat and also enable us to do our corporate social responsibility (CSR) projects of creating affordable housing for the B40 segment.
Are developers looking to make a quick profit?
This is a question that everyone asks; that are we making noise just to enrich ourselves. The answer is a simple no. For any given project, if we can make a profit of somewhere around 25%, we consider ourselves lucky but you must keep in mind that the 25% spreads over five to seven years. The amount of effort we put in to sustain in that period is unimaginable.
If we are not running at a loss, there is also no need for us to retrench our manpower or even shelve projects. All we are asking for is to give us the ability to float and to sustain. Sustainability is the key word.
How urgently does the issue needs to be addressed?
Right now, we are actually sending out an SOS. This is a very serious matter and we are sending out a plea to save us.
How many unsold property units do we have in the state currently?
As at 1Q2019, Johor has accumulated 51,000 of unsold property units worth around RM36billion, with an estimated of 16,000 units being Bumiputra units as of July 2019. The unsold Bumiputra units make up to RM8billion in total.
What are among the policies you recommend to be reviewed?
There must be an improvement of the Bumiputra units release mechanism. The state government has to come out with a floating system to sell the Bumiputra units instead of marking the unit titles. Some trivial laws which are not relevant at this day and age can be done away with like the advertising laws which stipulate advertising frequency and intervals.
The amount of risks and uncertainty and cost that a developer has to undergo makes the developer wonder if it’s worth to launch anything new now. There are lesser risks if we don’t launch anything.
Do you think that asking for a Bumi quote policy review will create some uneasiness?
We are not asking to review the policy to deprive the Bumis from acquiring properties. The review in policy will enable better matching to buyers and create a more vibrant economy. Some of the Bumi buyers don’t want to buy Bumi units as it will be difficult for them to sell the property later on as they have to sell the unit to a fellow Bumi since the title has been marked and this is not easy as the Bumi buyer will opt to buy a new unit compared to buying a sub-sale unit as he has plenty of choices out there.
In terms of compliance and development cost, don’t the developers usually just transfer that cost to the purchaser?
We are against doing business in that manner. Please understand that we as developers have a social obligation to build and deliver affordable and quality housing to our fellow citizens. Developers are commonly misunderstood as profiteering entities but rarely known that we suffer in silence.