MARCH 28 — DAP-led Penang state government risks cancelling out all its goodwill with the current Bayan Mutiara land deal. The state government has been giving out several social grants ranging from RM100 for those who are above 60-year old to RM1000 for those who are facing bereavement in their family. However, such tokenism will not help to alleviate escalating property prices and cost of living on the Penang island.
DAP has made several key policy decisions which do not appear to include the socio-economic considerations of lower middle income group in Penang. One of its most controversial decisions is the sale of Bayan Mutiara land to a private developer for the development of a mega project, Penang World City (PWC).
In my last article, I had highlighted several concerns over the sale:
Most private property projects on the island are focused primarily on premium and luxury property which have driven up prices beyond the reach of most Penangites. There is worry that the sale of the state-owned Bayan Mutiara land to a private developer may end up in a similar fate.
What was the rationale to allow a five-year payment period to the purchaser? It gives an impression that the purchaser may not have secured financing for the purchase.
Did the transacted price factor in any interest charges or projected land price appreciation over the next five years?
Is there any restriction or precondition between the state government and the purchaser to discourage any sub-sales? If the purchaser were to divide and resell some parcels of the land to other developers at a higher premium, it may further drive up property prices on the island. If such sales were allowed, is the state government entitled to a share of the higher premium?
Bayan Mutiara is no longer about selling above the current market value but the use of scarce prime land on the island for the purpose of socio-economic transformation. Ownership of prime land is very crucial for the state government to drive the state’s economy.
We do not want a repeat of high premium-reclaimed lands being sold to private developers who in turn inflate property prices in Penang and raked in billions in profit at the expense of the people.
It is most unfortunate that some of my concerns have turned out to be true. I have send out messages to a few DAP leaders including CM Lim Guan Eng but received a standard reply from the latter that the state government had to sell the Bayan Mutiara land to fund the low cost housing scheme in Batu Kawan. If it is about funds, the state government could have set up joint ventures with private developers to jointly develop the area which could have easily help the state government to raise more than RM1.07 billion from the deal. Oddly, the state government does not appear desperate to fund the low cost housing by offering a generous payment period of 5-year to Ivory for the land purchase.
Tropicana Ivory Sdn Bhd’s (TISB) announcement on PWC has confirmed some of my worse fear and created a few more questions over the project and the state government’s decision to sell the last remaining piece of prime land to a private developer.
I am not sure if DAP-led state government is taking an easy way by ‘outsourcing’ the drafting of Penang World City (PWC) master plan to a private developer or it is facing a relapse in policy making. I was told that the project will be strictly monitored by the local authority to ensure that it does not marginalise Penangites. However, the recent announcement by TISB does not appear to me that the state government is fully in control.
First, the state government is not only selling the 41 ha prime land to Ivory but appears to be ‘financing’ the development of PWC too through the generous 5-year payment period for the purchase. To date, about RM22mil or 2 per cent had been paid as earnest deposit for the land. The remaining down payment of RM80mil will have to be paid on or before April 10. The state government has not made public any schedule of payment by Ivory.
Moreover, Ivory’s Group chairman Low Eng Hock announced the first phase, to be located on a 10-acre site and scheduled for launch in the third quarter of 2012, will have a gross development value (GDV) of around RM600mil to RM700mil. Revenue collected from the first phase would have allowed Ivory and its partner, Dijaya Corporation, to make subsequent payments. More phases are expected to be launched between 2012 and 2013. Hence, there is little need for Ivory to seek for outside funding to help the purchase. The biggest financier appears to be the state government and the people of Penang. TISB initial capital outlay is a mere RM102 million for a land worth RM1.07 billion.
If the state government is a willing financier, it should have made this point clear to us, the stakeholders, at the beginning instead of keeping mum on the rationale to provide such generous payment period to Ivory. The question is, would TISB be willing to offer a similar 5-year payment period to all Penangites who buy properties at PWC? Will the state government be willing to give similar payment term to other land transactions in Penang?
Second, where’s the provision of affordable housing within PWC? According to TISB, about 15 per cent of the properties for the 800 to 1,000 high-rise units for the first phase will be priced between RM300,000 and RM500,000, depending on the built-up area which ranged between 600 sq ft and 800 sq ft. Subsequent phases for PWC will also see 15 per cent of the properties priced in the affordable range of between RM300,000 and RM500,000.
Under the revised guidelines of 2010, developers have to allocate 5 per cent of the total units in a development scheme to be priced at RM200,000 (which was not included by TISB for the first phase), Low said the group might consider using the plot ratio guidelines introduced in 2010 for the island to build medium-priced properties. Hence, who is really calling the shot on compliance, the developer or the state government?
Is this definition of ‘affordable’ also shared by the state government which has promised to monitor the development of PWC to ensure it is a balanced and inclusive project for the people of Penang?
The state government should take the matter of providing affordable housing at key economic hubs/districts seriously. If PWC is going to become the next key economic hub, does the state government expect local workers to travel all the way from Batu Kawan to work here since the state government has claimed that the provision of public transport system is something beyond its purview and jurisdiction? Sadly, the state government’s solution for congestion and public mobility focuses only on those who own private vehicles.
Third, the initial revelation of the PWC master plan appears to be less than appealing or beneficial for Penang’s socio-economic transformation. TISB’s contradiction is clear when it says it wants huge number of Penangites to live in PWC but at the same time it is pricing properties in PWC way beyond the means of average Penangites. Moreover, it wants to create Chinese, Korean, Middle Eastern and European villages or residential enclaves in PWC, so that the properties can be marketed and sold en-bloc in that particular country through an appointed real estate agent.
It will attract tourism, according to TISB. We should thank the developer and the state government for bringing China, Korea, Middle East (hopefully not Afghanistan but Doha or Dubai) and Europe to Penang. Penangites should contribute to the largest number of tourists visiting PWC. It helps to reduce outflow of tourism money to these countries too since we can enjoy a foreign experience of our choice by visiting PWC and still make it back home in time for our next episode of sitcom on Astro.
Finally, it is odd to note that Ivory, the successful bidder, is now left being a minority shareholder in TISB. TISB is a joint-venture company in which Dijaya Corporation Bhd holds a 55 per cent stake, while Ivory Properties Group Bhd the remaining 45 per cent. In the agreement with Dijaya Corporation Bhd, Ivory is the turnkey builder for PWC and will thus be entitled to 48 per cent of the project’s gross revenue with the amount due to the company estimated at RM5billion.
The deal is getting more complicated by the day. From a successful bid and a 70 per cent stake in the joint venture, Ivory is now a minority shareholder of a SPV and a turnkey contractor for a backdoor controlling shareholder of PWC which be built on the Bayan Mutiara prime land. Did the state government see this coming or it is a willing player all along?
Like I have said earlier, DAP’s reluctance or failure to provide a thorough, transparent, accountable and justifiable explanation on the Bayan Mutiara deal is going to offset and cancel out the goodwill it has done thus far.
* Khoo Kay Peng reads The Malaysian Insider.
* This is the personal opinion of the writer or publication. The Malaysian Insider does not endorse the view unless specified.