REAL ESTATE DIVISION PERFORMANCE REVIEW
The property market in Malaysia was greatly affected by the overall slowdown in 2015. According to the National Property Information Centre (“NAPIC”), market volume was recorded at 362,105 transactions worth RM149.9 billion in 2015, down by 5.7% in volume and 8.0% in value compared to 2014. On the back of the sluggish market, the number of new launches reduced to 70,273 units, down by 19.2%.
With the current economic climate, buyers will likely adopt the “wait-and-see” approach before committing to any property purchases. In addition, the property market is expected to remain challenging in 2016 as a result of bleak household sentiments, lacklustre commercial sub-sectors and dwindling business confidence, all of which are caused by the current slump in oil prices, rising cost of living and the weakened Ringgit. Stricter lending conditions coupled with higher interest rates have increased the cost of mortgage financing and rejection rates for home buyers. The Malaysian Government had in January 2016 recalibrated the 2016 Annual Budget in order to ensure that our country is well placed to face the forthcoming uncertainties.
In FY2016, Ireka Development Management Sdn Bhd (“IDM”) as the development manager for Aseana Properties, has achieved another significant milestone with the disposal of the Aloft Kuala Lumpur Sentral Hotel (“Aloft”) to Prosper Group Holdings Limited at a gross transaction value of RM418.7 million (approx. US$104.2 million) and the transaction was completed on 23 June 2016. During the year, Aseana has also divested its 55.0% stake in ASPL PLB-Nam Long Ltd Liability Co, the developer of the Waterside Estates residential project in Vietnam, to Nam Long Investment Corporation (“Nam Long”) and Nam Khang Construction Investment Development Limited Liability Company (“Nam Khang”) for a cash consideration of US$8.2 million.
On the whole, the Group’s revenue and income contribution from the Real Estate division has been severely impacted by the delay in launching of a few projects over the financial year under review, due to the unfavourable market conditions and delays in obtaining approvals from changes made to match market demands. Subsequent to the completion and hand over of the Kasia Greens project back in June 2015, Ireka Group is now focusing on developing the second phase of Nilai land development under the mid-market properties sector. The second phase consists of 6 parcels of lands measuring 30.6 acres which will be developed into courtyard apartments, condominiums, town villas and commercial centre. The sales launch of the courtyard apartments, known as dwi@Rimbun Kasia, was initially planned for the end of 2015. However, the launch date has now been postponed to Q1 2017 due to delays in obtaining approvals from the authorities. The project, dwi@Rimbun Kasia, consists of a 9-storey, 328 units apartment block with sizes ranging from 650 square feet to 980 square feet in line with the demand for such accommodation in the surrounding education hub in Nilai.
Meanwhile, the Group has commenced the soft launch for phase 1 of the Asta Enterprise Park, Kajang (formerly known as Kajang Industrial Development). This 31.5 acres of freehold development is located at a thriving neighbourhood south of Kuala Lumpur and consists of semi-detached and detached light industrial factories in a guarded environment. The design of the units emphasises on multi functionality and versatile utilisation to cater for the total industrial needs of companies. The project is targeted to be officially launched in Q3 2016.
Planning approval in principle has been obtained for the Serika Residences (formerly known as Kajang Residences). The Serika Residences will be positioned as a stylish and trendy new urban resort of serviced residences under the Group’s mid-market brand, zenZ, in the thriving area of Kajang. Likewise, the Group has obtained planning approval for the Kiara Residences project and is now in the midst of securing building plan approval. The Kiara Residences project is a serviced residence and commercial project located in the heart of the established and exclusive Mont’ Kiara enclave. Notwithstanding the sluggish property sector, the Group is confident that these upcoming projects will fare well as they are located at strategic and well established neighbourhood and addresses.