THE Negeri Sembilan government’s decision to change its affordable housing policy and raise the bumiputera quota for new residential projects from 30% to 50% has come in for a lot of flak from observers and property experts who deem the move “restrictive”.

However, niche developer Matrix Concepts Holdings Bhd says the rule change could translate into a 12% to 15% increase in the gross development value (GDV) of its projects and bolster its bottom line.

“The people will ultimately benefit as there will be more affordable housing, while developers can still make a profit,” Matrix Concepts founder and group managing director Datuk Lee Tian Hock tells The Edge.

According to him, the GDV of a project can be higher under the new ruling because only 15% of houses have to be priced below RM80,000 unlike before when at least 30% of the units had to be low-cost (RM40,000). This means that 15% of the units can now be sold at a higher price.

The trade-off, so to speak, is that at least half of the residential units built must be priced below RM400,000 each.

To recap, under the new ruling that became effective on June 9, 15% of residential units must be priced below RM80,000 each, another 15% should be sold for between RM80,001 and RM250,000 and at least another 20% have to be transacted at between RM250,001 and RM400,000 (see table).

While the requirement to set aside more units for bumiputera buyers will increase developers’ cost — as they are required to give discounts of 5% to 10% to bumiputera buyers regardless of their income level and the price of the property — Lee insists that the new rule is a win-win for the public, property developers as well as the state government.

“When the state government announced the new policy, a lot of developers complained that it would affect their cash flow … because of the unsold bumiputera units. For Matrix Concepts, we have no problem in selling those units. What I suggest to the other developers is that when launching projects, make sure you advertise in the Malay newspapers. In the next six months, you advertise twice more. If you still have unsold bumiputera units, then you can file to [have the units released] to the market,” he says, adding that the company had “no problems” in fulfilling the old 30% bumiputera quota.

“My target group are the bumiputeras, but now that my township has started to mature, more non-bumiputeras are buying units here.”

Incorporated in 1997, Seremban-based Matrix Concepts (fundamental: 2.15; valuation: 1.20) has sold over 21,000 residential and commercial properties with a total GDV of RM2.4 billion. Its flagship township is the 5,000-acre Bandar Sri Sendayan just 7km outside Seremban. It has 500 acres in Labu and Rasah, also in Negeri Sembilan.

“When Bandar Baru Sendayan started out, the first 5,000 units were below RM400,000. You must look at the policy from Negeri Sembilan’s perspective. Can you imagine selling a landed property for RM250,000? This new policy is workable in Negeri Sembilan. At the current pricing level, we can still make good margins by selling at below RM400,000,” Lee says, adding that some 90% of the company’s low-cost offerings are bought by bumiputeras.

For properties above RM500,000, Lee estimates that the buyers comprise bumiputeras (40%), Chinese (40%) and Indians (10% to 20%). Overall, Matrix Concepts’ buyer profile is 50% bumiputeras and 50% non-bumiputeras, he adds.

“We do a lot of reaching out to the bumiputera community by doing roadshows in Putrajaya, targeting the civil servants there, as well as advertising in the Malay newspapers,” Lee says. Generally, bumiputeras do not know about a development until it has matured, he adds.

Lee agrees that the mechanism to release unsold bumiputera units should be simplified and the approval period should be shortened to about a month from 6 to 12 months now.

“What I have suggested to the state government is, instead of having just the exco giving approval, the exco should delegate to one of the top three government servants in the state, that is the state secretary, the head of the Land and Mines Department or the head of Unit Perancang Ekonomi Negeri. This way, I think the process can be shortened.”

Analysts say Matrix Concepts has an advantage in Negeri Sembilan as its land cost is low. Bandar Sri Sendayan was acquired at RM3 psf, while the Sendayan Tech Valley, an industrial park adjacent to the township, was bought at RM9 psf, including infrastructure costs.

“The net impact of the rule change will be quite neutral, as Bandar Sri Sendayan is expected to continue being a preferred township for local buyers,” says Loong Kok Wen, an analyst with RHB Research Institute who covers Matrix Concepts.

Bandar Sri Sendayan is strategically located between Seremban and the Kuala Lumpur International Airport. The relocation of the Royal Malaysian Air Force’s ground training facility from Sungei Besi to Sendayan will give new impetus to the township, says Loong.

Still, Matrix Concepts’ concentration of landbank in Negeri Sembilan has been a concern, as its fortunes would be tied to the economic development of the state. For that reason, Matrix Concepts has ventured into the Klang Valley. For example, it paid RM95 million for a 5.76-acre parcel within walking distance of Setia Walk Mall in Puchong. It will develop a residential high-rise project with an estimated GDV of RM500 million there.

In Kuala Lumpur, it plans to acquire a parcel near Sunway Putra Mall and the Putra World Trade Centre. An analyst reveals Matrix Concepts’ development will have a GDV of about RM300 million.

These two projects will be built over four to six years.

When asked about the group’s landbank outside Negeri Sembilan, Lee says the company is weighing its options carefully in the light of the weak outlook for the property sector. Data from the National Property Information Centre (NAPIC) shows only 3,929 residential properties had been transacted in Negeri Sembilan in the first quarter of the year, down 25% from 5,236 in the previous corresponding period.

“The property market is very soft now, thus we do not want to acquire land only to find out that it is hard for us to sell the projects. So, we are looking for land that can be used for affordable housing projects, as the demand still outstrips supply,” says Lee.

Matrix Concepts’ net gearing level of only 0.04 times puts it in a good position to weather the tougher times ahead. As at end-March, its unbilled sales stood at RM392 million, down from RM429.3 million as at end-2014, but its ongoing projects have a total GDV of RM1.18 billion.

This article first appeared in The Edge Malaysia Weekly, on June 29 - July 5, 2015.

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