This article first appeared in The Edge Malaysia Weekly on June 5, 2023 - June 11, 2023
THINGS are finally moving along more than a decade after the idea of establishing Kwasa Damansara as a township was conceived and the master developer Kwasa Land Sdn Bhd, a wholly-owned subsidiary of the Employees Provident Fund (EPF), is closer to unlocking the RM2.8 billion investment it made in 2011.
Kwasa Land’s intention to pick up the pace at the 2,620-acre development in Selangor is clearly visible with EPF officially setting up its headquarters on a six-acre tract in the town, which is connected by the MRT Kajang Line and MRT Putrajaya Line, last month.
“This building is actually owned through Kwasa Utama Sdn Bhd, a 100%-owned subsidiary of EPF, and it is on a rental model back to EPF. And whatever yields we earn from it [the headquarters building] goes back to the members,” says EPF CEO Datuk Seri Amir Hamzah Azizan, assuring EPF members of the statutory body’s prudence.
“It is a better model and it facilitates borrowing, to use borrowings to fund the building. So, we get better use of our funds. The borrowing rate is lower than the return rate to members, which is okay, due to the structure rather than anything else.”
Amir, who joined the provident fund in 2021, acknowledged that the Kwasa Damansara township project, which had remained idle for more than a decade since it purchased the land from the Rubber Research Institute (RRI), was more challenging than expected.
When EPF bought the massive tract from RRI, the domestic property market was booming and real estate prices were rising fast, which is quite a contrast to the current scenario.
Nonetheless, the sight of construction barrier walls erected in Kwasa Damansara is a sure sign of progress towards the township’s estimated gross development value of RM50 billion.
Land sales is one way for EPF to generate yield, says Amir, who appears unfazed by the slow recovery of the property market. The model that EPF has adopted is effectively finding developer partners, he adds.
“In some instances, it [Kwasa Land] just sells land and gets money. In other instances, it sells land with a property kicker, so that there is a sharing of risk. It depends on what [the property developer] wants,” he elaborates.
When asked about the timing of the development, considering the prolonged soft property market, Amir points out that developments that find a niche in the market will do well even in bad times.
“I think each of the developer partners will have to do this assessment themselves. They [the developers] can come and put in money. They would not put in money if they do not believe they can get somewhere along the way,” he says.
EPF’s investment in real estate isn’t large, constituting about 7% of its investment portfolio as at December 2022.
Aimed as an inflation hedge, the allocation for real estate and infrastructure assets is 6% under the provident fund’s Strategic Asset Allocation (SAA) in 2021, down from 10% under its previous SAA in 2019, according to EPF’s 2021 and 2019 annual reports.
Given EPF’s size, with RM1 trillion under management, Amir does not deny that the development of Kwasa Land may not be that significant in terms of improving its dividend stream.
“It’s not going to make waves [in terms of generating dividends]. But for the Kwasa Land area, for the state of Selangor, for Malaysia, this is a tangible development. And if you look from a societal point of view, the element of creating a bit more equitable living and stuff like that also come into this,” he says.
“Because you have affordable housing. The first round is just less than 5,000 units, and the next round is another 5,000 units. That is 10,000 affordable homes. They are coming up because Kwasa Damansara was created.”
A groundbreaking ceremony was held in February for the proposed 4,694 Rumah Idaman homes, with built-ups of about 1,000 sq ft each, priced at about RM250,000 and slated for completion in 2026.
Amir hinted that a Kwasa Land tender for 600 acres on the PJ East side in Kwasa Damansara was taken up by a partner with “good returns”, but did not mention the name of the developer.
Of the 2,620 acres in Kwasa Damansara, 361 acres were acquired by the government for the construction of the MRT stations and the Damansara-Shah Alam Elevated Expressway (DASH), as well as for the use of the Malaysian Meteorological Department.
EPF’s ambition to grow the population of Kwasa Damansara is being solidified by its partnerships with property developers such as YTL Corp Bhd, Impiana Land & Development Sdn Bhd, Exsim Group, Gadang Holdings Bhd, TSR Capital Bhd and Malaysian Resources Corp Bhd, in which the provident fund has a 36.2% stake.
Kwasa Damansara is pictured as having an element of equitable living, with affordable housing projects such as the Rumah Idaman Kwasa Damansara — a partnership between Kwasa Land, Permodalan Negeri Selangor Bhd and Gagasan Nadi Cergas Bhd — having commenced.
Some 935 acres, or about 40% of the remaining 2,259 acres, were surrendered to the government for infrastructure works and public facilities. Meanwhile, 1,324 acres are for developments in Kwasa Damansara, with 345 acres under the Shah Alam City Council and 979 acres under the Petaling Jaya City Council.
“It gives us comfort that the pace of development is now coming into a better form. And because of that, the de-risking is also occurring for EPF,” says Amir, who is confident of the partners that Kwasa Land has chosen, which he believes are credible and tested.
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