1MDB embarks on Penang affordable housing project

While Penang’s soaring property prices have become a conversational topic, the federal and state governments have pledged to make affordable housing available on the island.

On Tuesday, 1Malaysia Development Bhd (1MDB), a government-owned development company, bought 9.5ha from Farlim Group (M) Bhd for RM112.5mil through one of its subsidiaries. The deal marks 1MDB’s first public land deal in Penang, and when contacted by StarBizWeek, the company says it is part of 1MDB’s plan to develop affordable housing in Penang as announced earlier.

During a visit to Penang in May, Prime Minister Datuk Seri Najib Tun Razak announced that the federal government will build 2,222 low-medium cost houses and 1,111 affordable houses in Air Putih, Air Itam and Paya Terubong. It was a pre-election political pledge to the people of Penang by the federal government.

A property developer reckoned that the affordable housing scheme could cost about RM300,000 per unit, depending on the development.

“If assuming the plot ratio is four, then it will work out to RM50 per sq ft of gross floor area. Construction cost circa 200 per sq ft, and that would work out to a total development cost of RM250 per sq ft.

Therefore cost of a three bedroom 1,200 sq ft unit would be around RM300,000. This is just the cost price,” he says.

He, however, said development cost could come down to RM150 per sqft if its based on a lower cost structure.

If we scrutinise the deal more, the said land is strategically situated within an established township known as Bandar Air Itam (formerly known as Ayer Itam) and is sited at the north-eastern part of the island.

“This township is located along Jalan Air Itam and Jalan Paya Terubong, the main thoroughfares leading to the Kek Lok Si temple as well as the Penang Hill funicular railway station,” says Farlim in a filing on Tuesday.

But the main caveat for 1MDB is that the land is presently occupied by squatters and structures comprising residential units (semi-concrete, concrete, wooden and zinc houses), foundries, temples, a recycle centre, factories, workshops and shops.

Simply, that would mean more time and capital exhausted to relocate these squatters to other suitable areas.

The company might have to allocate a number of units as settlement, narrowing down the supply of units for eligible owners.

From past experience, dealing with squatters is a sensitive issue as people have a natural resistance to change and eviction notices aren’t welcome.

“This might just be the beginning of high density flats ala the Singapore Housing Development Board (HDB) flats style,” says a market observer.

Speculation is also that 1MDB could be snapping up remaining portion of the land from the other owners, as Farlim have just a fraction of ownership rights to the said three parcels of land.

Farlim did not respond to queries by StarBizWeek over the identity of the other owners of the said land.

The Penang state government has earmarked seven projects in August for affordable housing where 4,145 low-medium-cost, 3,148 medium-cost homes and six shoplots would be built.

Meanwhile, the federal government has also proposed to redevelop the Rifle Range flats, Penang’s first affordable housing project. However, this is still pending approval by local authorities.

When the Rifle Range flats were completed in the early 1970s, they were the tallest buildings in Penang.

The units in the nine blocks of 16-storey dwellings were only about 400 sq ft and provide housing for some 25,000 people.

Besides its property venture, 1MDB has also gone extensively into the energy sector, buying up power plants to beef up its cash flow.

It currently holds 100% of Powertek Energy Sdn Bhd and 75% in Jimah Energy Ventures Holdings Sdn Bhd and Kuala Langat Power Plant Sdn Bhd (KLPP), respectively, involving an investment totalling RM12bil.

1MDB had acquired Powertek and KLPP in a portfolio of power plants with a total generating capacity of 4,600 MW in Malaysia, Bangladesh, Pakistan, Egypt, Sri Lanka and Abu Dhabi.

1MDB is also known to be actively bidding for a 2,000MW coal-fired power plant, dubbed Project 3B, as well as other greenfield and brownfield developments in the region.

It is taking the lead in the development of government land in prime areas of Kuala Lumpur. Some 70 acres in Jalan Tun Razak, the project of which is likely to be delayed, will be shaped into a financial district called the Tun Razak Exchange, while the old airport in Sungai Besi, renamed Bandar Malaysia, is being converted into a mixed development. - By CHOONG EN HAN (The Star)

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