KL moves to recover losses from undervalued land deals

This Aset Kayamas residential project in Kuala Lumpur consists of public housing and a private condominium on land once gazetted for public use.
This Aset Kayamas residential project in Kuala Lumpur consists of public housing and a private condominium on land once gazetted for public use.ST PHOTO: TRINNA LEONG
This Aset Kayamas residential project in Kuala Lumpur consists of public housing and a private condominium on land once gazetted for public use.
This Aset Kayamas residential project in Kuala Lumpur consists of public housing and a private condominium on land once gazetted for public use.ST PHOTO: TRINNA LEONG

Govt scrutinises 97 deals struck by previous administration, renegotiates terms of some

In the suburban township of Cheras on the edge of Kuala Lumpur, a former football field for residents has been sold off to be turned into low-cost flats and a private condominium.

The 986 units at the Holmes 2 apartments are priced from RM370,000 each, yielding a gross development value of RM410 million (S$136 million).

But the land, valued at RM46 million, according to official documents seen by The Sunday Times, allegedly cost property developer Aset Kayamas only RM11 million.

The Cheras land deal from 2015 is one of 97 transactions being scrutinised by the Malaysian government as it seeks to recover losses from billions of ringgit worth of land deals struck by the previous administration since 2012, after a probe revealed property developers bought swathes of prime land in the capital from the Federal Territories (FT) Ministry at low prices.

A source with knowledge of the investigation told The Sunday Times that of the 97 land sales, 17 were awarded directly to Aset Kayamas, while a further eight were snapped up by textile company Jakel, also by direct tender. The remaining deals were made with dozens of other developers.

"Most of the land that's being probed now was sold directly to companies," said the source.

FINANCIAL VIEWPOINT

Our goal wasn't to determine elements of corruption but to ensure that the deals don't cause City Hall any losses... Since we have no access to investigate bank accounts of those involved, we've focused on whether those lands were sold at a reasonable price or not.

MR KHALID SAMAD, new Federal Territories Minister, who says the ministry is not looking to penalise the companies, as that would be left to the anti-graft agency which is conducting its own investigation.

New FT Minister Khalid Samad said the ministry is not looking to penalise the companies as that would be left to the anti-graft agency, which is conducting its own investigation. "Our goal wasn't to determine elements of corruption but to ensure that the deals don't cause City Hall any losses," he said.

"Since we have no access to investigate bank accounts of those involved, we've focused on whether those lands were sold at a reasonable price or not", he said at a press conference earlier this month.

Mr Khalid said some RM149 million has been recovered after the government renegotiated terms on 16 land deals with the developers. "The government was also able to get back 5ha of land valued at RM113.8 million," he added.

The Sunday Times understands that after deliberations, the government allowed 15 of the land sales to Aset Kayamas to proceed, but two remain unresolved as negotiations reached a stalemate.

Meanwhile, seven of the transactions involving Jakel will also go ahead but one of the deals will be contested in court.

"From a legal viewpoint, the buyers have grounds to object based on the agreements they signed with DBKL," said Mr Khalid, using the Malay acronym for Kuala Lumpur City Hall. "But we hope the courts will take all factors into consideration. DBKL is willing to buy the land back at the price the contractor bought it for."

The deals - involving prime land totalling 273ha and worth RM5.63 billion - were struck under the previous Barisan Nasional government.

The investigation found that developers could buy land cheaply by promising to build affordable housing on it under the FT Ministry's Rumah Wilayah Persekutuan (Rumawip) programme.

 
 
 
 

They would build one or two blocks of Rumawip and develop private condominiums on the rest of the land, raking in handsome profits from lower land costs, and exemptions or discounts on charges and fees for land development.

"This method easily saves any one company between RM50 million and RM100 million per project," said the source.

One such project is Aset Kayamas' The Holmes 2, which will be built next to a two-block Rumawip.

A document viewed by The Sunday Times shows the land's price tag to be RM46 million but, according to the source, an Aset Kayamas subsidiary paid the government only RM11 million for the land after discounts and exemptions for certain charges were applied.

Documents also show that the government-owned parcel was in 2005 gazetted as reserve land set aside for public use. In 2015, City Hall issued a directive to convert the land status to residential and sell it to an Aset Kayamas subsidiary.

Letters seen by The Sunday Times mention that the directive came from the former FT minister, Tengku Adnan Tengku Mansor.

Aset Kayamas, which is owned by businessman Chai Kin Kong, did not respond to a request for comment. Its website shows it is building 15 affordable housing projects within the city. The Chai family has been involved in the logging business in Sabah for more than three decades, via public-listed Sanbumi Holdings, and in property development since 2004.

Textile group Jakel, meanwhile, launched its maiden residential property project in Cheras, Kuala Lumpur, in 2015. The family-owned company is run by four brothers from the Jakel family, company documents show. The company declined to comment for the story.

Since taking power in May, the Pakatan Harapan administration has been looking into various deals conducted by the former BN government.

Kepong MP Lim Lip Eng first highlighted these land deals in April, divulging that only half of the 64 land plots sold for RM4.28 billion were for affordable housing. Subsequent probes by the new government found 97 land transactions involving over 100 land plots.

"The unfair part is why only one company owns so many plots and why some of the land was sold to non-property development companies," said Mr Lim.

He had previously urged the Malaysian Anti-Corruption Commission to investigate Datuk Seri Tengku Adnan, who he says was the one who approved all the land sales. According to Mr Lim's calculations, at least one plot of land was sold every month during Tengku Adnan's five years as FT minister.

Current FT Minister Mr Khalid said 43 of the scrutinised deals were, nevertheless, allowed to proceed because they involve affordable housing projects.

"It's difficult to pin the guilt on anyone except the (former) minister, who gave clear specific instructions," Mr Khalid said.

Tengku Adnan did not respond to requests for comment.

A version of this article appeared in the print edition of The Sunday Times on October 21, 2018, with the headline 'KL moves to recover losses from undervalued land deals'. Print Edition | Subscribe