Penang Property Forum | Malaysia | DIBS | Curbs on property scheme?

Vulcaninternational: Is DIBS scheme good for purchaser? Are there any negative impact to purchaser? What about to property speculator or investor? Why only now the Bank Negara (Malaysia Central Bank) is re-looking into DIBS? What about RPGT effectiveness in serving its purpose?

In light of the above questions, do read through to find the answers.
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DIBS property 2013 | Bank Negara said to be relooking at popular, easy developer interest-bearing scheme.

PETALING JAYA: Bank Negara is studying the risks arising from the developer interest-bearing scheme (DIBS) with a view of potentially imposing curbs on it, sources said.

Although it is unclear if or when such curbs would be put in place, Hong Leong Investment Bank (HLIB) said that it may be “later this week”, adding that such a move would be a negative for future sales in the primary property market.

Other industry players think that the measures might be introduced in the second half of the year.

DIBS has become a popular easy financing package offered by property developers in joint-promotion activities with banks in recent years.

Under the scheme, buyers need not fork out much initial downpayment to buy properties, as the developer supposedly absorbs the initial interest. This is until the buyer takes possession of the property.

A high number of buyers enter this scheme with the intention of flipping the property when they gain possession of it, making a profit without having to come up with much capital in the process. Such a scenario fuels speculation.

“Typically, under the scheme, buyers only foot between 5% and 10% of the house price upon signing the sale and purchase (S&P) agreement and only begin payment when the project is completed,” a property consultant told StarBiz.(DIBS definition)

“There are caveats to this scheme, as buyers commit to a financial obligation upon the signing of the S&P and the interest cost has actually been already passed on to buyers via the higher selling prices.”

DIBS is mainly offered to the high-rise residential segment. Some property consultants have opined that the presence of DIBS in the market has caused prices to be set on an artificially higher trajectory.

Notably, the Singapore government banned DIBS in 2009.

“While the exact measures are yet to be revealed, we believe the curbs would impact this easy financing scheme,” HLIB said in a note yesterday.

According to analysts, most of the sales in the recent property bull cycle were tied to the attractive DIBS scheme at the expense of the secondary property market which has remained sluggish. And given the persistent rise in household debt, the Government is mulling over measures to limit it.

“In the recent past, Bank Negara has been compiling information on the scheme and studying its impact on the sector,” a source said.

Bank Negara had yet to respond to StarBiz’s queries as at press time.

“The difference between the non-DIBS and DIBS pricing can range from as low as 5% to as high as 30% if other incentives like early-bird discounts, stamp duty waivers and cash payments are taken into account,” said Elvin Fernandez, managing director of Khong & Jaafar group of companies.

He advocates regulators to compel developers to be transparent on the various incentives, as it may be difficult to do away with DIBS packages.

“Developers should inform buyers and bankers of the actual value of the discounts they are getting so that house buyers know the true value of the house they are buying,” he said.

UOB Kay Hian Research noted that new launches in selective high-rise projects in the suburbs of the Klang Valley were transacted at over RM1,000 per sq ft (psf) vis-a-vis RM450 psf two years ago.

“Household debt has risen to 80.5% of nominal gross domestic product as at end-December 2012, up from 60.4% as at end-2008.

“We also note that outstanding banking sector loans in the household sector has risen 3.6% year-to-date as at end-April to RM638.5bil from RM616.5bil as at December 2012. As the rise in consumer credit is partly linked to housing, curbs may be introduced to dampen speculation,” UOB Kay Hian said in a report yesterday.

On the financial impact of curbing DIBS on property companies, HLIB said that it would be “negative for future sales in the primary market but the extent of damage varies with the degree of exposure to the high-rise segment for each individual developer”.

UOB Kay Hian reckons that if DIBS or similar schemes were to be tightened, it could “significantly dampen new property launches as speculators will be filtered out”.

The company also does not rule out the possibility of a further upward revision in real properties gains tax (RPGT) to dampen speculation.

In Budget 2013, the Government had raised the RPGT for the second time since 2011, stipulating a 10% to 15% tax for the disposal of properties within two years of purchase, and 5% to 10% for the disposal of properties within three to five years. However, properties sold five years after purchase are exempted from the RPGT.

This article has been written by VULCAN INT'L Real Estate Research Institute http://www.vulcanresearch.blogspot.com for VULCAN INTERNATIONAL Real Estate Investors Club http://www.vulcaninternational.blogspot.com .

VulcanInternational could be contacted at +6 016 451 1321 .

You're welcome to write your constructive comment below.

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VULCAN INTERNATIONAL Real Estate Investors Club

Penang iProperty Talk | Auction Property | Auction House | MalaysiaProperty Bubble | Save your home from being auctioned

Those who take loan should be more aware of the conditions that could lead to their houses being auctioned off. Borrowers must educate themselves on foreclosure procedures.

Generic Foreclosure Procedure For Properties With Individual Titles:

1. A letter of demand is issued to the borrower informing him of his breach (of the loan agreement), with a demand to remedy that breach.

2. If the borrowers fails to satisfy the bank, it will issue a notice in Form16D of the National Land Code (a Notice of Default with respect to a charge).

3. The bank files an Originating Summons(OS) and a affidavit in support of the OS to apply for an Order of Sale. Both will be served on the borrower.

4. At the hearing of the OS, the court must be satisfied that the legal documents have been served on the borrower, before granting an Order for Sale.

5. The bank files a notice of application and an affidavit in support with the valuation report to apply for an auction date and the appointment of an auctioneer.

6. Once the court has fixed an auction date and appointed an auctioneer, the auctioneer will prepare a Proclamation of Sale(POS) and advertise the POS in a local newspaper two weeks before the auction date.

7. On the auction day, the property will be sold to the successful bidder.

8. If there are no bids for the property above the reserve price, the auction will be called off. The bank will file a new notice of application and an affidavit in support to apply for a reduced reserve price and new auction date. (Typically a reduction of 10% of the reserve price. However it's up to jurisdiction of the bank to also not reduce reserve price).

9. Process step 1 to 8 is repeated until the sale of the property at an auction.

Note: (a) Step 3-4 will take 6 months.
(b) From step 4-7 will take another 6 months.
(c) Process of public auction or sale of a property (in the case of a property with a separate title) is governed by Section 256 to 269 of the National Land Code.
(d) Where a property has no individual title (with the loan made by way of Deed of Assignment), and there is a default on the loan, then the auction would be a private one.

Picture below: Scene during public auction day in Penang.

This article been written by VULCAN INT'L Real Estate Research Institute(Penang iProperty) for VULCAN INTERNATIONAL Real Estate Investors Club.

VulcanInternational could be contacted at +6 016 451 1321 .

You're welcome to write your constructive comment below.

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Penang iProperty Talk | Butterworth | Double Storey Semi Detach HouseFor Sale

For Sale Double Storey Semi Detach House at Butterworth, Penang.

Land Area: 3,750 sq ft
Build Up: 3,000 sq ft
Bedroom: 5
Bathroom: 3

Interested please call Vulcan Lau, mobile: +6 016 451 1321 for details.

For Sale Double Storey Semi Detach House at Butterworth, Penang.

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For private viewing do contact Mr Vulcan Lau, mobile no.: +6 016 451 1321 | #VulcanInternational | #VulcanFocus | #YouCallWeMatch

Note: If you've factory/warehouse/land/commercial building/condominium/house to sell/let or intent to buy/rent one, do call Mr Vulcan Lau +6 016 451 1321 . We will match the buyer/tenant or seller/landlord for you from our MLS [Multiple Listing Service] . Interested party do contact Mr Vulcan Lau, mobile no.: +6 016 451 1321 | #VulcanInternational | https://VulcanInternational.blogspot.com

Penang iProperty Talk | investPenang | MIDA | PDC | Factory And Warehouse With 3-Storey Office Building For Sale

Subject property is situated within an area designated for industrial purposes in Perai, Penang. Land Area: 1.5 acres (65,340 sq ft), GFA(Gross Floor Area): 64,740 sq ft

The subject property comprises the following buildings:
(a) 1 1/2 storey factory building, GFA(Gross Floor Area): 43,900 sq ft
(b) (i)Three storey office block, GFA(Gross Floor Area): 5,640 sq ft with
(b) (ii) annexed single storey warehouse, GFA(Gross Floor Area): 15,200 sq ft
(c) TNB Substation
(d) Other ancillary buildings

Picture below: (1)Warehouse Area, Ceiling Height ~ 30 ft. (2) Loading bay, (3) 3rd floor of the 3-Storey Office Building, (4) The Facade Of Office Building

investPenang: http://www.investpenang.gov.my/portal/
MIDA (Malaysian Investment Development Authority): http://www.mida.gov.my/env3/
PDC (Penang Development Corporation): http://www.pdc.gov.my/index.php/English/

Interested please call Vulcan Lau, mobile: +6 016 451 1321 for details.

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Penang iProperty Talk | Malaysia Property Price | As landowner how doyou protect your property from scam? | The stink of injustice

Case study 3: As investors we're wary about awry land deal and this is one of them. As landowner how do you protect your property from scam? You're welcome to write your constructive comment below.
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This is a heart-rending story, a story about an incessant quest for justice by three generations of a Thai family.

It all happened on Dec 12, 1956 when a Thai of Chinese origin, Sie Guan Tjang @ Sie Hang Bok, purchased two pieces of land for investment – Lots 3606 and 3607 of Mukim 18 at Tanjung Bungah, Penang (“the said lands”).

During his lifetime, Sie visited Penang very often with his Thai wife, Boonsom Boonyanit, also known as Sun Yok Eng. They loved Penang and her people so much that they had intended to build their retirement home on the land. On Jan 18, 1967, the two lots of land were transferred to Boonsom by way of a memorandum of transfer (“Form 14A”).

Under section 81(3) of the National Land Code (Penang and Malacca Titles) Act 1963 (Act 518), Form 14A was then treated more or less as proof of ownership over the said lands. Section 92 of Act 518 also provides that pending the issuance of a final title, an advance certificate of title (“ACT”) would be issued. Since Jan 18, 1967, Boonsom had been at all times in possession of the Form 14A apart from faithfully paying all the quit rents and assessments due on the said lands.

Some time in June 1989, Boonsom’s eldest son, Phiensak Sosothikul, chanced upon an advertisement in a Thai newspaper, Thairat, dated June 11, 1989, which was inserted by a law firm from Penang, Messrs Khor, Ong & Co (“KOC”). The advertisement requested that any person who had any right to the said lands or any heir to Boonsom residing at a house No. 87, Cantonment Road, Penang, Malaysia to contact KOC. The court was later told that when Boonsom’s accountant did contact KOC, the latter could not give any useful information.

Boonsom then engaged the law firm, Messrs Lim Kean Siew & Co (“LKSC”) to conduct investigations which revealed that the said lands had been fraudulently transferred by an impostor claiming to be Boonsom to Adorna Properties Sdn Bhd, then known as Calget Sdn Bhd (“Adorna”) on May 24, 1989.

Boonsom then sued for the return of the said lands. The Penang High Court ruled in favour of Adorna on April 28, 1995. On appeal, the Court of Appeal in its judgment dated March 17, 1997 reversed the High Court’s decision. Adorna then appealed, and the Federal Court comprising Eusoff Chin, Wan Adnan Ismail and Abu Mansor Ali allowed Adorna’s appeal in its judgment dated Dec 13, 2000 and pronounced in open court on Dec 22, 2000 (“Adorna Judgment”). Sadly, Boonsom had already passed away on May 23, 2000.

Boonsom’s second son, Kobchai Sosothikul, being the representative of her estate, soldiered on and filed two separate motions to the Federal Court for review of the Adorna Judgment.

In the first attempt, Kobchai argued that when the Adorna Judgment was delivered, Eusoff Chin had already retired on Dec 19, 2000. Steve Shim, Haidar bin Mohd Noor and Mokhtar Abdullah dismissed this application in its judgment dated Feb 26, 2001.

In the second attempt, the Federal Court comprising P.S. Gill, Rahmah Hussein and Richard Malanjun ruled on Aug 27, 2004 that the Adorna Judgment was not patently wrong to have resulted in grave injustice.

On March 15, 2005, Kobchai sued the Penang land office for negligence and breach of statutory duty. On Jan 10, 2011, Judicial Commissioner Vazeer Alam Mydin held that the Penang land office was indeed negligent and in breach of statutory duty, but unfortunately the action had to be dismissed because it was time-barred as it was filed 36 months late under the Public Authorities Protection Act 1948.

Interestingly, a strong five-member bench of the Federal Court had finally decided on Jan 21, 2010 in Tan Yin Hong v Tan Sian Sang to reverse the Adorna Judgment as the error committed in the Adorna Judgment was, in the words of the then Chief Justice, Tun Zaki Tun Azmi, “so obvious and blatant”. But it came too late for the Boonsoms.

In fact, my committee and I had also held discussion with two successive Ministers of Natural Resources and Environment, Datuk Seri Azmi bin Khalid and Datuk Douglas Uggah Embas, on July 24, 2007 and Nov 6, 2008 respectively and later with the Attorney-General, Tan Sri Abdul Gani Patail with the view of amending section 340 of the National Land Code, 1965 to legislatively reverse the Adorna Judgment. But it now appears that the decision in Tan Ying Hong has rendered the proposed amendments unnecessary.

Sadly, there is no way the Boonsoms can ever recover the said lands. On Oct 7, 2004, Adorna sold the said lands to Diamaward (M) Sdn Bhd, a subsidiary of Hunza Properties Berhad, for RM13,220,000. Today, what is on the said lands is the Infinity Beachfront Condominium. Strata titles have been issued to the individual parcel owners.

In fact, in his judgment, Vazeer made a very strong observation: “In the beginning, I alluded to the fact that this is the sequel to a sad saga, which is now part of the annals of the nation’s legal history. The helplessness of the plaintiff in the face of the fraud perpetrated leading to the loss of the said lands is very evident.

“The apparent negligence and breach of statutory duty by the defendant and the complete inaction of the police in bringing the forger and fraudster to book is very disturbing indeed. After all, the fraudster was represented by a firm of solicitors in Penang in the transfer of the said land to Adorna and there would have been sufficient leads for investigations.”

After reading all the judgments related to this case, I too was troubled by the following facts revealed in there:

Two police reports were lodged – on July 12, 1989 by lawyer Ooi Chooi Li from LKSC and on July 22, 2002 by Kobchai but there has not been a whisper from the police since 1989, especially its Commercial Crimes Department.

The impostor made the first statutory declaration on June 18, 1988 claiming that she, Sun Yok Eng @ Boonsom Boonyanit had lost the Form 14A. She made the second statutory declaration on April 6, 1989 claiming that Mrs Boonsoom Boonyanit (the impostor) and Sun Yok Eng @ Boonsom Boonyanit were the same person, even though with a different Thai passport number.

A day later, the impostor signed the memorandum of transfer (“MOT”) in favour of Adorna, not before her lawyer from KOC, but in the presence of Arifin bin Awang, then an Assistant District Land Administrator of Bukit Mertajam. Arifin (now a Datuk) is now the Director of Land and Mines of Penang but he was never called as a witness in any court proceeding. The MOT also revealed when the said lands were transferred to Adorna, final title for Lot 3606 held under Grant (First Grade) Registration No. 28476 had also been issued. All this took place in just a matter of months! In fact, Vazeer held in his judgment that by not calling Arifin to testify in court, an adverse inference could be drawn under section 114(g) of the Evidence Act 1950.

According to Lim Chan Hwa of CA Lim & GE Tan Sdn Bhd, valuers and estate agents, he was first asked by one Fong Wa Tan, a director of Adorna, to do a valuation of the said lands some time in July 1988. (But Fong testified that he was first approached by Lim in late October 1988 regarding the said lands.) Lim also testified in court that he was also first asked by one Victor Joseph Dass of Messrs Victor Real Estate Agency to look for a purchaser for the said lands. The sale option by the impostor was dated Nov 13, 1988 and this was given to Lim’s company through KOC under cover of their latter dated Nov 11, 1988. In this letter, it also referred to two ACTs.

This means ACTs for the said lands had even been issued before the sale and purchase agreement was signed on Dec 15, 1988 (SPA). In the SPA, the impostor was represented by KOC. The impostor put her address in the SPA as under the care of one Saifi bin Daud of No. 8, Taman Fauziah, Jalan Satu, 01000 Kangar, Perlis. Her signature was attested by lawyer Khor Kheng Loon from KOC. But Victor and Khor were not called as witnesses in any court proceeding.

According to Cheong Wai Meng, lawyer who acted for Adorna in the sale and purchase, the purchase price of RM1,865,798 was fully paid to KOC on April 17, 1989. The advertisement in the Thai newspaper was dated on June 11, 1989. The first police report was made on July 12, 1989. As Khor was not called as a witness in court, no evidence was proffered as to who eventually received the purchase price from Khor and when was this done and through what means.

It follows that the police have a lot of explanation to do for being more than tardy in investigating the most infamous land forgery case in Malaysia.

On the part of the Penang state government, I was rather surprised that it had sought to raise the defence of limitation of time to avoid liability, especially when Lim Kit Siang himself has for many years described this case as “gross injustice”. Legally, the Penang government may be right to have done so, but morally it is hoped that the Penang government will now at least tender an apology to the Boonsoms even though the event took place under the previous administration.

I can only conclude that this is one injustice that stinks to high heavens! Unless this stink is removed, it will indelibly remain a huge dent on foreign investors’ confidence in our land offices, police investigations and the administration of justice.

> The writer is a former chairman of the Conveyancing Practice Committee of the Malaysian Bar Council.

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