Ekovest encounters partnership hiccup

KUALA LUMPUR: Ekovest Bhd, which plans to launch several property projects in Kuala Lumpur and Johor with a combined gross development value (GDV) of RM10 billion through 2023, is encountering a hiccup in identifying its foreign joint-venture (JV) partners, as the housing cooling measures announced by the government last year has dampened interest in local properties.
"The housing cooling measures has sent a wrong message to the foreign investors. It is too early for Malaysia to introduce that because our property market hasn't gone back to the booming period in 1998," said Ekovest managing director Datuk Lim Keng Cheng (pix).
In Budget 2014, the real property gains tax (RPGT) was raised to 30% for properties disposed off within a holding period of up to three years. For disposals within the holding period of up to four and five years, the rates were increased to 20% and 15% respectively.
"(By raising RPGT), you're creating a big vacuum shortage in the supply of properties and the contractors will be crying for jobs because a lot of developers are worried about the cooling measures. There will be lesser units to supply the market and that will create another round of hike in property prices," said Keng Cheng, adding that the only way to cut down the prices is to increase supply.
He also opines the RPGT should be revised back to the pre-budget level, as the property market in Malaysia has not reached the same level as Shanghai, Hong Kong and Singapore.
Ekovest, an integrated construction, property development and infrastructure group controlled by property tycoon Tan Sri Lim Kang Hoo, has a 10-year plan to develop its landbank in Kuala Lumpur and Johor, with a GDV of RM5.6 billion and RM4.4 billion respectively.
According to Keng Cheng, who is Kang Hoo's nephew, the property projects in the pipeline such as EB Gateway (RM2.8 billion), EB Quay (RM210 million), EB Park Place (RM323 million) and EB Avenue (RM186 million), are all open for JV partnerships with any reputable foreign developers.
"My door is always open for JV. We welcome property developers from China, Indonesia, Japan and Korea. But so far, nothing is concrete," he said, adding that the JV ratio is open for discussion.
Despite the negative impact from the revised RPGT, Keng Cheng however remains optimistic about the prospect of attracting foreign partners to jointly develop the landbank in the River of Life precinct, dubbed KL River City.
"Yes, this (RPGT) is the main challenge for us. But the petrol in our country is being subsidised and the cost of building materials here is cheaper than other countries," he said.
"This is how I convince them and they still see the positive side of Malaysia. Hopefully, this is just a hiccup and they will be back," he added.
He went on to say that some of the foreign developers have expressed interest to undertake the JV with Ekovest, hence the group may not need to raise capital should the JV partners come in.
On the on-going property projects, Keng Cheng said EkoCheras, with a GDV of RM1.6 billion, was launched in September 2013 and its residential units have almost sold out. As for its commercial units, the group intends to build a shopping mall to generate recurring income.
In the second half of 2014, Ekovest will launch EB Titiwangsa, a mixed-development project comprising retail shops and service apartments with a GDV of RM500 million.
On another note, Keng Cheng said Ekovest may consider expanding its highway concession business to Malacca, as the group has built and now operates the RM1 billion Duta-Ulu Kelang Expressway (DUKE) 1 and the RM1.18 billion DUKE 2.
For its construction segment, Ekovest has an orderbook of RM2.27 billion, including the construction work of DUKE 2, as well as the fourth lane widening of PLUS highway between Nilai and Bukit Lanjan.
The group is also bidding for other projects worth RM1 billion, including the infrastructure civil work of refinery and petrochemicals integrated development (RAPID) project in Pengerang, Johor.
Going forward in 2015, Keng Cheng expects the highway concession business and property division to contribute 30% each to Ekovest's revenue, while the remaining 40% from its construction segment.