The Star Online > Business

Monday May 29, 2006

Global earnings flowing to bottom lines

THE lucrative international market is beckoning Malaysian property development and construction companies.  

Local companies that have successful offshore projects have gained from the positive publicity, and seen a boost in their earnings performance and reputation. 

Among the bigger players with overseas property projects are Mulpha International Bhd, IJM Corp Bhd, IGB Corp Bhd, Sunway City Bhd and IOI Corp Bhd.  

Quite a number of construction companies, including IJM Corp, Gamuda Bhd, Road Builder Holdings Bhd, WCT Engineering Bhd and Mudajaya Corp Bhd, are exporting their expertise overseas, the most popular destinations being India, China and countries in the Middle East and South-East Asia.  

The inroads made by the big construction groups in the foreign markets have given reason for their property subsidiaries to explore opportunities in those countries as well. This allows the units to leverage on the reputation and networking of their parent companies.  

The huge and relatively untapped property markets have much to offer Malaysian developers, which through their immense experience, innovativeness and technical know-how, are able to plan, build and market a broad spectrum of residential and commercial projects. 

Going by Mulpha's huge success Down Under, Australia is a big real estate market for developers with the right products to offer.  

Lai Voon Hon
Mulpha, through its development projects in Sanctuary Cove, Queensland, and Norwest Business Park, Sydney, is one of the largest Malaysia-based real estate investors and developers in Australia. The company's Australian operations contributed more than 60% to total group earnings.  

There are also bountiful opportunities in India and China that Malaysian developers could take advantage of. 

In China, a surge in demand for residential and commercial products has resulted in a big scope for new real estate developments in most of the big cities. 

India is another promising market that is wooing Malaysian developers to its shores. 

An increase in job creation, rising income, low housing finance rates, rising demand and changing demographics have contributed to a buoyant Indian real estate market.  

The Indian authorities in February last year eased rules on foreign direct investments in the real estate sector, allowing 100% foreign participation in development of townships, housing, commercial premises, hotels, resorts, hospitals, educational institutions and recreational facilities. 

Indian joint-venture partners are wooing Malaysian developers for their expertise in developing townships, shopping complexes, infrastructure and highway developments, as such projects and facilities are still lacking in India. 

Tan Boon Lee
Malaysian developers are undertaking ventures in Hyderabad, Bangalore and Chennai, while some adventurous ones have become pioneers in Punjab.  

Hyderabad and Bangalore, which have become the country's IT hub, are rapidly expanding and there is urgent demand for commercial and residential products to cater to the huge influx of residents into these areas.  

IJM, one of the first to offer integrated township living in India, has made good headway in the country's property landscape. 

Analysts said as the projects were being undertaken via joint ventures with state-owned landowners, the land costs of IJM projects remained relatively low and lucrative.  

AmWatch, in a recent research note, said by starting its own ready-mix concrete plant in India, IJM would be able to control the cost and supply of key raw materials, such as concrete for its developments in the country.  

IOI Corp is using its maiden offshore development project to build a gems and jewellery complex, AP Gems Park, in Hyderabad, India, as a test bed to explore opportunities in the country's property market. The complex is scheduled to open for business by the end of this year.  

IOI property director Datuk David Tan said: “India is on the verge of an explosive growth. Its high GDP growth rates have made it the second fastest growing economy (after China). It has a very rapidly increasing middle class. There are opportunities for Malaysian developers to find the correct local partner. 

Teh Kean Ming
“If there are opportunities for more of such viable projects, we are prepared to move into India in a bigger way,” Tan said. 

Ireka Corp Bhd, which has completed a RM40mil design-and-build Brunei Embassy project in Beijing last year for the Brunei government, is also eyeing a bigger exposure overseas.  

Executive director Lai Voon Hon said property subsidiary Ireka Land Sdn Bhd was actively exploring opportunities in Vietnam, India and China. 

“Due to the rapid growth of the middle-class in India and Vietnam, there is big demand for condominium living and even gated communities. The public in both these countries have high regard for Malaysia's quality and type of residential developments, and indeed, welcome its developers to venture there.” 

Ireka plans to kick off its i-ZEN residential projects in those countries soon.  

IGB Corp Bhd chief executive officer (hotel division) Tan Boon Lee said one of the advantages for Malaysian real estate companies in their overseas pursuits was the ease that they could assimilate into any society.  

“We are multi-lingual and have a culture that makes us work easily with different races. Our businessmen are just as comfortable overseas as they are at home. This allows us to learn the local customs, traditions and ways of life quickly, thereby, we can tailor make our products better to fit into the local market,” Tan said. 

Most companies prefer to team up with good joint-venture partners to pursue their maiden forays overseas.  

As observed by IJM Properties managing director Teh Kean Ming: “The local partners have the right market knowledge and networking while we possess the technical skills and marketing know-how to deliver quality and well-designed products.” 

According to Sunway City Bhd (SunCity) senior managing director Datuk CK Wong, before venturing into any overseas projects, the company will look for financially strong and well-connected joint-venture partners, preferably landowners, to develop the projects. 

Besides SunCity's maiden offshore property project in Cambodia, the company is currently exploring opportunities in China and India.  

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