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Abu Dhabi, UAEThursday 13 December 2018

Malaysia bans foreign buyers from $100bn Forest City project

Chinese developer Country Garden says comments contradict what Prime Minister said last week welcoming foreign investments

No go. Foreigners will now not be allowed to buy property at Forest City in Johor, Malaysia. Reuters
No go. Foreigners will now not be allowed to buy property at Forest City in Johor, Malaysia. Reuters

Malaysian Prime Minister Mahathir Mohamad said foreigners won’t be allowed to buy property at Country Garden’s $100 billion project, or be granted visas to live there.

The Forest City project near Singapore had targeted buyers from China for its mixed-residential development, as well as investors from Indonesia, Thailand and Dubai. Malaysia’s My Second Home programme allows wealthy foreigners to live in the South East Asian nation on a long-stay visa, with Chinese nationals being the largest group of participants.

“Our objection is because it was built for foreigners, not meant for Malaysians,” Mr Mahathir said to reporters. “Most Malaysians are unable to buy those flats.”

His comments are inconsistent with what he said during an August 16 meeting with Country Garden’s founding chairman Yeung Kwok Keung, the company said. During the 40-minute discussion, Mr Mahathir said he welcomes foreign investments that can benefit Malaysia’s economic growth and job creation, according to the company.

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Since coming to power in May, Mr Mahathir has taken a firm stance against foreign investments that he says don’t benefit Malaysians. He indefinitely deferred the $20bn East Coast Rail Link project and a Trans-Sabah gas pipeline project backed by Chinese state companies after his visit to Beijing last week. But he still struck a conciliatory tone, saying he can’t blame the Chinese side for unfavourable contracts signed by the previous Malaysian government.

Mr Mahathir didn’t say how he would put a stop to foreigners buying the property at Forest City or how far-reaching the ban on visa approvals would be.

The Shattuck-St Mary's School Forest City campus overlooks ongoing construction and the Port of Tanjung Pelepas in Johor, Malaysia, August 20, 2018. Picture taken August 20, 2018. REUTERS/Fathin Ungku
The Shattuck-St Mary's School Forest City campus. Reuters

Forest City has complied with all laws and regulations and has the necessary approvals to sell to foreign purchasers, Country Garden said in its response. The company is seeking clarifications with the Prime Minister’s Office regarding the press conference, it said.

Country Garden’s shares pared gains to 2.2 per cent after Mr Mahathir’s comments, having risen as much as 3.9 per cent earlier.

The Forest City project in southern Malaysia sits on four artificial islands, and once completed, will house approximately 700,000 people on an area four times the size of New York’s Central Park once completed. It will have office towers, parks, hotels, shopping malls and an international school. Construction began in February 2016 and apartments became available in May last year.

Prospective buyers look at a model of the development at the Country Gardens' Forest City showroom in Johor Bahru, Malaysia, on February 21, 2017. Reuters
Model of Country Gardens' Forest City. Reuters

The projects were first marketed in China with thousands of buyers paying deposits for apartments that cost as much as double the rate per square meter paid by Malaysian home buyers. Last year, Country Garden shifted its selling focus to other foreigners, after mainland buyers were spooked by a Chinese crackdown on outflows. Sales at Forest City project fell 20 per cent to 8 billion yuan (Dh4.4bn) in 2017, Reuters reported.

Malaysia’s My Second Home programme was a selling point for the project given its lower investment thresholds compared with countries such as the US, Canada and Singapore. For Forest City buyers, Country Garden will cover their fees to apply for the programme and help with the application, according to its marketing website.