Forest City's slew of incentives seen as a big plus

Singapore

THE multiple tax incentives accorded to Iskandar Malaysia's Forest City including the coveted duty-free zone has made the ambitious mega-mixed development more feasible, particularly in a depressed market, property consultants say.

But at the same time, Putrajaya's award of special incentives to selected developments only serves to reinforce the impression of an uneven playing field as it creates a "two-tier" market for developers and investors.

"It's going to help Forest City a lot. Singaporeans can buy duty-free on the islands and take the products back," said Hall Chadwick Asia chairman Kumar Tharmalingam.

"It's been given the same benefits as Medini, plus duty-free status," he said of the special tax breaks announced by Prime Minister Najib Razak over the weekend. Besides corporate tax incentives for qualified companies in the selected areas of tourism, education and healthcare, the companies will not face foreign equity ownership restrictions.

"Yes, you could describe the incentives as the 'mother of sweetheart deals'," he laughed.

The four man-made islands of some 1,386 hectares on reclaimed land north of Singapore's Tuas are a joint venture project between China's Country Garden and Esplanade Danga 88 which is owned by the Johor state government's Kumpulan Prasarana Rakyat Johor and the state monarch Sultan Ibrahim Iskandar.

Unlike most local developments, it will not be subject to the usual standard requirements including a specified number of low-cost homes, or that a certain percentage of the development is allocated to bumiputras. There are also no foreign ownership caps.

Having waived the normal requirements - ostensibly because of the massive amounts invested by Country Garden although cynics contend it is more because Mr Najib wants to get on the good side of the monarch - the hope is that Forest City succeeds in attracting investors, buyers and tourists to Malaysia.

The enormous amounts ploughed into Malaysia by Chinese developers such as Country Garden which paid RM4.5 billion (S$1.5 billion) to the state monarch to reclaim the four islands, have left many in no doubt that they operate on a different level.

"Locals would take 100 years to do such a development but the Chinese are doing it in 10-20," observed Tanah Sutera Development general manager Steven Shum. "The Chinese are awesome. They go where angels fear to tread. They've pumped in so much money they're definitely here to stay," remarked Mr Kumar.

The generous incentives are expected to attract even more investments to Forest City, with the government projecting total investments of RM170-RM175 billion by 2035.

Locals are waiting to see if the hype rubs off on the rest of Iskandar which is going through a soft patch because of concerns of a housing glut following a period of hyper-interest over 2010-13.

Although most local developers chafe at the special incentives accorded to Forest City or to Medini, they acknowledge the Chinese developers in Johor including Guangzhou R&F and Greenland Group, seem to have their own customer base.

"They are not targeting the local market so much but more the mainland Chinese using Singapore as a marketing tool," Mr Shum said. Even so, he observed that Chinese buyers have been slow to occupy their completed apartments and suggested investors of secondary property in denser projects do more research to avoid buying into buildings that are poorly occupied.

According to news reports, phase one of Forest City's residential segment would be launched in Singapore in the first quarter and will offer villas and four blocks of condominiums totalling 600 units.