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Monday, 10 July 2017

(NST) Forest City still on growth path


THE development of Forest City in Johor is still progressing well, despite the capital outflow’s restriction from the Chinese government, which has severely affected its property investments abroad, say industry observers.

The restriction has spooked some Chinese buyers as China allows only an annual foreign exchange (forex) quota of US$50,000 (RM215,000). Hence, forex buyers must sign a pledge that they would not use their quotas for offshore property investment.

Forest City is seen to be one of the largest Chinese property projects abroad facing difficulty in obtaining buyers’ payment for their units on four man-made islands in southwest Johor.

However, Knight Frank Malaysia managing director Sarkunan Subramaniam said Forest City master developer Country Garden Holdings would be able to continue the development despite the hiccup.

“The development will carry on but at this time it will be at a slower pace due to the restriction in China’s capital outflow policy,” he said.

Sarkunan added that Forest City will be a success on the back of its developer’s strong financial and construction foundations.

“Country Garden has the financial muscle to complete the first phase of Forest City. The developer has already entered the second phase without any hiccup,” he said.

Forest City will consist of four reclaimed islands spanning 2,025ha, and boast a gross development value (GDV) of US$100 billion when fully completed in 20 years.

Sarkunan said Country Garden would come up with more ideas to strand resources and bring investors from other countries as well.

“Whenever there is a project in Malaysia developed by well-known developers, obviously there’s a higher interest from China.

“Country Garden should be able to garner the same interest from other countries as well,” he said.

Sarkunan said the Forest City development would open its doors to Malaysian and Singaporean developers to compete equally to attract potential buyers.

“There is always market from Singapore, Indonesia, India, Bangladesh and Southeast Asian countries. The Middle East buyers are also there but the trend has slowed down compared with the past.

Meanwhile, Associated Chinese Chambers of Commerce and Industry Malaysia deputy chairman of small medium enterprise and human resource development committee Datuk Jeffrey Tan said the capital outflow restriction would temporarily deter some of the Chinese buyers.

“A lot of Chinese buyers have various ways to buy properties overseas such as Malaysia, without going through the official channel,” said Tan.

He added that although the restriction would affect the interest of China’s properties buyers, Country Garden had already set up sales galleries elsewhere like in Singapore, Indonesia, Thailand, Taiwan and the Philippines.

“In the short-term, the sales of Forest City would slow down but I believe it is temporary. Country Garden is among China’s top three property developers. I do not think it will abort any project in the development.

“When things start to pick up, I believe the project will be an international attraction in terms of investment and tourism aspects,” he said, adding that Forest City would be a good place to invest over the long term.

According to Country Garden, through the first five months of this year it had achieved US$35.7 billion in contracted sales and 293 million sq ft in sold gross floor area.

It has targeted US$58 billion sales this year with a budget allocation of about US$ 21.9 billion for new land acquisitions.

Last year, Country Garden’s residential property sales exceeded US$43 billion, covering about 293 million sq ft.

Dubai-based real estate IQI Global said the Chinese government’s capital control measure is perfectly in line with market structure since the government wants to bring structural reforms to boost the yuan value in the financial markets.

Iskandar Regional Development Authority chief executive officer Datuk Ismail Ibrahim said the current capital controls not only impacted Johor but also the rest of the world.