RM46mil allocated to four restoration projects in Penang

By DAVID TAN davidtan@thestar.com.my

http://biz.thestar.com.my/news/story.asp?file=/2012/11/3/business/12262216&sec=business



The restored Macalister Mansion has 8 hotel rooms, two restaurants and two bars

SINCE George Town received Unesco World Heritage Site (WHS) status in 2008, over RM46.3mil has been allocated to restoration work in four major heritage projects.

The most well-known of these heritage properties restored are the Choong Lye Hock mansion and the Loke Thye Kee building.

The other two restoration projects are by Asian Global Business (AGB) and Public Packages Holdings Bhd involving commercial offices and warehouses built in the early 20th century at Weld Quay and Church Street Ghaut.

The AGB Group is restoring two early 20th century commercial and warehouse properties to be an integrated RM220mil Rice Miller Hotel and Residences, which is an in-fill development project.

An in-fill development involves constructing a project from scratch.

The cost of restoring a heritage project depends on the quality of finishing used and normally ranges between RM300 and RM400 per sq ft.

Sometimes a company spends more for restoration because of the condition and age of the property.

A prime heritage property in George Town can fetch rental of between RM5 and RM10 per sq ft, which means that a 2,000 sq ft heritage property strategically located can generate a rental of RM10,000 to RM20,000 a month, according to Henry Butcher Malaysia (Penang) vice-president Shawn Ong.

The Choong Lye Hock mansion restoration project, located on 48,943 sq ft at Macalister Road, was undertaken by local businessman Datuk Sean H'ng and his wife Datin Karen H'ng.

The Choong Lye Hock mansion belonged to a tycoon and philanthropist, who bought the property in the late-1890s.

Lye Hock is the father of local millionaire Ch'ng Eng Hye and the grandfather of badminton legend Datuk Eddy Choong.

The restored building, now known as Macalister Mansion (MM), has eight hotel rooms, two restaurants called The Dining Room and The Living Room, and two bars called the Bagan Bar and The Den.

Macalister Mansion opened its doors to the public in April 2012.

According to MM public relations director Josephine Leong, the planning and the restoration work for the 17,286 sq ft mansion took about 20 months.

“This is corporate responsibility initiative project to demonstrate that old colonial buildings can be regenerated into useful and practical spaces with a contemporary feel.

“Some eight months were spent on planning the design with a Singapore-based interior design company, Ministry of Design (MOD) to produce stunning interior designs.

“It took us 12 months to restore and reinforce the original columns, staircases and archways, original brick walls and wall cornices.

Leong says the Macalister Mansion project was more about a labour of love.

“The owners want to raise the bar in the boutique hotel scene in Penang. As global travellers, they would like to bring back that differentiated hotel experience where guests get to enjoy a more personalised and intimate level of service within luxurious surroundings,” Leong adds.

Raine & Horne Malaysia director Michael Geh says about RM2mil or about RM630 per sq ft was spent on restoring Loke Thye Kee, known as the oldest restaurant in Penang, at Burmah Road.

According to Geh, a local investment company, Loke Thye Kee.com, set up by Singaporean investors, bought the double-storey property from a local businessman some about six years ago.

“About two years, which included also the time to obtain the green light from the local authorities for renovation, was spent on restoring the building with approximately 3,200sq ft of built-up area.

“It has been leased to a local company called Food People Sdn Bhd, which plans to set up soon a Hainanese restaurant, and food and beverage outlets,” he says.

Known as the House of Happiness in Hainanese, the Loke Thye Kee restaurant was established by brothers Loy Kok Boon and Loy Kok Dai, who leased the building from local businessman and philanthropist Khoo Sian Ewe.

Loke Thye Kee serves traditional Hainanese and Western cuisine such as curry kapitan, choon piah, and chicken chop.

AGB Group spent RM21.5mil or RM860 per sq ft to restore two heritage commercial and warehouse properties built in the early 20th century at Weld Quay.

AGB chief executive officer Dr Noraini Abdullah says the restoration turned out to be costly because a lot of work had to be done for strengthening the physical buildings, as their conditions were bad.

“About RM16mil was spent for restoring and reinforcing the physical infrastructure of the warehouse building, which serves as the event hall of the Rice Miller Hotel.

“Another RM5.5mil was spent in restoring a 5,000 sq ft colonial commercial building that will serve as the restaurant for the Rice Miller Hotel,” she adds.

The Rice Miller Hotel and Residences project is scheduled for completion next August and scheduled for opening in Dec 2013.

It will comprise 48 hotel suites, 99 city residences, which range between 800 and 2,500 sq ft in built-up, 23 retail lots of 600 sq ft, and two blocks of five-storey office buildings.

“In the past 12 months, we have sold 50% of the retail lots and city residences. Most of the buyers comprise Penangites and investors from Ipoh and Kuala Lumpur,” she adds.

Next to the Rice Miller Hotel and Residences project, Public Packages Holdings Bhd (PPHB) is restoring two heritage double-storey commercial properties with over 39,632 sq ft to be integrated into a RM50mil in-fill heritage hotel cum commercial project located at Church Street Ghaut, off Beach Street, which is popularly known as the central banking district.

PPHB hotel project manager Tony Koay says the group would spend RM15.8mil or RM400 per sq ft to restore the two heritage properties with fittings.

“One of the heritage commercial building with 11,000sq ft will be restored as part of the in-fill heritage hotel.

“The other heritage property with 28,632sq ft will be restored for commercial and office usage,” he says.

Koay says the advantage of carrying out infill development work for the heritage hotel project was that one could maximise the interior of the buildings to suit the needs of modern business usage.

The cost per sq ft to develop a heritage hotel from scratch with furnishings is about RM1,000 per sq ft, says Koay.

“A problem with restoring a heritage building for hotel usage is that the interior of such heritage buildings restricts the utilisation of space,” he says.

Koay adds that the in-fill heritage hotel would have over 150,000 sq ft of built-up area, 150 rooms, a business centre, meeting rooms, two-level of basement car-park, and retail shops on the ground floor.

“The architectural style for the hotel follows the design of late 19th and early 20th century port offices and warehouse buildings in George Town.

“We are targeting the upmarket tourists,” Koay says.

Higher prices with heritage status

By DAVID TAN davidtan@thestar.com.my

http://biz.thestar.com.my/news/story.asp?file=/2012/11/3/business/12262229&sec=business



The Coffee Atelier, comprising 5 prewar buildings at Stewart Lane.

HERITAGE properties in Penang are now selling for RM600-RM1,200 per sq ft, depending on the historical and architectural characteristics of the property, the size and location.

Henry Butcher Malaysia (Penang) vice-president Shawn Ong says that prior to George Town's listing as a Unesco World Heritage Site (WHS) in 2008, the properties were selling from between RM300 and RM600 per sq ft.

“In view of the limited units of pre-war properties available in Penang, pre-war buildings with unique characteristics are generally attracting a lot of buying interest.

“Therefore, it is quite common for pre-war buildings available for sale being snapped up by investors, pushing up the selling price.

“The majority of buyers are Malaysians contrary to perception that more foreigners than Malaysians buy pre-war properties.

“A notable recent transaction is the sale of 30 units of pre-war shophouses in Nagore Road, George Town to investors,” he says.

According to Ong, the rentals of pre-war buildings of larger size in George Town's prime zones generally fetch RM10,000 to RM20,000 per month, compared to between RM5,000 and RM8,000 before George Town's Unesco WHS status.

“Locations such as Armenian Street, Stewart Lane, Chulia Street, Love Lane, and Muntri Street, due to their proximity to Little India and Khoo Kongsi, are among the most sought-after areas for heritage properties in George Town,” Ong adds.

The selling price of heritage properties in Penang has risen by about 10% this year compared with 2011, according to Ong.

According to Henry Butcher's Penang Real Estate Market Report, the total number of pre-war buildings within the conservation area of George Town Unesco WHS is 4,665, with 2,344 units at the core zone and 2,321 units at the buffer zone.

The core zone covers 109.4 ha bounded by the Straits of Malacca on the north-eastern tip of the island, Love Lane to the north-west, and Malay Street Ghaut and Dr Lim Chwee Leong Road to the south-west corner.

The core zone is protected by a 150-ha buffer zone bounded by Dr Lim Chwee Leong Road to the south-west and Transfer Road to the north-west.

According to PPC International Sdn Bhd director Mark Saw, the number of heritage property transactions for Penang in 2011 was 228, compared with 211 in 2010.

“Most of these properties were for double-storey pre-war houses in the north-east district of the island.

“Those with the foresight to invest in heritage properties before George Town received the WHS status would see the value of their properties increased substantially today.

“In the market presently, there are large-size heritage properties in inner George Town selling for more than RM10mil,” he says.

One such heritage building in inner George Town with a built-up and land area of 10,000 sq ft and 5,762 sq ft respectively is the No. 25 China Street, a double-storey property built in 1846 by Kapitan Chung Keng Kwee.

Malaysian-born David Wilkinson, who owns the property, says he bought the property in 2005 and spent over RM2mil to restore the building, which took about two years.

“It is the largest property on China Street as the building is equivalent to three shophouses. The property is being used as a private residence, but has the potential for commercial usage as a special heritage museum,” he says.

Another sizable heritage property in inner George Town that has seen its value rise substantially since 2008 is the row of five pre-war houses on Stewart Lane now collectively known as Coffee Atelier, comprising a coffee house cum restaurant, museum, art gallery and four hotel rooms owned by Stefan Gehrig and his wife Lorina.

Stefan says he purchased the five properties, which had a total built-up area of 8,160 sq ft and land area of 4,800 sq ft, for RM3.5mil in 2010.

He adds that he had recently received an offer of RM6mil for the properties.

“The five unique heritage properties were built in 1927 and were called shophouses because the original inhabitants carried out their trades on the ground floor, and lived with their families on the upper floors.

“One of these shophouses was once a coffee merchant's workshop in 1988.

“The name Coffee Atelier' derives from this element of the building's history and celebrates the memory of this artisanal trade from a bygone era,” he says.

Reducing tax on your rental income

Dr Tan Thai Soon @ 19 October 2012 for RED – News Straits Times

http://www.nst.com.my/red/reducing-tax-on-your-rental-income-1.158775

TAX MATTERS: It pays to know what are deductible so as to reduce your taxes on rental income

Classification: This article covers the latest developments on tax treatment for rental income from real property under the Public Ruling No. 4/2011, effective for the year of assessment 2011. In particular, we will focus on the classification of rental income as business source or non-business source, the grouping of business source and non-business source when computing the statutory income, the commencement date of letting of real property, and allowable and non-allowable expenses.

A. Advantages of rent as a business source

The advantages of treating the rent as a business source are as follows:

• It can claim capital allowance.

• Business source losses can be carried forward to the next period.

• Current year business source losses can be utilised to set off all sources of income.

To treat rent as a business source, section 4(a) of Income Tax Act 1967 (ITA) requires the tax person to provide “maintenance services or support services” in relation to the real property.

Maintenance or support services: Where, in conjunction with the letting of a property, a person also provides “maintenance services or support services”, the letting of the property can be considered a business source of income under section 4(a) of ITA. The maintenance or support services should be “comprehensively” and “actively” provided.

‘Comprehensively provided’: Maintenance services or support services comprehensively provided means services which include:

(a) doing generally all things necessary (e.g. cleaning services or repairs) for the maintenance and management of the real property such as the structural elements of the building, stairways, fire escapes, entrances and exists, lobbies, corridors, lifts/escalators, compounds, drains, water tanks, sewers, pipes, wires, cables or other fixtures and fittings; and

(b) doing generally all things necessary for the maintenance and management of the exterior parts of the real property such as playing fields, recreational areas, driveways, car parks, open spaces, landscape areas, walls and fences, exterior lighting or other external fixtures and fittings.

However, if a person only provides security services or other facilities, it should not be considered as providing maintenance services or support services comprehensively.

Services ‘actively provided’: Services actively provided means the person who owns or lets out the real property:

(a) provides them himself; or

(b) hires another person or another firm to provide the maintenance services or support services.

Maintenance services or support services: The following examples in Table 1 show where the letting of property is treated as a business source: See Table 1



Table 1



Rent as a non-business source: If a person lets out the real property without providing maintenance or support services comprehensively and actively, the rental income is regarded as a non-business source of income and is charged to income tax under section 4(d) of ITA.

Passive maintenance or support services: If a person lets out the real property and the maintenance or support services are passively derived from the ownership of the real property, the rental income is treated as non-business income under s4(d) of ITA.

Table 2 shows examples where the letting of property is treated as non-business source: See Table 2



Table 2



B. Letting of property to related parties

Letting of property between related parties can be considered as a business source as long as maintenance services or support services are comprehensively and actively provided. The rental charged must be at arm’s length. However, if the rental charged to the related parties is not at arm’s length basis, the Inland Revenue Board would adjust the rental payment accordingly.

Meaning of related parties and related company: The related parties include individuals or companies; meaning one of the parties is in a position to influence or control the other party. Related company means where one company holds not less than 20 per cent of the ordinary shares or preference shares of the other.

C. Commencement date of letting of real property for the first time

The commencement date the real property is rented out for the first time, where the source is treated under s 4(d) of the ITA is “the date of letting”. However, the commencement date of letting of real property where the source is treated under s 4(a) of the ITA is on the date “the real property is made available for letting”, that is, when the real property is ready to be occupied by tenants. Expenses incurred before the commencement date are not allowable, therefore considered as pre-commencement expenses.

D. All real properties grouped as a single source

If a person lets out several real properties in a YA (Year of Assessment) and the letting of real properties can be grouped as one source:

(a) all real properties is a business source, all the real properties can be grouped as one business source under s 4(a) of the ITA (see Example 1);

(b) all real properties is a non-business source, all the real properties can be grouped as one non-business source under s 4(d) of the ITA (see Example 2); and

(c) some of the real properties is a business source and some is a non-business source, income from both sources shall be assessed separately under s 4(a) and (d) respectively (see Example 3).

E. Expense relating to income of letting real property

Expense ‘wholly and exclusively incurred’: An expense wholly and exclusively incurred in the production of income under section 33(1) of ITA and which does not fall under section 39(1) of the ITA is allowed as a deduction from income of business of letting of real property charged under s 4(a) of the ITA.

Deduction of direct expenses from income under s 4(d): Expense which is allowed a deduction from income under s 4(d) is direct expense that is wholly and exclusively incurred in the production of income under s 33(1) of the ITA.

Examples of direct expenses:

a) Assessment and quit rent paid to the local authority and land office respectively;

b) Interest on loan taken to finance the purchase of real property which is rented out;

c) Fire insurance premium paid in relation to the real property which is rented out;

d) Expense on rent collection fee and legal expense incurred to enforce rent collection

e) Expenses on rent renewal incurred on tenancy agreement or to change tenant; and

f) Expense on ordinary repair to maintain the real property in its existing state.

Initial or pre-commencement expenses to obtain first tenant: Initial expense is not allowed as a deduction from rental income assessed under s 4(a) or (d) of the ITA, as the expense is incurred to create a source of rental income and not incurred in the production of rental income. An example of such expenses is the cost to obtain the first tenant such as advertising cost.

Expenses during a period the real property is not rented out: Generally, expenses incurred in relation to a real property during a period it is not rented out are not allowable as a deduction. However, if the period the real property is not rented out occurs after it has been let out and it is clear that it is ready to be let out, then expenses during that period are allowable.

Letting ceases temporarily: If the letting ceases temporarily due to the following circumstances:

a) repair or renovation of the building;

b) absence of tenants for a period of 2 years ( 24-month period) after termination of tenancy;

c) legal injunction or other official sanction; or

d) other circumstances beyond the control of the person who lets out the real property,

then expenses for the period the real property is not let out are allowable provided that the real property is maintained in good condition and is ready to be let out.

Replacement cost of furnishings for non-business source: If the letting of real property is a non-business source, the replacement cost of furnishings, such as furniture and air conditioner can be claimed as deduction from gross income from letting.

Rental income received in advance: Rental received in advance is treated as gross income for the basis period in which it is received, any expense incurred in relation to that rental income after that basis period is allowable in the basis period in which the income is assessed. Therefore amendment has to be made to the assessment for the YA concerned.

Where there is more than one real property and rental from one or more properties is received in advance, expenses related to that source is deductible from other rental income in the basis period in which the expenses are incurred.

Capital allowances for rental under business source: If the letting of property is treated as a business source, capital allowances can be claimed on expenditure incurred on plant and machinery. The provisions in Schedule 3 of the ITA shall apply.

If the letting of property ceases temporarily, capital allowances can still be claimed provided the real property is maintained in good condition and is made available for letting

Dr Tan Thai Soon is the managing director of TST Consulting Group and can be contacted at tanthaisoon@tst.com.my and www.tst.com.my

Read more: Reducing tax on your rental income - RED - New Straits Times http://www.nst.com.my/red/reducing-tax-on-your-rental-income-1.158775#ixzz2BE1pI3Rl

Buyers turn to Kajang as KL home prices rise

By THEAN LEE CHENG

http://biz.thestar.com.my/news/story.asp?file=/2012/10/27/business/12185858&sec=business

THE past couple of years, in tandem with the rise in property prices in major towns and cities in the country, Kajang's property market has generated quite a bit of interest among both developers and house buyers.

Located about 20km from the city of Kuala Lumpur, Kajang is benefiting from its second-tier location status as Kuala Lumpur and Petaling Jaya prices move beyond the affordability of ordinary salaried workers.

Two property negotiators based in the area say much of the interest of late is due to improved accessibility with the various highways that have been completed, and not so much because of the soon-to-materialise MyRapid Transit system (MRT).

Says one of them who declined to be named: “The spike in prices in Cheras properties has resulted in people from Cheras buying into Kajang as housing is cheaper over there. Unless it is very old and run-down, it is not possible to buy into Cheras with RM500,000 and below,” she says.

The other factor is schooling. Yu Hua Kajang, which offers both Chinese primary and secondary schooling, will only consider applications from a Kajang address, she says.

“Saujana Impian and Prima Saujana, by virtue of their proximity to Cheras, enjoy good demand, with Saujana Impian having more tenants than owner occupiers.”

She adds that projects in that vicinity by the Naza TTDI group have received good response from buyers and investors. As for Kajang-based developers MKH and private developer TLS Group, she says the Kajang and Cheras population are familiar with both.

She says the issue is not so much a lack of housing, but the scarcity of bread-and-butter double-storey housing.

“Developers, in their search of higher profits, are building three-storeys housing, semi-detached and bungalows in Kajang. What people really want are double-storey terraced housing,” she says.

Because of the challenges in getting land in and around Kuala Lumpur, developers are also scouring other towns and Kajang seems to be within their radar.

Three developers who have bought land in or close to Kajang include Mah Sing Group Bhd, SP Setia Bhd and the Dijaya Corp Bhd. The Sunway group has moved into that location several years earlier. These newcomers will be competing with developers who have built a strong following over the years.

Says MKH group managing director Datuk Eddy Chen Lok Loi: “We have no trouble competing with anybody. We are doing everything that other developers are doing.”

Chen says that at the marketing level, the mid-sized developer, formerly known as Metro Kajang Holdings Bhd, has a strong reputation there, having built 30,000 units ranging from residential to commercial properties over the years.

Financially, having accumulated land at between RM8 and RM9 per sq ft would put it at a great advantage compared to newcomers who have paid considerably more. In areas like Semenyih, some of its land bank was acquired at less than RM5 per sq ft.

“I believe MKH is about to make a huge leap forward. Our strategic land bank, which we bought at a very good price when compared with newer players, and the emergence of MRT will give us a strong advantage over our competitors.”

The third factor is the RM135mil turnkey project comprising about 550 acres in Puncak Alam, Selangor, with Puncak Alam Resources Sdn Bhd, he adds.

Over the next seven years, MKH plans to build projects with an estimated gross development value (GDV) of more than RM5bil.

As a result of the Sg Buloh-Kajang MyRapid Transit line, MKH is tweaking its plans for some of its commercial projects. The 51km Sg Buloh-Kajang line will have two stations in Kajang. One of them will be sited at the town centre, about 500 metres from the police station, which is next to MKH City.

The second MRT station will be located along Jalan Reko at the Sekolah Menengah Kebangsaan Jalan Bukit.

MRT will provide additional public rail transport to the current Keretapi Tanah Melayu (KTM) line. There is also a proposal to have a KTM station next to Kajang 2, another MKH project.

Improved rail transport, says Chen, will benefit the company's new developments like MKH City, MKH Boulevard and Kajang 2. It will also give a boost to its older projects Plaza Metro Kajang and Metro Point.

Chen says the value of Plaza Metro Kajang will be enhanced considerably as the station will be about 400 metres from it. The company is also considering building a walkway to connect to it.

“We had wanted to built a small complex on one of the new sites with a gross area of about one million sq ft. With the MRT line entering Kajang town, we are now considering doubling that to two million sq ft because the MRT line will take care of parking issues,” says Chen.

The line will pass close to MKH's new and existing properties MKH City, MKH Boulevard and Kajang 2.

Chen says the company has between 500 and 600 acres of land, with the bulk of them in Kajang and Semenyih, excluding its 550-acre turnkey development in Puncak Alam, Selangor. Semenyih is about 10km from Kajang.

Besides its base in Kajang, MKH also has projects in Petaling Jaya, Old Klang Road and Kuala Lumpur.

On affordable housing, the current buzzword in the property industry, Chen says its projects in Semenyih are priced at between RM300,000 and RM400,000, which is today categorised as affordable. Kajang double-storey housing, by comparison, are now priced about RM500,000.

MKH's nine-month earnings for financial year 2012 has risen 124% year-on-year to RM47mil, driven mainly by successful key projects in Kajang, Semenyih and Bangsar. A HwangDBS Research report says the three locations collectively achieved a commendable 77% take-up rate.

Land – the bread and butter of housing developers

HOUSING INVESTMENTS
By THEAN LEE CHENG

http://biz.thestar.com.my/news/story.asp?file=/2012/10/27/business/12234097&sec=business

INCREASINGLY, the number of new developments being advertised and marketed of late are located further away from Kuala Lumpur closer to Rawang, Cyberjaya and Putrajaya with the projects undertaken by some of the larger Bursa-listed property developers.

The trend of such developers moving into periphereal locations started a couple of years ago due to the scarcity of large pieces of land between 50 acres and 100 acres close to or in the city which explains why there is so much interest in the Sg Buloh Rubber Research Institute of Malaysia (RRIM) land.

If the core business of a company is property development, then land is virtually gold to them. Without land, they will not be able to develop anything which means no sales and no revenue. This is why, every year, developers have to launch new projects.

The replenishing of land bank has be to be done consistently and constantly, unless they already have a large land bank. This objective to have steady revenue year after year can be a challenge when there is a property downturn, which also explains why it is extremely important to avoid a property bubble.

In the last several years, developers have had multiple launches in order to cater to demand. The need to show a consistent stream of income may explain why some of our larger developers are also involved in the plantation sector. Plantation land can be converted into property development if and when the need arises.

Besides the availability of land, the next important issue is land price.

Some of the larger players which have purchased land in the Kajang, Semenyih and Bangi areas over the last couple of years include S P Setia Bhd, Mah Sing group and Dijaya Corp Bhd.

Last year, S P Setia bought 272.5ha, or 672 acres, of freehold land in Semenyih for RM381.26mil or about RM13 per sq ft.

A couple of years ago, Dijaya bought the 200-acre Kajang Hill Golf Club for RM228mil or about RM26 per sq ft. The price a developer pays for his land is important because at the end of the day, this will be reflected in his selling price.

Mah Sing Group Bhd is the other new player in the Bangi area. In May, it bought about 400 acres in Bangi for RM333.25mil or about RM18.50 per sq ft.

When a developer buys land that is not slated for property development, there is conversion cost. For example, if a piece of agricultural land is bought for RM10 per sq ft, it has to be converted into land for development. The land office will consider the price of other development land in the area. If the market price is RM20 per sq ft, there is a difference of RM10. The developer will be charged a premium of 25% of RM10 which is his conversion cost.

That means, in order to change the land status from agriculture to development land, he will have to pay an extra 25% multiplied by his land size. There are various factors that determine the cost of conversion.

The price Mah Sing is paying is benchmarked against rival developers. In this case, S P Setia's RM13 per sq ft versus the current land price of between RM25 and RM28 per sq ft in Kajang, according to RHB in May. This takes us back to the 2,330-acre RRIM land, which was sold to the Employees Provident Fund for RM2.28bil, or RM22.46 per sq ft. This is unconverted agricultural land compared to S P Setia's and Mah Sing's land in Semenyih and Bangi respectively

A developer who wants to build on the RRIM land will have to first convert it to development land. There is a different price range for commercial and residential land, with commercial land being more valuable.
Apparently, Mont'Kiara land is already between RM600 and RM700 per sq ft, and the Tropicana land is RM200 to RM300 per sq ft.

Because some parts of RRIM land is next to Tropicana, when the land was parcelled out, the price may be rather prohibitive to smaller and less capitalised property developers.

Considering that large-scale developers have been land-hungry and have been buying into places in Semenyih, Kajang and Bangi, and the RRIM land being far more strategic, it is hoped that the Government, by virtue of the fact its cost of funds is cheap, will parcel a considerable portion of it for affordable housing.

The Government could also help by releasing other land under its plan to provide affordable housing for the people but as it stands today, it may, in all likelihood, also be further away from the city with places like Kajang, Semenyih and Nilai mentioned, among others.

Deputy news editor Lee Cheng is of the view that housing issue can become a social problem if not dealt with expediently.

Are you ready to follow Robert Kiyosaki’s advice?

Money & You by Yap Ming Hui | September 1, 2012

http://biz.thestar.com.my/news/story.asp?file=/2012/9/1/business/11927075&sec=business

I am thrilled that my last article, What Robert Kiyosaki Didn't Tell You, garnered positive feedback. It shows that many people are thinking about the impact Kiyosaki's work can have on their finances. As such, I would like to continue the discussion about investors taking on and managing risks (or investors being unable to manage such risks).

Kiyosaki is right to say that we must take an active interest in how we manage our wealth and assets. Rising inflation and the high costs of living are proof that we can no longer afford to be lackadaisical with our personal finances.

That said, in a book he co-authored with Donald Trump, Why We Want You to Be Rich: Two Men, One Message, Kiyosaki said this: “If you do not decide to become rich, the chances are you will become poor.” I feel that this is simply untrue: I don't think that if you decide not to become rich, you'll be poor.

The problem is that Kiyosaki's statement evokes fear in many people, especially the middle class. Petrified that they are going to be poor, many take a leap of faith by either investing aggressively in property or starting their own business. Many people do this in the belief that they are conforming to another of Kiyosaki's fundamental points and that is to take on a good debt.

According to Kiyosaki, there are two types of debts: bad debts and good debts. Bad debts are those taken to finance your lifestyle and enjoyment. Good debts are ones taken to fund your investments that will grow your wealth. Naturally, Kiyosaki advocates you taking on more good debts. However, remember that when you take on good debts, you are also exposing yourself to financial risks. In addition, there's no such thing as good risk or bad risk. So, when you take on good debts, how much risk are you being exposed to? Also, are you ready to manage such risks?

It is the failure to consider these questions that have led people to follow Kiyosaki's advice with disastrous consequences. Those who invest in properties are usually excited by the high possibility of becoming wealthy. However, those who fail are often the ones who rush to take out loans from banks without giving their actions careful thought. Unable to rent or sell these properties, many can't service their loans and suffer financially. In some cases, their suffering includes their mental and physical health.

I personally benefitted from Kiyosaki's advice as it gave me the assurance and encouragement to start my own business more than 10 years ago. I thought it would be smooth sailing all the way and business would pour in. After all, I had created a workable business plan, saved enough money and believed that people wanted to know the services offered by independent financial advisors. In no time, I realised that starting and managing a business wasn't going to be easy, especially when independent financial advisory services were relatively new and unknown. However, I was lucky because I had the necessary support, knowledge and experience to manage my business risks by virtue of being involved in a business that emphasises risk management. I was able to avoid some of the traps that people fall into when they don't manage their risks properly.

Let me give you a real-life example: a 28-year-old engineer is frustrated in his job. He sees his bosses driving fancy cars and going on annual holidays to exotic places and wonders if he'll ever be in the same financial position. He decides that the only way to become rich is to become his own boss. So, he quits his job and opens a restaurant. Only, he has not prepared a written business plan, has little capital, no idea how to manage cash flow or his staff and knows nothing about the food and beverage industry. After three years, he is still struggling and now borrows money from relatives and friends to keep the restaurant afloat. Two years later, his business has completely failed and he's declared a bankrupt. When he falls back on the only thing he knows, which is engineering, he's already 33-years-old and has been out of the job market for five years. He'll be hard-pressed to find an employer willing to employ him.

If this same 28-year-old engineer were to approach me, I would tell him to optimise what he has now to achieve financial freedom first. In the process, he will learn about managing and minimising the financial risks he may be exposed to. In particular, I would tell him to continue working, but not give up on his dream to become wealthy and start his own business. Then, when he's comfortable, he can take on more risks.

Planning process

The rationale behind the advice I give this 28-year-old engineer is this: the process of planning and preparing for a successful business might take a few years. What is important is that throughout this process, he continues to have a steady source of income, thereby, reducing his mental stress and any strain on his finances. He will also be able to invest his savings and accumulate his wealth. When the time comes for him to assume the risk of running a business, at the very least, he will be financially secure. It may appear to be a slower and more conservative approach than Kiyosaki's, but it is, by far, a safer way to achieve wealth.

So, are you ready to follow Kiyosaki's advice? In a nutshell, you're ready if you feel comfortable taking various business and investment risks. This will mean being in a position to manage and minimise possible stress that can come with such a move.

Naturally, it is an added advantage if you know how to adapt Kiyosaki's money-making ideas within a Malaysian context. You must also be equipped with sufficient knowledge and experience about your investments. Most important of all is to have a back-up plan in place to support you and your family financially in the event such money-making ventures fail.

No doubt, this is a lot for the average Malaysian to consider if he wants to start on the journey to becoming wealthy. It is possible for him to become lost along this journey. Bear in mind that every journey begins with a single step and you should take that wisely. In my new book, Set Yourself Free, I emphasise how important it is for you to have clarity about your present financial position. Then, by using a new tool I've created called “The Money Matrix”, I show you how to successfully plot a safe path to wealth, with minimum effort and risk.