Property
Developing townships for Malaysians
Aliff Yusri 
Property prices in Kemuning Utama have appreciated 220% since 2005
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TOWNSHIPS hold a special place in the hearts of most Malaysians as that’s where a majority of the population have lived in recent decades.

In particular, mid-tier townships have become the cornerstone of the property sector, delivering housing to the M40 demographic, which is also a lynchpin of the domestic economy.

This segment is defined as the middle 40% of households by income and comprises the nation’s middle class, which is expected to comprise 45% of the population by 2020, or a projected 15.2 million people.

Township products have seen a resurgence of popularity among Klang Valley developers in catering for this demographic in recent years, due to increasing land scarcity and cost in urban areas as well as improvements in infrastructure and master planning.

 

Push and pull factors

These factors have drawn a number of developers such as Paramount Property Development Sdn Bhd and GuocoLand (Malaysia) Bhd to greener pastures outside Kuala Lumpur and beyond.

“These products are doing well because with lower land costs, developers can offer more affordable property prices with larger built-ups, green areas and open spaces,” says Knight Frank Malaysia Sdn Bhd managing director Sarkunan Subramaniam.

“However, township residents must consider longer travel times and higher transportation costs to the city. Due to their size and scope, new townships will also take time to fully mature.”

At the higher end of the market, developments like Setia Eco Park in Shah Alam by SP Setia Bhd, Eco Grandeur in Puncak Alam by Eco World Development Group Bhd and Ara Damansara in Petaling Jaya by Sime Darby Property Bhd primarily cater for the T20 demographic.

The T20 demographic is defined as the top 20% of households by income, with B40 comprising the lower 40%.

The Department of Statistics’ latest Household Income & Expenditure Survey reported the mean monthly income for T20 households was RM14,305, M40 households (RM5,662) and RM2,537 for B40 households in 2014.

Public and private affordable housing initiatives such as Rumah Selangorku and Tropicana Urban Homes target the B40 segment, though lower profit margins at this range make them less attractive to developers.

Stepping in to fill the needs of the burgeoning middle-income group, mid-range townships are the bread and butter of the national housing agenda. They essentially address residential needs for the middle class while generating sustainable revenue for property players.

“Today, the market is flooded with affordable homes and high-end launches. Developers need to differentiate themselves to succeed, which is why we’re striving to create a niche for ourselves in the mid-range,” says GuocoLand group managing director Datuk Edmund Kong (see sidebar).

There were an estimated 2.7 million households in the M40 segment in 2015, accounting for some 11.6 million Malaysians.

“Large township developments can only be undertaken by the largest established developers, while smaller developers are more likely to venture into niche developments within these townships, which can then become mid-range township developments,” says CBRE|WTW managing director Foo Gee Jen.

Large-scale home ownership needs have been met, says Foo, opening the door for mid-range township players

He notes there is no definition for mid-range townships except based on market perception. “We have adopted market perception of these townships as ranging between 40ha and 120ha, with better planning of open green spaces and relatively lower densities.”

Foo notes that landed properties in the price range of RM300,000 to RM700,000 remain the preferred choice for demographics targeting these townships, given their flexibility and scope for extension and renovation, as well as the escalation of monthly service charges for high-rise properties.

 

Finding room to grow

Paramount Property Development, a major township developer, traces its roots to township projects in Kedah, including Taman Patani Jaya and Bandar Laguna Merbok, which was the first gated township in Sungai Petani when it was launched in 1996.

Like many players in the northern market, the developer – a subsidiary of Paramount Corp Bhd – eventually ventured into the Klang Valley, drawn by its affluent outlook and enduring prospects.

 Its launches in the central region include Kemuning Utama, Shah Alam in 2005 and Greenwoods Salak Perdana, Sepang in 2015.

Greenwoods Salak Perdana, sprawling over 95.9ha with a gross development value of RM1.06 bil, is a prime example of a mid-range township, with link and strata home, townhouse, apartment and shopoffice components.

Projected for completion in 2024, the development will take place over eight phases, with the RM45 mil Belian commercial hub, comprising 47 units of double-storey shopoffice, as its current launch.

Chew says mid-range townships require developers to anticipate market trends up to 15 years ahead of time

Paramount Corp group CEO Jeffrey Chew notes that there will always be demand for landed properties in well-planned townships, particularly in growing and suburban areas.

“Under current market conditions, we are maintaining a ratio of 70% landed to 30% high-rise within our residential components, as we feel this is reflective of demand,” he tells FocusM.

“Townships, being greenfield developments in nature, also give developers the freedom to craft unique concepts that are then carried through in totality, which the market is very much about these days.”

Reapfield Properties Sdn Bhd group chief operating officer Jonathan Lee reinforces this point, highlighting Desa ParkCity (in Kepong, Kuala Lumpur) by the Samling Group as a township which has benefited greatly from the developer’s tight creative control throughout its development.

“Samling capitalised on the demographics of the area, starting with more affordable launches then transitioning into a more affluent market to differentiate the township,” he says.

“Today, it’s one of the Klang Valley’s most desirable addresses. It’s not huge in terms of acreage, but it has everything from healthcare and recreation facilities to commercial areas and more.”

 

Playing the waiting game

In terms of planning, Paramount Corp’s Chew notes that mid-range townships can be easier to manage in that their internal infrastructure can be designed from scratch, making it easier to integrate into the larger masterplan.

“In this regard, city and integrated developments are more challenging, because developers are often required to work around existing infrastructure elements,” he says.

CBRE|WTW’s Foo says these considerations are particularly relevant to mid-range township developers due to their capital constraints relative to more established players.

Lacking the financial leverage to implement large-scale earthworks and residential projects, they benefit less from economies of scale in the construction supply chain. As such, they rely less on pricing and more on design, quality and branding elements to differentiate their products.

Other challenges involved in developing townships include the longer timeframe required for them to mature.

Desa ParkCity, Knight Frank’s Sarkunan notes, took 15 years to establish itself since its 2002 launch, while Setia Alam by SP Setia is about 70% developed, 13 years after it kicked off in 2004.

This translates to slower but steady value appreciation rates for township purchasers and investors compared to boutique projects, with Chew noting that unit prices in Kemuning Utama have increased by 220% over 12 years.

This “gestation period” means that township players must strive to anticipate future market movements for the project to succeed. “We need to be able to read and understand property trends, correctly predicting what consumers will demand over a long development period, often between eight to 15 years,” says Chew.

In future-proofing these developments, he adds it is critical they continue to be accessible and well-connected, even as other towns and cities evolve around them.

“Design elements that promote health and well-being are also important, from airflow to green parks and a strict adherence to environmental and waste management standards,” he says.

 

Connectivity and convenience

The primary issue that townships face in terms of consumer perceptions is their distance from the city centre and its associated employment and leisure opportunities.

Here, infrastructure projects such as Klang Valley’s growing mass rapid transit (MRT) and light rail transit (LRT) networks, and its growing confluence of major routes and trunk roads, are closing the gap for township players as a stop-gap measure.

“Klang Valley’s LRT and MRT will ease commuting time for residents in existing townships in the short to medium term. However, as population increases and the LRT/MRT lines are extended and ridership grows, commuting times may again lengthen,” says Foo.

Another more holistic way for developers to address travel time for their communities is to strive for a balanced mix of components within a township, eliminating the need for residents to travel far.

Sarkunan notes that a successful development should include neighbourhood retail areas, primary and secondary educational institutions, healthcare components, recreational areas, and safety and security features.

International schools and universities are a bonus, while a range of residential product types, from landed to high-rise, can widen the township’s target market.

“Some developers are now designing their products and townships with retirees, and we’ll see more of these senior-assisted living features rolled out in the near future,” says Lee.

In addition, players like Eastern & Oriental Bhd are reported to be incorporating wellness components into townships such as Elmina West in the City of Elmina, capitalising on a medical tourism market with a target revenue of RM1.3 bil this year, as estimated by the Malaysia Healthcare Travel Council.

However, one element that many mid-range townships lack is the industrial component, which can affect their ability to reach a “critical mass” of working and residential population with time.

“Townships have been mainly a mix of residential and commercial properties. However, successful townships must also create employment opportunities in the form of technology parks, decentralised offices and more,” says Foo.

“These are modern industries which are more knowledge- and service-based, and are necessary for townships to become economically and commercially self-sustaining in the long term.”

 

Cycles in property

It’s worth noting that townships are not a recent trend but a revisited one, with large-scale developments driven by federal housing initiatives as the norm in the 1970s and 1980s.

“In the past, mega townships could be developed by developers such as Sime Darby and the Sunway Group due to the huge demand for home ownership. Hundreds of houses could be offered for sale in a single launch and be taken up almost immediately,” says Foo.

“However, most of the rakyat have purchased homes and the demand for home ownership in the thousands has been largely satisfied. Under prevailing conditions, sales launches have been much smaller, with less than 100 homes in a single launch in many cases.”

Following the boom period for property, many developers in the central region focused on housing products targeting more affluent demographics, pushing prices and launches towards the higher end of the market.

This focus has left the middle and lower segments of the market unaccounted for, with a resulting call for more affordable housing in the Klang Valley in recent years.

With the need for large townships largely past, the task of delivering housing for these demographics falls primarily on mid-range township players.

Outside of the Klang Valley, such townships have remained the staple of developers in other states such as BDB Land Sdn Bhd in Kedah and Matrix Concepts Holdings Bhd in Negeri Sembilan.

Matrix Concepts has developed Bandar Sri Sendayan, a 2,117ha township in Seremban with residential components focusing on the mid-range of the market (see sidebar).

In the case of BDB Land, it has delivered more than 9,400 homes since its inception in 1983, with the majority of these launches based in its townships and 97% of which are in the affordable range.

Creating a township within a township

GUOCOLAND (Malaysia) Bhd has traditionally kept a low profile in the property sector, but that has changed with the reimagination of its iconic 404.69ha Emerald Rawang township.

Going back to the drawing board, group managing director Datuk Edmund Kong and his team have modernised the masterplan for the development’s remaining 146.69ha with an eye to lifestyle elements.

The market is flooded with affordable homes and high-end launches. Developers need to differentiate to succeed, says Kong


In this way, GuocoLand has effectively created a township within a township, updating Emerald Rawang with contemporary amenities while staying in line with its mid-range positioning.

These include plans for a central park, recreational and commercial centres, and a range of landed and high-rise residential offerings, with a total gross development value (GDV) of RM2.5 bil.

Upcoming launches for Emerald Rawang include Chloe Residence, comprising 142 units of terraced homes with a GDV of RM120 mil, and 12 Points, with 12 shopoffice units.

Leveraging on the Emerald branding, GuocoLand will also be launching Emerald Hills in Cheras, a 19.17ha township encompassing 181 terraced homes and 1,378 condominium units.

Targeted for launch in the fourth quarter, Emerald Hills is envisioned as a serene getaway from the bustle of Cheras, with a projected GDV of RM963 mil. 

Property for the masses

MATRIX Concepts Holdings Bhd is a classic example of a developer which has gained success by developing homes for the people in townships outside of the Klang Valley.

The company debuted in 1997, catering for mid-range housing in Taman Bahau, Seremban, a RM50 mil mixed development comprising 581 terraced houses and 14 shopoffices.

Previously a project abandoned after the economic recession in 1985, Matrix redeveloped Taman Bahau in line with revised affordable housing guidelines by the Negeri Sembilan state government.

The revival initiative was a success for the developer, with 100% uptake within a year despite launching at the height of the 1997 Asian financial crisis.

Today, Matrix is primarily known for Bandar Sri Sendayan, its 2,117ha township in Seremban with residential components focusing on the mid-range of the market.

The developer has delivered 7,851 residential and commercial units in the township to-date, with 2,313 units under construction this year and a balance of 8,429 units for future development.

With an estimated gross development value (GDV) of RM1.29 bil in Q1FY18, Bandar Sri Sendayan’s upcoming launches include Hijayu Resort Homes, Suriaman and Ara Sendayan.

Hijayu Resort Homes will comprise 129 terraced houses and 52 semi-detached homes with a GDV of RM179.6 mil, while Suriaman will feature 253 terraced units with a GDV of RM186.3 mil.

Finally, Ara Sendayan will offer 269 terraced homes and 388 terrace office units, with a GDV of RM429.7 mil.



This article first appeared in Focus Malaysia Issue 253.