Project exists but is not official yet

IPOH: A proposed RM180 million housing project in Seri Iskandar, at the centre of a graft probe, exists -- contrary to the claim by the menteri besar that it does not.

Sources told the New Straits Times that one of the exco members detained by the Anti-Corruption Agency for alleged graft had even showed a third party the land earmarked for the mammoth project recently.

It is understood that the idea to develop a large parcel of land in the Perak Tengah district for housing cropped up during an informal meeting at the Perak Tengah district office and was immediately acted upon by one the suspects.

"The third party was even taken to the proposed site before he agreed to submit a proposal to develop the land.

"It is still in the early planning stages. This is why searches by the state government on the project did not come up with anything," a source said.
Menteri Besar Datuk Seri Mohammad Nizar Jamaluddin said on Wednesday the project did not exist, shortly after the ACA announced the arrest of six people in its probe into allegations that they had received RM120,000 to expedite the approval process.

Perak Tengah district officer Hasim Hasan said even if a survey on the said land had been carried out, it was strictly between the parties concerned.

It is understood that the ACA will call Hasim later today to record his statement to facilitate investigations.

REIT managers seek withholding tax waiver

MANAGERS of real estate investment trusts (REITs) in Malaysia are hoping that a removal of withholding tax for investors will be included in next year's federal budget. The move is crucial to spur growth in the industry and to keep Malaysian property trusts competitive, they said.

"We would like to see a waiver or substantial reduction in withholding tax. Currently the withholding tax is notably higher compared to markets such as Singapore, Thailand and Hong Kong," Quill Capita Management Sdn Bhd chief executive officer Chan Say Yeong said. The company is the manager of Quill Capita Trust.

Lowering withholding tax would directly make Malaysia property trusts more regionally competitive, improve foreign direct investment into the country and increase the after-tax yield, he said.

"Such a move will attract foreign pension funds that are looking for long-term investments with higher yield as well as individual investors seeking higher return than bank deposits," Chan told Business Times via e-mail.

He added that the resulting better yield and foreign investor interest from the waiver will further generate confidence in developing Malaysian REITs.

His view was echoed by Stewart LaBrooy, the chief executive officer of Axis REIT Managers Bhd, who told reporters of a similar wish during a company briefing this month.

Malaysia imposes a 15 per cent withholding tax and 26 per cent tax on foreign investors and 20 per cent on institutional investors. In Singapore, there is no withholding tax on individuals and only 10 per cent tax on other investors, LaBrooy said.

Despite their defensive nature, as property trusts generally pay higher dividends, their share performance were not spared by the current weak market. So far, there has not been a single REIT being listed this year, after a few years of solid growth.

"The slowdown in the global economy and the tightening in liquidity due to US subprime issue have impacted the growth of the equity market in general, not just limited to REITs," Chan said.

Still, he said, Malaysian REITs have a lot of untapped potential as properties in the country are still generally undervalued and the economy is poised for sustainable long-term growth.

"The waiver in withholding tax that we are hoping for will create positive response in the market, helping to attract foreign inves-tors and individual investors."

Malaysia remains a new and fledgling market when it comes to the REIT industry, Chan said. Hence, investor awareness and education need to be continued and strengthened to boost industry prospects, he said.

Malaysia's Opus Group scouts for India buys

NEW DELHI: Malaysian government-owned infrastructure major OPUS is scouting for medium-sized infrastructure and engineering consultancy firms to partner with in India on niche infrastructure projects. The focus of OPUS is to provide expertise and the technical know how to bring, develop and manage environmentally-friendly construction methods in India.

OPUS has recently set up an office in Chandigarh with plans to expand to other cities in the near future. OPUS has been working with clients to develop and manage their infrastructure and built environment assets. In countries like New Zealand, UK, Malaysia and Australia, OPUS has been an advisor, manager and partner, and has worked with clients to develop and maintain assets that include highways, rail, airports, bridges, sports complexes, hospitals, maritime ports and other facilities. OPUS holds assets worth $233 mn in New Zealand and South East Asia and has a turnover of $260 mn in the fiscal year 2007.

OPUS is a subsidiary of Malaysia-based UEM Group, and has been providing technical and project management expertise for UEM Group’s large scale projects such as expressways and the Malaysia-Singapore and Malaysia-Penang sea bridges. In India, UEM Group has executed Rs 2,300 crore worth road projects with partners such as GMR and Hindustan Construction (HCC).

“We are looking to acquire some firms or enter into joint ventures with Indian infrastructure players so as to bid jointly for expressways and roads at the state and national levels. The objective is to bring both expertise and finance to the table. However, we are yet to finalise our expenditure budget for India,” UEM country director Muhinder Singh said.

UEM also plans to forge strategic consortiums with Indian players for real estate and townships in Punjab, Haryana, Rajasthan and Delhi in the North and Tamil Nadu, Gujarat and Maharashtra in southern and western India respectively.

UEM Group is the largest toll concessionaire in South-East Asia and wants to introduce new techniques such as resource optimisation, asset management and preservation methods to Indian road development.

“We undertake projects right from the conception and inception to maintenance and value addition years after the asset is created,” remarked Muhinder.

UEM Group has also constructed Malaysia’s light rail system and may consider such urban transport projects for India.

Malaysian Pacific Corp banks on LakeHill Resort

PETALING JAYA: It was all quiet on the central front for property-based Malaysian Pacific Corp Bhd (MP Corp) due to a delay in the sale of its Wisma MPL in Kuala Lumpur.

The delay was due to its strategy for a partial sale with a view for joint development of a tower block rather than an outright sale of the entire property.

Such a joint venture was in the best interest of the company and its shareholders, as management worked towards obtaining a better price and terms, the company said in its latest results announcement.

There is, in addition, a southern front in the group’s development strategy. It has about 500 acres of freehold land near Pasir Gudang in Johor that is master-planned for its proposed LakeHill Resort township.

Artist's impression of the proposed Asia Pacific Trade and Expo City

That may sound like just another township but one of its components is the proposed Asia Pacific Trade and Expo City (Aptec). This will be developed as a wholesale trade and distribution hub, with proposed participation from merchants and manufacturers from China, India and other countries in Asean.

The Federal Government is understood to be interested in supporting and participating in the LakeHill project. Hence, one of its agencies is expected to sign for a stake in the project next week.

With the Government as a partner, development of the whole project, including Aptec, should be facilitated.

The concept for Aptec is that products from the region will be brought to one location for the convenience of buyers instead of them having to fly to each country to view the products.

In addition, the whole project is within the Iskandar Malaysia area in Johor which the Government is keen to develop. MP Corp is applying for Iskandar development region status for the LakeHill project so that companies operating there will qualify for tax incentives.

Industry sources said it was also planned that a foreign party, expected to be China-based, would take a stake in the LakeHill project.

Equity participation by both the Government and, in particular, the Chinese party, was envisaged to erase or reduce the bulk of the bank borrowings of the MP Corp group.

The group had borrowings of RM178mil against an investment property valued at RM225mil and land held for development of RM139mil. The group’s shareholders funds totalled over RM200mil at end-March.

Finance costs amounted to RM11.4mil in the nine months to March 31, 2008, and the group is working towards the right direction to reduce or eliminate that.

MP Corp is led by Datuk Bill Ch’ng, an architect who became a developer and businessman many years ago.

E&O Property to be delisted

KUALA LUMPUR: E & O Property Development Bhd (E&O Prop) will be delisted from the Bursa Malaysia main board today.

Eastern & Oriental Bhd (E&O) said in a statement yesterday the delisting marked the completion of the merger exercise between E&O Prop and E&O.

The enlarged entity would enable the group to consolidate its financial and operational expertise and resources to better seize growth opportunities in the increasingly competitive local property landscape.

By The Star

Surviving the property slowdown

Word has it that a Kuala Lumpur property developer recently called up its purchasers to refund them their deposits collected earlier. The developer is opting to put its project on hold rather than proceed with losses, as building material and other costs continue to rise.

As the property sector sinks deeper into a quagmire, industry watchers are worried that some projects may even be abandoned. Master Builders Association Malaysia (MBAM) president Ng Kee Leen has warned that "if this (rising cost of building) persists, the whole industry may collapse." He added, "Political instability due to the outcome of this year’s general elections had also affected the construction and property sectors." Unless the government does something fast, developers may be left with no choice but to abandon projects due to escalating building material prices, a serious shortage of construction workers and weak market sentiments. Analysts say that the hardest hit will be properties costing below RM250,000. Buyers in this range might hold back as they see their household income shrink due to higher food and fuel costs.

Unfazed by the negative sentiments, some developers are still upbeat on their high-end projects. Mulpha Land recently announced plans to launch four new projects in prime areas within Kuala Lumpur over the next two years. Top on the list will be eight bungalow units with built-up areas between 10,000 and 12,000 sq ft priced from RM15 million each in the exclusive Bukit Tunku neighbourhood. And in the adjacent neighbourhood of Bangsar, it will offer seven units of three-storey bungalows priced at between RM9 and RM10 million. Built-up areas for these bungalows will range from 8,500 to 9,600 sq ft. Elsewhere in the so-called Embassy Row area of Ampang, it will build 12-units of luxurious apartments with sizes starting from 3,700 sq ft at and a tag of RM1,000 psf onwards. Mulpha will also build a Class A office building in the city. The 23-storey building will have a leasable area of 270,000 sq ft and will be designed by renowned New York architects Kohn Pedersen Fox who designed the Shanghai World Financial Centre.

SP Setia has also announced its maiden high-end condominium project in the city. Their six-acre freehold Setia Sky Residences will have 844 units ranging in size from 1,044 to 1,679 sq ft. Most of the units will have a clear view of the Petronas Twin Towers and indicative price is RM800 psf. But it remains to be seen how a high-density project can be marketed as a "luxury" condominium.

Glomac Bhd’s group managing director Datuk FD Iskandar is of the opinion that demand for properties above RM1 million remains good and these high-end units usually take only a week to be taken up. SP Setia’s group managing director also shared the same sentiments. He was reported as saying that "higher-end property investors were more resilient and recession-proof."

Meanwhile investors are generally divided on whether to enter the property market now or to avoid it altogether. With inflation expected to surge to a high of 6 per cent and no fresh leads in the stock market, many prefer to be cautious. Some experts are of the opinion that the weaker market and slower take-up rate for new properties might result in property prices coming down despite rising building material and labour costs. Henry Butcher’s chief operating officer Tang Chee Meng was quoted as saying, "Confidence in the economic climate is vital for a buoyant property market. People will buy property if they see that there is room for capital appreciation."

Prime Minister Abdullah Ahmad Badawi was reported in the media as saying that Malaysia’s economy is stable even though the country is faced with global crises such as the increase in fuel and food prices. "There is nothing to worry about. We continue to attract foreign investments and we are still a preferred investment destination," he reiterated. He also said that Malaysia’s economy is still on track to achieve at least 5 per cent growth this year as the fundamentals are strong.

But perhaps Reapfield Properties’ president David Ong sums it up best when he said, "Property is one of the best investments in time of inflation. Any time is a good time to buy." - (www.property-report.com)

CapitaLand to enlarge Malaysia footprint

By ANGIE NG

CAPITALAND Ltd, which sees good growth potential in Malaysia's property market, is keen to expand its presence in the country by going into more exciting and challenging projects that will spice up the local property landscape.

The Singapore-based property group has the capability to add value to property projects through its Midas touch and strong branding.

CapitaLand has expanded to over 20 countries including China, India, Australia, Vietnam, Thailand and Japan to reduce its dependence on the city-state of 4.7 million.

According to a senior executive, Malaysia is one of CapitaLand’s key markets in South East Asia and the group is committed to being a long-term real estate player in the country.

“What we have achieved in Singapore so far are exportable and we are doing that in China, Vietnam and Thailand. We have big plans for Malaysia as well,” he told StarBiz in Kuala Lumpur.

In Malaysia, the company has executed its real estate value chain and is one of the largest foreign investors in the real estate market.

Through its US$30.5mil real estate private equity fund, Mezzo Capital Fund, CapitaLand has invested in five high-end residential projects. These are Zehn Bukit Pantai in Bangsar; Seni Mont’ Kiara; Kiaraville and Tiffani by i-Zen in Mont Kiara; and Hampshire Residences, located within the Kuala Lumpur City Centre area.

“These investments are in line with our premier, award-winning homes across the Asia-Pacific,” he said.

Last March, CapitaLand, together with Maybank Group, successfully closed the US$270mil Malaysia Commercial Development Fund (MCDF).

MCDF, one of Malaysia’s largest property funds with an expected gross development value of US$1bil, is looking to invest in real estate development projects in Kuala Lumpur and the Klang Valley.

In the commercial property sector, the company has a 30% stake in Menara Citibank, a prime 50-storey freehold office building located in Kuala Lumpur’s Golden Triangle.

In service residences, CapitaLand's The Ascott Group owns and manages seven properties in Malaysia with a total of 814 units.

The company is also eyeing a bigger stake in Malaysia's real estate investment trust (REIT) market.

Its plans to list a REIT with RM2bil (US$613mil) of assets will see the country’s first foreign-sponsored REIT on Bursa Malaysia later this year.

The company will group its shopping mall assets in Malaysia for the trust.

CapitaLand has been eyeing a presence in Malaysia’s retail market for a while now and started building its asset portfolio last year.

The company had last August paid RM770mil to buy Gurney Plaza in Penang and RM435mil for the Mines Shopping Fair in Seri Kembangan, Selangor. Its latest acquisition was a 61.9% stake in Sungei Wang Plaza for RM595mil in June.

Enhancement works are ongoing to spruce up the facilities and add new space to the shopping malls.

In 2007, CapitaLand and Malaysia’s Quill Group listed Quill Capita Trust (QCT) on the main board of Bursa Malaysia. The trust is managed by Quill Capita Management Sdn Bhd.

Quill Capita Management is 40% owned by CapitaLand Financial Ltd through wholly owned unit CapitaLand RECM Pte Ltd, while Quill Resources Holding Sdn Bhd and Coast Capital Sdn Bhd each has a 30% stake.

Quill Capita Management chief executive officer Chan Say Yeong said: “The Malaysian real estate market is undergoing a stage of rapid growth following healthy economic performance over the past few years.

“Riding on this positive backdrop, CapitaLand has continued to expand and strengthen its footprint in Malaysia through QCT, which owns nine properties in Cyberjaya and Klang Valley, and the US$270mil MCDF.

“We believe Malaysia will enjoy sustainable long term growth and we see real estate value increasing over the years,” Chan added.

QCT’s initial asset portfolio of four quality commercial properties valued at RM280mil has since grown to nine assets in Cyberjaya and the Klang Valley worth RM680mil.

The trust has potential access to a pipeline of completed properties to be developed by CapitaLand’s MCDF and Quill Group.

To further diversify its geographical presence, it recently acquired the freehold RM132mil Tesco building in Jelutong, Penang, which carries a 24-year remaining lease with Tesco.

CapitaLand also has four listed trusts – CapitaMall Trust, CapitaCommercial Trust, CapitaRetail China Trust and Ascott Residences Trust – on the Singapore Exchange.

Developer sets sights on JB

Tanah Sutera wants to make its project the central hub of Skudai

JOHOR BARU: Tanah Sutera Development Sdn Bhd wants to position its Taman Sutera Utama development as the “central hub of Skudai”.

General manager Steven Shum said the development on a 48.562ha site would offer business, entertainment and education facilities.

“Being located along the Johor Baru-Skudai-Senai Growth Corridor within Iskandar Malaysia augurs well for its future growth,’’ he told StarBiz.

Shum said the catalyst of the hub would the RM75mil Sutera Mall, Johor Baru’s latest retail complex that would be opened tomorrow.

Sutera Mall at Taman Sutera Utama that will be opened on Friday.

The three-storey mall with 27,870sq m floor area offers a wide range of tenant mix from 250 outlets.

Shum said it was well linked to matured and developing residential estates – Taman Ungku Tun Aminah, Taman Sutera, Mutiara Rini, Bandar Selesa Jaya, Nusa Bestari, Bukit Indah, Taman Impian Emas, Tampoi, Kempas and Senai.

He said these estates had a population of 500,000 , which offered a ready market.

“The mall is easily accessible from the city centre via Jalan Skudai, Perling Highway, North-South Expressway and Singapore by the Second Link crossing,” he said.

He said the company would be launching the RM60mil Entertainment City project year next to the mall next year.

The proposed project includes cinemas, a bowling alley and food court with office and hotel blocks.

“The retail sector in Johor Baru has the potential to grow but it is still largely untapped unlike Kuala Lumpur and Singapore,” said Shum, adding one way to grow the sector was for the state government to have more friendly policies.

Tanah Sutera Development is a consortium of local and Singapore-based companies, namely Permodalan Nasional Bhd, Lembaga Tabung Angkatan Tentera, CapitaLand, Keppel Land and Lee Rubber Co (Pte) Ltd.

SMEs stand to gain from Iskandar Malaysia'

JOHOR BARU: Small- and medium-sized enterprises in Iskandar Malaysia have been assured that they will benefit from the expected influx of major foreign investors.

Menteri Besar Datuk Abdul Ghani Othman said SMEs should not worry about being sidelined as they had an important supporting role to play.

"The trickle effects of the projects will definitely go down to the local SMEs," he said after opening the Johor SME Exposition 2008 at the Angsana shopping complex here yesterday.

On claims that the local SMEs had yet to receive any benefit from Iskandar Malaysia, Abdul Ghani said all quarters should not jump to conclusions before the whole plan for the development corridor could take off.

He had previously promised that the first of a series of major projects in Iskandar Malaysia would start before the end of this year.
Iskandar Region Development Authority (Irda), the administrator of the development corridor, had from time to time been criticised for not being sensitive to the needs of the local business community.

The latest criticism came from Domestic Trade and Consumer Affairs Minister Datuk Shahrir Abdul Samad, who was quoted on Aug 3 as saying that Iskandar Malaysia had yet to produce any direct benefit, especially for small local businesses.

Shahrir, who is also the Johor Baru MP, claimed that the needs of residents in this city were not given priority in Irda's plans.

"Even if this project turns out to be a success, it would not seem likely to be ours," he was quoted as saying.

Without referring to Shahrir's statement, Abdul Ghani said those expecting to benefit from the development needed to give it time to mature as proper planning and the drawing of huge investment had to be done in a comprehensive and structured manner.

"Please bear in mind that Iskandar Malaysia is just two years old. We have to be patient with it."

Earlier, Abdul Ghani told a group of SME operators that their resilience in weathering economic downturns over the years was proof that they had a role in ensuring the continuous growth of Johor.

"The SMEs have their own unique characteristics which make them important players in our economy.

"The state government will continue to support them and provide whatever assistance available."

Abdul Ghani said the state government's recent decision to acquire a 20 per cent stake in water concessionaire SAJ Holdings was meant to ensure better water tariffs, not only for households but also businesses and industries.

"I will not say that the tariffs will be reduced but it will be relatively better, considering the present circumstances."

Energy, Water and Communication Minister Datuk Shaziman Abu Mansor had announced the state government's acquisition last Tuesday, saying it would profit Johor as SAJ would from now on be required to pay for the water it took from the state.

CapitaLand's retail REIT may boost Malaysian sector

A plan by CapitaLand to list a pure-play retail REIT on Bursa Malaysia later this year could draw more investor interest to the country's REIT sector. REITs in Malaysia have suffered from a perceived lack of liquidity. "Local REITs generally lack liquidity as they are perceived to be too small in their issue and capital base, and REITs with larger asset size like CapitaLand's will be able to attract greater trading interest," one analyst noted. Star Publications (Malaysia) (08/05)

Malaysia needs to win back confidence

By THE STAR

KUALA LUMPUR: Malaysia needs to regain foreign investors’ confidence to spur the current property market, says Selangor Dredging Bhd (SDB) managing director Teh Lip Kim.

“They feel insecure here because of the current political instability. Instead, they prefer to invest in other countries such as Singapore,” she said after a media tour of its Park Seven Residences at Persiaran KLCC.

Teh Lip Kim standing in front of Park Seven Residences

Sold out since early last year, Park Seven received its certificate of fitness for occupation on April 22.

Teh said Malaysia still offered cheaper properties than Singapore and she believed the demand for niche market was still present.

“There are still people with money in the market. When they want to buy properties, they become more selective.

“That’s why SDB always believed in branding to attract them,” she said, adding that its on-going projects in Malaysia and Singapore would always focus on the niche market.

“What makes us different from the other players is the concept that we introduce every time we launch our projects.

“By doing that, we usually manage to sell 30% to 40 % more than our competitors,” she said.

On the increase in construction cost, she said developers would have to pass part of the burden to buyers.

SDB would be developing its land bank in Taman Melawati, Jalan Ampang, Damansara Heights and Petaling Jaya soon, Teh said.

“Apart from that, we are looking to invest in countries that are more transparent and have stable financial systems, such as Australia, Thailand and Vietnam.”

Budget proposals to kickstart property

Having taken tough measures to counter the rising cost scenario, property developers have stepped forward to suggest a series of measures that can help kickstart the industry and put the players on firmer ground.

In its Budget 2009 memorandum, the Real Estate and Housing Developers Association (Rehda) has highlighted that among other things, the bumiputra quota release mechanism should be standardised, structured and transparent.

Rehda president Datuk Ng Seing Liong has proposed:

·An automatic release of the quota units to be in place after six months of a project's launch or when a project has reached 50% in its construction, whichever is earlier;

·Discounts for bumiputra buyers to be capped at 5% and only applicable for houses RM250,000 and below as purchasers in a higher market segment are more financially secure and do not need such discounts;

·The low-cost housing ceiling price to be raised to RM60,000 a unit from RM42,000 currently to mitigate the effect of increased construction costs;

·A reduction or waiver of stamp duty rates for house purchase that average between 2% and 3% now. which will also help reduce the people's burden;

·Granting tax exemption for dividend income to unitholders to give a much-needed lift to the real estate investment trust (REIT) market.

Developers have been harping on some of these issues for a long time but attention from the Government is more urgent now.

The mantle of protectionism should be unshackled so as to create a more level playing field. Developers, already bracing for tougher days ahead, do not want to be further burdened by some of these practices.

Already many new project launches have been delayed to avoid unnecessary cost over-runs, now 25% to 30% higher than earlier projections.

Most developers see more challenges on the horizon with food and petrol price hikes, escalating costs of construction and expected rise in interest rates to contain inflationary pressures.

Their woes have been exacerbated by the weak take-up rate that prevents them from passing on the rising costs to buyers.

Many of these buyers are adopting a wait-and-see attitude especially in view of the uncertain interest rate scenario.

Malaysia has a relatively young population where almost a third of the 26 million people are aged 25 to 44, and the country still needs a fairly big number of houses each year.

There will still be demand for houses, especially good products at competitive prices in the right locations.

While demand for medium and lower priced properties has dropped, the high-end market is still holding out as buyers in this segment are less affected by the rising cost of living.

With sales for lower priced property expected to remain soft, more developers should consider coming up with more versatile designs and smaller projects with shorter turnaround time and better cash flows.

By The Star (by Angie Ng)

Rehda outlines plans to boost Malaysia’s property market

by News Editor

In its Budget 2009 memorandum, the Real Estate and Housing Developers Association (Rehda) has proposed a number of initiatives that it hopes will provide a boost to Malaysia’s struggling property market.

Rehda notably suggests reviewing the bumiputra quota release mechanism to make it more structured and transparent.
Rehda president Datuk Ng Seing Liong has proposed an automatic release of the quota units to be in place six months after a project´s launch or when a project has reached the halfway stage in its construction, whichever is earlier.

Liong also suggests discounts for bumiputra buyers should be capped at 5 percent and only applicable for houses priced RM250,000 and below as purchasers in a higher market segment are more financially secure and do not need such discounts.

In addition the low-cost housing ceiling could be be raised to RM60,000 a unit from RM42,000 currently to mitigate the effect of increased construction costs.

A reduction or waiver of stamp duty rates on house purchases, currently between two and three percent, is another suggestion to help the demand side of the market.

Already many new project launches have been delayed to avoid unnecessary cost over-runs, now 25 percent to 30 percent higher than earlier projections.

Most developers see more challenges on the horizon with food and petrol price hikes, escalating costs of construction and expected rise in interest rates to contain inflationary pressures. Their woes have been exacerbated by the weak take-up rate that prevents them from passing on the rising costs to buyers. Many of these buyers are adopting a wait-and-see attitude especially in view of the uncertain interest rate scenario.

With sales for lower priced property expected to remain soft, more developers should consider coming up with more versatile designs and smaller projects with shorter turnaround time and better cash flows, said Liong.

Govt move to reduce functions won’t hurt hotels much

By LOONG TSE MIN

WHILE certain quarters in the hospitality sector are making a hue and cry over the Government's recent move to reduce its functions at hotels, the situation may not be as bleak as painted, judging from the views of industry observers.

According to the Malaysian Association of Hotels (MAH), three- and four-star hotels have lost about RM120mil in revenue up to the middle of July since the Government issued a directive on June 9 to its departments and agencies to reduce the number of events at hotels.

Executive director B. Sarjit Singh said the association was appealing to the Government “to be more relaxed” on the ruling.

“We have written to the Tourism Minister asking her to help rectify the circular to civil servants to stop using hotels for functions,” he said,

Kumar Tharmalingam

The minister indicated she would take up the matter, but there has been no result as yet, he said.

Something that may weaken MAH's argument is the huge growth in foreign tourist arrivals that has boosted hotel occupancy and average room rate growth this year so far.

Occupancy rates in Kuala Lumpur for the second quarter ending June 30 stood at 74%, up from 66.5% in the first quarter.

Average room rates have grown to RM221 per night for the second quarter from RM168 in the first quarter.

However, Sarjit Singh said three- and four-star hotels that depended on government functions for up to 70% of revenue were currently seeing a dilution in revenue.

If the situation were prolonged, he said there was a possibility of the industry reducing its manpower and not recruiting more staff.

At the same time, with high fuel prices and inflation, hotels were seeing a rise in operating costs.

For instance, electricity rates for hotels had gone up 26% in June, he said.

Inflation was also beginning to hurt domestic tourism that was also a substantial component of earnings, he added.

However, continuing high occupancy and average room rates have led property consultants to conclude otherwise.

Property and real estate consultants Hall Chadwick Asia Sdn Bhd chairman Kumar Tharmalingam sees only the “top 10 hotels” being impacted by the austerity drive.

Previndran Singhe

But even so, five-star hotels are currently benefiting from a tourism boom continuing from the past 18 months to two years.

“There isn't such a significant loss. Maybe a slight drop but not too severe,” Tharmalingam said.

“Despite the Government's austerity drive, it would still need to hold functions,” he said.

He added that a more likely scenario was for government departments to switch from five-star venues to three- and four-star venues.

“Of the 36,000 (hotel) rooms available in Kuala Lumpur, fewer than 10,000 are five-star,” Tharmalingam said.

“Three- and four-star, and older hotels in the city would be the beneficiaries,” he said.

At the same time, the private sector would still need to do business at hotels, he said.

Private sector conference budgets might rise, as companies need to spend more on marketing on concerns of a downturn.

Zerin Properties chief executive officer Previndran Singhe was equally bullish on the sector.

“Tourism and hospitality industries in Asia are growing at a whopping 10% annually, four percentage points higher than the world average.

“Among Asian countries, Malaysia recorded one of the highest growth rates at 20%.”

He said Malaysia was among the tourist magnets of the region with soaring tourist arrivals.

A survey showed that in the first five months this year, Malaysia registered tourist arrival growth of 23% compared with the previous corresponding period.

China showed a 5.6% increase, while tourist arrivals in Hong Kong, Singapore and Thailand were up 9.5%, 12% and 15% respectively.

Singhe said there were clear indications of future success of the hotels and resorts industry in Asia, with a projected 1.6 billion international travellers to the region by 2020, almost twice last year's figures.

“Although it is fair to assume that this rate of growth cannot be sustained due to the increases in fuel prices and other 'mega crises', the number of potential travellers is so huge that the long-term growth prospects will remain substantial by any measure,” he added.

What is also interesting to note, according to Singhe, is that tourism profitability in Asia has also improved significantly and is already exceeding that achieved in Europe and the Middle East.

“In addition, 18 Asia-Pacific countries are expected to receive US$110bil in additional tourism revenue over the next three years,” he said.