This article first appeared in The Edge Malaysia Weekly, on January 11 - 17, 2016.

THE Edge: What about the land in Air Itam, Penang? Lim Guan Eng says some of the land [parcels] don’t have titles. Is that true?

Arul Kanda Kandasamy: The Penang land was purchased with a very specific objective — to build affordable homes and to monetise the rest of the land. That area is fairly run down with lots of squatters. It is a part of Penang that could do with improvement.

So that was the original objective. But since then, 1MDB has faced challenges, as we have discussed. With the rationalisation plan, it is to either sell it outright, or to enter into a joint venture with a third party. But where we are in the grand scheme of things is to focus on Edra and Bandar Malaysia. Now that those are legally completed, we will now shift our focus to Air Itam and Pulau Indah.

Is the plan for affordable housing still on for the Air Itam land?

That is very much the objective, but clearly you have to develop it to do the affordable housing. What we have done with Bandar Malaysia is likely what we will do with the Air Itam land, where we will team up with a developer, and the developer will then deliver the project.

But first you will need to move out the squatters? Wouldn’t that be challenging?

The land was purchased on that basis. There are two key issues with the land. Firstly, the squatters who have lived there for a long time. Secondly, some portions of the land are owned on an undivided basis with other parties.

We have a lot of lots and in some of the lots, we have a 14% undivided co-owner meaning that we jointly own the land in that proportion. So any development will need the consent of the co-owner. But in real estate we have mechanisms to deal with this.

For example, we buy them out. Or we give them 100% of a 14% portion. That’s all normal.

But first, you need a plan for the land. And that is why you need a development partner to first come in. So, the undivided ownership is not an issue.

In terms of the squatters, in Penang, many squatter developments have been successfully relocated. It is a function of two things — can you give them alternative accommodation, and can you give them monetary compensation?

There are clear benchmarks of what is required of that. Once we have a development plan, we can embark on that. I don’t see that as an issue. And the price reflects that. We have an independent valuation by 

C H William that values the land at RM1.6 billion without any encumbrances. We bought the land at RM1.3 billion but we only paid RM1.06 billion because the difference is the cost of removing the squatters.

The rough estimate of relocating the squatters, at the time the land was purchased, was RM240 million.

If you ask any other developer, they will give you a similar answer.

So you disagree that 1MDB overpaid for the Air Itam land?

I completely disagree. We have independent valuations, as I said. You only need to compare the prices of equivalent land in that area.

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