Industry Overview

5. INDUSTRY OVERVIEW 5. INDUSTRY OVERVIEW Converging Knowledge Sdn Bhd Phone + 603 2333 8950 E-8-6, Megan Avenue 1 Fax + 603 2333 8899 fk)~convergl(7g No. 189, Jln. Tun Razak 50400 Kuala Lumpur, Malaysia ~nowleage® (Co.Reg.No: 926858-U)
Delivering Research Intelligence To Business The Board of Directors 101 Properties Group Berhad Two 101 Square 101 Resort 62502 Pulrajaya Malaysia Dear Sirs, Executive Summary of the Property Development and Property Invesbnent Industry in Malaysia, Singapore and the People’s Republic of China This Executive Summary of the Property Development and Property Investment Industry in Malaysia, Singapore and the People’s Republic of China is prepared by Converging Knowledge Sdn Bhd (“Converging Knowledge”) for inclusion in the Prospectus of 101 Properties Group Berhad rIOIPG” or the “Company”) in relation to the listing and quotation of the entire issued and paid-up share capital of the Company on the Main Market of Bursa Malaysia Securities Berhad CBursa Securitiesn). The information in this Executive Summary was derived from our report “The Property Development and Property Investment Industry in Malaysia, Singapore and the People’s Republic of China” (“IMRR”). 1. OVERVIEW OF THE ECONOMY The growth of Asian economies is expected to remain strong, with developing countries in Asia relying less on European and US demand. While the region saw a slower growth of 6.1% in 2012, gross domestic product (“GOP”) for the region is estimated to grow at 6.0% in 2013, before increasing slightly to 6.2% in 2014. Despite moderate economic growth in the People’s Republic of China (“PRC”), the robustness of domestic demand in Southeast Asia is expected to lead to expansion in the Asian region. The focus of this research is on Malaysia, Singapore and the PRC. The folloWing sections highlight the key economic indicators of these countries, specifically those bearing relevancy to the property industry. (Source: IMRR) 1.1. GOP 1.1.1. Malaysia In Malaysia, the local economy perfonned positively over the past five years, with the exception of 2009. Malaysia’s economy rebounded in 2010, recording a 7.4% real growth rate. The country continued to see positive growth in its economy, albeit at moderated growth rates, posting real GOP worth RM751.5 billion in 2012, and RM711.4 billion in 2011. Bank Negara Malaysia anticipates Malaysia’s real GOP to grow from 4.5% to 5.0% in 2013. Malavsia’s Annual GOP and GOP Growth at Constant Price from 2008 to 2012 ~­Growth
(Source: IMRR) Singapore Malay6ia Hong Kong 93 5. INDUSTRY OVERVIEW (Cont’d) Note: Data for 2011 is estimated, whereas the figure for 2012 is preliminary.
In terms of state performance, the top four contributors to Malaysia’s GOP in 2010 were Selangor, Kuala Lumpur, Sarawak and Johor. Selangor and Kuala Lumpur are among the states under the Greater Kuala Lumpur/Klang Valley (“GKUKV”) region, whereas Johor is home to Iskandar Malaysia. Greater Kuala Lumpur/Klang Valley GKUKV is one of the 12 National Key Economic Areas (“NKEA”) under the Economic Transformation Programme (“ETP·’). The goal of this NKEA is to transfonn GKUKV into the top 20 most liveable metropolises, and top 20 in terms of economic growth. GKUKV comprises the area under the administration of 10 local authorities, covering Kuala Lumpur, Klang, Kajang, Subang Jaya, Petaling Jaya, Selayang, Shah Alam, Ampang Jaya, Putrajaya and Sepang. Contribution from Selangor and Kuala Lumpur constituted 38.7% of Malaysia’s GOP in 2012, indicating that these two states are important economic zones in the country. Of the total approved investments in manufacturing projects in Malaysia, GKUKV has seen an increase in its proportion, from 19.0% in 2008 to 29.2% in 2012. Furthermore, Kuala Lumpur commanded the highest GOP per capita among the states in Malaysia, at RM73,931, whereas Selangor’s GOP per capita of RM36, 135 was higher than the national average for 2012. SeJangor was also the largest contributor to the country’s GOP in the same year (accounting for 23.5%), followed by Kuala Lumpur (15.2%). In the country’s ETP, GKUKV is set to receive an extensive upgrade of its urban rail transport system to accommodate future expansion plans and a growing population. Additionally, intemational and regional multinational companies are encouraged to locate their global/regional headquarters to GKU KV. Iskandar Malaysia Iskandar Malaysia is the main southern development corridor in Johor. The economic zone, which covers 2,217 square kilometres, was allocated RM6.83 billion by the government, and is the largest single development project ever to be undertaken in the region. The government is shaping the Iskandar development region in Johor into a metropolitan hub, which will encompass luxury residences, high value commercial, services and industrial districts, as well as leisure centres. In 2012, Johor accounted for 13.5% of Malaysia’s total approved manufacturing projects, or otherwise, translated to approximately RM5.5 billion. For 2012, Johor contributed 9.2% to Malaysia’s GOP, with GOP per capita standing at RM24,574. The Iskandar development region in Johor has been earmarked for mega project investments, with several catalyst projects on-going. By 2025, the region is expected to record GOP growth of 8.0% per annum, with nominai GOP of USD93.3 billion and GOP per capita of USD31, 100. Iskandar Malaysia stands out as a compelling and convenient investment destination, especially for Singapore companies, due to factors such as close proximity to Singapore, warm bilateral ties as well as investment-friendly policies. The proposed Johor Bahru-Singapore rapid transit and the Kuala Lumpur-Singapore high speed rail link will improve the connectivity between Johor Bahru and Singapore, as well as Kuala Lumpur and Singapore, thus, establishing Iskandar Malaysia as a lower-cost alternatjve location to the island state. By 2012, investment into the country’s smallest economic corridor had totalled RM106.3 billion, with a total of 500,000 new jobs created. It was further reported that Iskandar Malaysia received an additional increase of almost RM9.3 billion of investments by the end of September 2013, totalling the region’s cumulative committed investments to dose to RM128.2 billion in the third quarter of 2013. Iskandar Malaysia is targeting RM383.0 billion in investments by 2025. (Source: fMRR)
1.1.2. Singapore Singapore is an urban state, with a real GOP of SG0305.2 billion in 2012. Singapore’s economy rebounded from the 2008 economic crisis with a GOP of SG0286.4 billion in 2010. The recovery of the economy was led by the manufactUring industry, particularly the biomedical sector. Singapore’s real GOP grew by 1.3%, a decline from 5.2% in the preceding year, in the face of weak export demand and contraction in the manufacturing sector. Growth in the construction industry helped to stabilise the overall economic growth for the year, as it grew by 8.2%, the largest growth rate among all sectors. The Ministry of Trade and Finance projected Singapore’s real GOP to grow between 2.5% and 3.5% in 2013, in view of improved global macroeconomic conditions and a resilient domestic market. (Source: IMRR)


5. INDUSTRY OVERVIEW (Cont’d) Singapore’s GOP and GOP Growth at Constant Price from 2008 to 2012 GrolA1:hSGDBiliion 20.0U3!>O.O 305.1301.2 300.0
15.0% 2S().O 10.0% 1.00.0 ·5.0% 150.0 0.0% 100.0 -5.0\1(; 0.0 2008 200~ 2010 1.011
“‘” (Source: IMRR) 1.1.3. The PRC The PRe has seen vast development in its economy over the last decade. The Chinese economy was one of the least affected by the 2008 global financial crisis, contributed by strong external trade and a strict monetary policy. The PRC registered real GOP worth RMB31,662 billion in 2012, reflecting a growth of approximately 7.8%, against 9.3% the previous year. This slowdown for 2012 was attributed to weak exports, as well as the PRe government’s efforts to cool down the housing sector. Nonetheless, the PRe’s real GOP has reflected an increasing trend for the past five years, with a CAGR of 9.2% from 2008 to 2012 (Source: IMRR) The PRC’s GDP and GDP Growth at Constant Price from 2008 to 2012 RMB (100Million) Growth ._…__._._.-._~ 12.0% 316,618.0:::::\ 9;.% –:,,,···,,··.._·,,·_””’_·..·_····:::·..,.,1″0·1I4,,%s;,:: 10.0% 250,000.0 ·1—–zn,89’.0 ~-~~!.-_.-~:~–_.-. –­, 8.0%
200,000.0 6.0%
‘.0% 100,000.0
Z.<J% 50,000.0 0.0%00 2DOS 2011 20122D09 2010 (Source: fMRR)
1.2. GDP Per Capita 1.2.1. Malaysia The positive macroeconomic trend and market productivity in Malaysia has also led to rising income and stable employment among its population. As an indicator of the increasing standard of living in Malaysia, the national average GOP per capita was RM32,084 in 2012, up from RM30,536 in 2011. This was equivalent to an annual growth of 5.1%. It is estimated that Malaysia’s GOP per capita growth moderated to 9.4% and 4.6% in 2011 and 2012, reaching RM30,419 and RM31 ,828 in the respective years. For 2013, Malaysia’s GOP per capita is expected to grow by 5.9%. (Source: IMRR) 5. INDUSTRY OVERVIEW (Cont’d) Malaysia’s GOP per Capita and GOP per Capita Growth at Current Prices from 2008 to 2012 I GDP ,..C.,II. G,owth'” I 35,000 ———..—..—-.———…—————-lO.O~> I I 150% I 30.000 10.0% I
25,000 5.0% 0.0% 20,000 -5.0% 15.000 -10.0%
-15.0% 200S 0,000 [ (Source: IMRR) 1.2.2. Singapore Similarly, Singapore’s population has been enjoying rising income and stable employment, partly due to positive growth in the biochemical and manufacturing sectors. From 2008 to 2012, Singapore’s GDP per capita rose by a CAGR of almost 4.0%, reaching 5GD65,048 in 2012. During the period, growth in GOP per capita peaked in 2010 at 13.0%, slowing down thereafter to 3.6% in 2011, and 0.9% in 2012. (Source: IMRR) Singapore’s GOP per Capita and GOP per Capita Growth at Current Price from 2008 to 2012 5GD Growth 140%66,000 12.0% 64,000 10.0% 62,000 8.0%
60,000 6.0% 4.0%58,000 1.0% 56.000 0.0% 54,000 -10%
52.000 -4.0% -6,0% 2008 2009 2010 2011 50,000 IIiIIIIl GDP per Callita

(Source: IMRR) 5. INDUSTRY OVERVIEW (Cont’d)
1.2.3. The PRC The per capita income of the population in the PRC showed a CAGR of 12.8% from 2008 to 2012, posting at RMB38,354 in 2012, as opposed to RMB23,708 in 2008. This rise is a reflection of the increasing purchasing power of the population. (Source: IMRR) Per Capita Income of the PRC from 2008 to 2012 RMB 45,000.0 f——. :::::: +——_-_-~_~~~—-_-_-_-35-,’.;–~:~:–­IIF'”~-_:: ••~- 30.~1525.000.0 • 25,60820,000,0 —-23,7·0B ———-­15,000.0 . 100000 L———–­. . i 5,00::: J=-~~~==:–~~–­200S 2009 2010 2011 2012 Year (Source: IMRR) Likewise, per capita disposable income of urban households in the PRe has also shown an upward trend, registering a CAGR of 11.7% from 2008 to 2012. This further reinforces the rising purchasing power of the Chinese popUlation, specifically the urban households. In 2012, the per capita disposable income of urban households reached RMB24,565, which was approximately 1.6 times that of 2008. 1.3. Population 1.3.1. Malaysia The Malaysian population stood at 29.3 million people in 2012. It has been growing at a CAGR of approximately 1.6% from 2008 to 2012. It is projected that the population will increase to 32.4 million in 2020, and 38.6 million in 2040. (Source: IMRR) Malaysia’s Population and PopUlation Growth from 2008 to 2012 Population (Thousand) Gro… 3.0%29,33729,500 ·.r
2.5% 2.0%28.500 28,000 1.5% 27,500 1.0% 27,000 0.5% 2&,500 0.0% 2008 1009 2010 20U€-20121.’ I Note: Data tor 2011 and 2012 are estimates. (Source: lMRR)
5. INDUSTRY OVERVIEW (Cont’d) 1.3.2. Singapore Singapore’s population reached in excess of 5.3 million in 2012, and was growing at CAGR of approximately 2.4%. Singapore’s population has been struggling with a low replacement rate for the past three decades. It recognises the need to take in younger immigrants to help top up the smaller cohorts of younger Singaporeans, and at the same time, balance the aging of the country’s citizen population. Singapore’s total population is projected to be between 5.8 million to 6.0 million people by 2020, with the resident population, citizens and permanent residents. expected to be 4.0 million and 4.1 million respectively. This anticipated rise in total population indicates a growing need for residential properties in the country. (Source’ IMRR) Singapore’s Population and Population Growth from 2008 to 2012 Population [Thousand) 5,400.0 -r———-­
6.mli 5,300.0 5.0%
5,200.0 4.0’1\> 5,100.0 ­3.0% 2.0%soooli 1.0% G.OYo 20<J1I 2011 2012.
(Source_-IMRR) 1.3.3. The PRG The PRC is the most populous country in the world, with 1.35 billion people in 2012. Although there was a slight decline in the population in 2009, the country’s overall population reflected a rebound in 2010, and continued to mark a steady growth until 2012. During the five-year period from 2008 to 2012, the PRC’s population increased by a CAGR of approximately 0.5%. (Source: fMRR) The PRe’s Population and Population Growth from 2008 to 2012 Population (Million) Growth 1,360 —1f5T%­0.52% 1,355 0.51% 0.51%1,350 0.50% 1,345 0.50% 1,340 0.49% 1,335 I ——_. 0.49% 1,330 I·· 1-,-5-2e—-­0.48% 0.48% 0.47% 1,315 L.~-­::::: tl—~ -0.47% 2008 2009 2012 (Source’ IMRR) 2010 2011 Papulation (Million) 720.0  711.9  -~ Growth I’,4.0%  700.0 2.9% 680.0 t–JrC.  3.5% 3.0%  660.0  2.5%  640.0 +  —.­624.0  2.0% 1.5%  620.0  1.0%  600.0 I 580.0 L…  2009  2009  2010  2011  2012  0.5% 0.0%
5. INDUSTRY OVERVIEW (Cont’d) The growing population in the PRe will give rise to the increasing demand for more residential properties. 1.4. Urbanisation 1.4.1. Malaysia More Malaysians are moving into cities and commercial hubs to live and work. In 2012, 71.0% of Malaysia’s total population was urbanised, while the remaining 29.0% lived in rural areas. In comparison, the urban population constituted 6.2% of the total population in 2001. 37.3% of Malaysia’s population lived and worked in Kuala Lumpur, Johor, Selangor and Putrajaya in 2010. Selangor’s urban population formed 17.6% of the country’s total population, whereas Kuala Lumpur and Putrajaya reported only urban population. Out of the 16 territories in Malaysia, 15 had an urban population majority. From 2000 to 2010, total population in rural areas decreased by 7.2%, whereas the total population in urban areas increased by 39.5%. 1.4.2. The PRe The urban population in the PRC constituted over 52.6% of the total population in 2012, as compared to 51.3% in 2011. The proportion of urban population in the PRC has reflected a positive trend over the past five years -from 2008 to 2012, in tandem with rising GDP per capita. (Source: IMRR) Urban Population and Urban Population Growth Rate in the PRe from 2008 to 2012 (Source: IMRR) 1.5. Tourism 1.5.1. Malaysia Tourism played a significant role in Malaysia’s overall economy. In 2012, the travel and tourism industry contributed 15.6% to Malaysia’s GOP. This industry is projected to continue its pace and grow by approximately 6.0% in 2013. Malaysia’s tourism receipts hit a five-year peak of RM60.6 billion in 2012, having grown by 3.9% from 2011. Tourist arrivals grew at a CAGR of3.2% from 2008 to 2012. While foreign arrivals have traditionally been the core focus of the tourism industry, domestic demand is shaping up to be a key driver for growth in the industry. Domestic hotel guests constituted 53.3% of all hotel guests in Malaysia in 2012, up from 51.6% in 2011. Domestic tourism in Malaysia is thriving on the back of higher spending power and a bustling leisure industry. The tourism industry in Malaysia is expected to continue this upward trend, suggesting an increase in the demand for accommodations, as well as supporting hospitality service. (Sourcs” IMRR)
5. INDUSTRY OVERVIEW~(C~ont___…..’d”,-~ Tourist Arrivals and Tourist Receipts in Malaysia from 2008 to 2012 RM (Billion) Arriv~l. (Milllon) ———————————-16.0 60,6
25.0 24.0 23.0 “0 I 21.0 20.0 2008 2009 2010 loll lOll IIIIIIIIlollri~tAnl\,’alslMiliioll) (Source: IMRR) 1.5.2. Singapore The tourism industry in Singapore has seen consistent growth since 2009. The industry was boosted by the introduction of two Integrated Resorts (“IR”) in 2010, and recorded a growth of 50.0% in tourism receipts that same year. Prior to that, the industry witnessed the lowest number of visitor arrivals of 9.7 million In 2009, from 10.1 million arrivals in 2008. The industry also saw a similar movement in terms of tourism receipts in 2009. The industry, however, recovered in 2010, and saw direct revenue from tourism increase by 1.8 times in 2012. In 2012, tourism receipts stood at SGD23.0 billion, with 14.4 million tourist arrivals. The two IRs -the Marina Bay Sands and Resorts World Sentosa -had spearheaded the new impetus to shape the future sustainability and relevancy of the tourism industry in Singapore. (Source: IMRR) Visitor Arrivals and Tourism Receipts in Singapore from 2008 to 2012 VlsltcrAalv,,’ Tourism Re~e;pl. (BIUlon) (SGDElllllon) 150 c-········-········ -“I ;!so i 14.0 I································· /20.013.0 12.0
–1-:.1..-(•.­H.O 10.0 _1-­=1::: 9.0 -I ii'” 5.0 .” …J 0.0 _ iIi~;\o, Amv.,1 _ T<\ur;sm R~c~;pls 2009 2010 101l Jonl> Note: “p” -prelimina.ry (Source.-IMRR) While Singapore is a small country, it has become a stepping stone for tourists wishing to explore Asia. Singapore has managed to turn itself into a tourist attraction, as it continues to evolve in the heat of stiff competition. In 2013 to 2014, seven major attractions have already opened, or are scheduled to be opened, which will further boost the nation’s tourism. The development of Iskandar Malaysia and the attractions therein may also be a catalyst for Singapore’s tourism, as visitors are likely to stay for an additional day or two in the country to enjoy the full spectrum of attractions in the region. All these will serve to boost demand for hotels and hospitality-related services in Singapore. Vi:;;itor AITlval (Million)  RMB(BIIIIOn)  —-­ -~-­…._ ..­ 60_0  .  –1-3-6-;4  ————-­ 50.0
40.0  132.0  130.0  30.0  128.0  l20.0  126.0  10.0  124.0  122.0  0.0  200B  2009  2010  2011  2012  _NumbcrGfOYerseos Tourist  _  FGrGign EDrningsfrom InternatiGnolTourists

5. INDUSTRY OVERVIEW (Cont’d) 1.5.3. The PRe The PRe’s tourism industry is largely driven by domestic demand for leisure and travel. In 2012, domestic tourists made up more than 90.0% of all tourists, with close to 2.3 billion domestic tourists, as compared to 132.4 million foreign visitors. The country’s tourism industry has seen consistent growth from 2008 to 2012. Earnings from domestic tourists grew from RM88749 billion in 2008 to RM82,276.0 billion in 2012, representing a CAGR of 26.9%. This significant growth in domestic tourism may be a reflection of the country’s rising affluence, and growing income of the population. (Source: IMRR) Visitor Arrivals and Tourism Receipts in the PRe from 2008 to 2012 VlsltorAn1val (Bllllon~ RMB (Billion)
_Nun,t>..rofDomesticVisitol· _Eer.rningfron~Domeatic T(]urist (Source: IMRR) The PRC is a vast country that offers plenty of diversity in sights, cultures, food and adventure. Due to this, it is common for overseas tourists 10 make repeated travels to the PRC to discover different parts of the country. Likewise, the PRC extends infinite opportunities for domestic tourists, be it for short travels or longer vacations, to explore their homeland. As such, the tourism industry is expected to see much growth, thus, giving rise to continued growth in demand for hotels and hospitality-related services. 5. INDUSTRY OVERVIEW (Cont’d) 2. OVERVIEW OF THE PROPERTY DEVELOPMENT AND PROPERTY INVESTMENTS INDUSTRY IN MALAYSIA, SINGAPORE AND THE PRe 2.1. Activities and Segmentation of the Industry The property industry mainly consists of two core activities -property development and property investments.
Activities within the PropertY Industrv Property Property Development I Property Investment (Source”IMRR) Property development is a wide-encompassing activity, typically covering the business of purchasing land, determining the type of properties to develop on the land that will meet market demands and bring forth the best returns, designing and obtaining the necessary approvals and financing, building, or appointing builders to undertake the construction of the structures, managing the properties, and ultimately, selling the properties. Property investments, on the other hand, involve the acquisition of ownership of properties for the purpose of generating profit through rental income and/or capital gains. Property development and property investment often go hand-in-hand, as property developers decide, based on current and future market conditions, whether to sell or rent the properties they own and/or developed. However, it is more common for businesses or individuals to be solely focused on property investments, without engaging in the actual development of properties. While property investment decisions require good market acumen, property development entails harnessing a wide range of technical skill sets and know-how, and involves various expertise in real estate, finance, engineering, legal marketing and market development, among others. The property development and property investments industry, or otherwise known collectively as the property industry, can be further categorised based on the types of developments, which may be divided under four broad segments -residential, commercial, industrial, and leisure and hospitality. Property Development and Property Investments Segments
Note: • 101 Properties Group Berhad is involved in all four segments. (Source: IMRR) 5. INDUSTRY OVERVIEW (Cont’d) 2.2. Position of IOIPG within the Industry Structure IOIPG is the property division of 101 Corporation Berhad. The Group is one of the leading property developers in Malaysia, and is actively involved in all four segments of the property development and property investments industry. IOIPG is an investment holding company, while its subsidiaries and jointly controlled entities are engaged in property development, property investments and leisure/hospitality, with a strategic focus in key economic development areas, namely Klang Valley, JOhOf, Negeri Sembi/an, Singapore and the PRe. The Group has a strong reputation as a township developer, with projects such as its flagship development, Bandar Puchong Jaya, Bandar Puteri Puchong, 16 Sierra in South Puchong, 101 Resort City in Putrajaya, Bandar Pulra Kulai, and Bandar Putra Segamat, amongst others. It has since extended its offerings to include standalone mid to high end commercial and residential property developments situated at prime locations or within mature townships, which 10lPG deems as its “niche developments” both locally and overseas. 10lPG also has a portfolio of leisure/hospitality properties, encompassing golf-courses and hotels, such as the five”star Marriott Putrajaya Hotel, the four-star Palm Garden Hotel, and Palm Villa Golf & Country Resort. Other than property development, 10lPG is also involved in property investments. 10lPG Group’s existing property investment portfolio comprises mainly retail and office space with approximately 2.65 million square feet (“sq ftll) of lettable area. The Group’s principal investment properties are 101 Mall in Puchong and Kulai, One and Two 101 Square in 101 Resort City, 101 Boulevard and Puchong Financial Corporate Centre. The 10lPG Group is also currently developing 101 City Mall in Putrajaya, a shopping mall with lettable area of approximately1.45 million sq ft. While 10lPG Group has a strong presence in the Malaysian market, it has ventured overseas, with projects in Singapore and the PRC. Seascape, Cape Royale, Cityscape, Trilinq and South Beach are developments of the Group in Singapore, whereas in the PRC, it currently has two mixed development projects in Xiamen, the PRC. (Source: IMRR) 2.3. The Property Development and Property Investments Industry Dynamics In this section, property development and property investment industry dynamics, with focus on residential and commercial subsectors for Malaysia, Singapore and the PRC, are discussed. Note that data sets for the three countries may differ due to different reporting compilations from official sources. 2.3.1 Malaysia Residential and Commercial Properties Malaysia’s property development and property investments industry grew positively, with strong demand particularly in residential and commercial properties. The growth is fuelled by low interest rates and favourable banking policies, along with bullish private investment in 2012. As outlined in the Tenth Malaysian Plan (“10MP”) and the Third Industrial Master Plan (“3IMP”) the Malaysian government has begun a renewed focus in developing high-value, high­income industries from 2011 to 2015. This boom is driven by an increase in economic activities, which will continue to bring with it an influx of foreign workers and expatriates, boosting demand for luxury residential and commercial properties in and around Kuala lumpur, as well as other key economic regions in the country like Iskandar Malaysia. From 2008 to 2012, the Volume of transactions for residential and commercial subsectors saw a general increase. During the period, the number of transactions for residential properties rose by a CAGR of approXimately 5.9%, recording 272,669 transactions in 2012, as opposed to 216,702 in 2008. Transaction volume for commercial properties grew by a larger CAGR of 6.7%, reflecting increased economic and investment activities in the country. Alon9 with the rising spending power, malls and shop-lots have surfaced in Malaysia to cater to a wealthier population. Malaysian residents have also better propensities to invest in commercial properties. (Source: /MRR) 5. INDUSTRY OVERVIEW (Cont’d) Transaction Volume across Residential and Commercial Subsectors in Malaysia, from 2008 to 2012 [ No.on,,”,,:,o:, [000
27l,6G9269,789 2.50,000 150,000 100,000 T SO,OOO o
2008 2009 2010 1011 2012 .tii! Commercial • RIi’~idential (Source. IMRR) In terms of transactional value, residential and commercial subsectors of the property market also saw the same upward trend from 2008 to 2012. The value of residential property transactions increased by a CAGR of 13.2%, followed by commercial properties at 13.7%. Transaction Value across Residential and Commercial Subsectors in Malaysia. from 2008 to 2012 RM MJIIlon fl{J,OOO.O
LOO8″ 2009 1010 gCommerdal 2011 lOll • Residentl<ll (Source: IMRR) 5. INDUSTRY OVERVIEW (Cont’d) Year-on~year Annual Average Residential Property Prices in Malaysia ‘M  Growlh  3(00,000  14.M6  l.~U,IJOIJ  241,591  1′) 0:;’:,  200,000  10.0%  1~O.OOO  l:tU% 6.0%  100,000  4.0~;  ~o,ooo  l.O~i  1008  .1009  2010  2011  2011rl  0.0%
Note: “p” -preliminary (Source: IMRR) The annual residential prices in Malaysia, across all housing types, recorded a CAGR of approximately 7.7% from 2008 to 2012. In 04 2012, residential properties in Kuala Lumpur, Selangor and Johor Bahru witnessed an average year-an-year (“y-a-y”) price inflation of 17.4%, 10.5% and 15.8% respectively. The average price of residential properties across all housing types in Kuala Lumpur continues to be the highest among all the states, at a nominal average price of RM576,991, with a 1292% premium over the national average price of RM251,731 in 04 2012. The state with the third most expensive residential properties, Selangor, recorded an average price of RM377,536. Although the trend of residential property prices in Johor is comparatively subdued, with an average price of RM183,810, there remain untapped opportunities in the state, with the development of the Iskandar region into a lifestyle hub with luxurious accommodations. In 02 2013 the average price of residential properties in Malaysia stood at RM257,605 per unit, with the average price of a residential unit in Kuala Lumpur being RM605,711, while Selangor and Johor recorded average unit prices of RM387,412 and RM187,644 respectively. Supply of new residential properties in Malaysia is growing at a stable rate, with the number of new launches running parallel with the growth in domestic demand for new residential properties. In 2012, 57,162 residential units were launched, a 16.0% increase over the number of new launches in 2011. Out of those, 27,264 units were sold, translating into a yearly sales performance of 47.7% for the industry. Sales perfonnance has seen a modest increment over the previous year, which saw a 46.3% sales ratio, with 22,797 units sold. (Source: lMRR) I 5. INDUSTRY OVERVIEW (Cont’d) Sales Performance and Percentage of Units Sold from Units Launched for Residential Properties in Malavsia tram 2008 to 2012 “,(; compostio(l 5alu Pel101mante 1(10% 70% 50′<, lO% 20% 10% 0%

‘l008 1009 1010 2011 1012 ‘;<“Ullits Unsold -Salesperfolllldnce (SOlJrce: IMRR) Kuala Lumpur, Selangor and Johor recorded the highest number of new residential unit launches in 2012, A substantial proportion of the new launches are in Kuala Lumpur. 10,903 units, or 19.1% of the total new units launched across Malaysia are situated in Kuala Lumpur, New unit launches in Selangor and Johor constituted 15.8% and 15.7% respectively of the national total. These three states also have some the highest sales performance in Malaysia. Kuala Lumpur heads the list with 6,485 units sold, or a sales performance of 59.5%. Selangor and Johor each recorded a sales performance of 49.2% and 43.6% respectively. While sales performance in Johor is experiencing a cyclical slowdown, from 51.2% in 2011, Kuala Lumpur and Selangor have each seen improvements in their sales performance. Both states recorded sales performance of 46.3% and 42.3% respectively in 2011. (Source: IMRR) I Company No: 1035807-A I 5. INDUSTRY OVERVIEW Units Sold. Units Launched & Sales Performance in Malaysia for Residential Properties. by State. in 2012 State~ Sale’ Perforrn3nce[%) WPKmla Ltlmpur Selangor Johor Perall Neg~j Sembllan Kedah Pahang Pulau Pinang Saraw<llo:. Ke!an[an Melaka Te/enggaOl! Pedis ‘):IIbah WP Labui’ln Putrajaya l”;;;;,}JZ4&1i1A~”‘i!J!4″*Ji’$i:7JJ,’Z;’:;t\~\”;””'<:’!(‘7,,~rr;,7Jft!J!J;;,\g%;~’;{~~’1~~~it;f(59.5%)<,i,’7fi;*””~,\·”’;’*~$£..~~”~”’~·11111111111l1111l1111l1111l1111l1111111111111111l11111111111111l1l1ll1ll1ll1lll1l1llll1l1ll1l!ll1ll;2X1;1~%’;§Jit4%0g,~%£$i;£ti;1/);/::,::::~::S’!::iJ;;J:JfiJr.’iB.fjflif!J!t,,~J5ii!!!:::!.&§tl£’i!rJJi!!Sr!JJiifi!/lf£+A’i!f//&~’4i.’?~~_;’;”1y§A7Ji,0~W$f!/tf!jJ;ffi-” ~)S!Elim”)’tll;-‘\i!i”iR1;1f”””–_’i.~'””0″t’,,,”i~’i'{&?ih…~’iiff1Jl,¥ffL;;fl$!1ff[!ii§{ftJ§f!£t~~”t.>:fP;g}!iffjJf!iJ!fffjf)J!!J!iffj@if!Jjj&!!Mffiif,,~’i(;;’~i~ (49.2%)’l~11I1IIII1IIII1IIII1IIl1II1III1III1III1III1III1III1III1III1II1III1II1III1IIII1IIII1IIII1III1III1IIII1ll1III1III1I1~-”””””’f~I’-Ji>”,,-‘-‘ • [43.6%}~iiLb-::s.'”11:,~~f~t£k4JbiJitm’WEk£g,w~~ 144.8%)FW.I’i’~~Jil.”””””­.-liN’ ,,” i I [ill 149.2.%)I [28,0%)~1l!B!Jl (44.0%~fti¥iii@i!1I (56.4%) 144.6%1 ~–­I __!II!iLZF=149.9%1 (50.7%1
{47.3%1r::­(16.7%1 343 (44.9%1 ililiiii , 127.1’%1 .” 9610 ,~Ullit~ ~old .. Units l”lInd1~d (Source: lMRR) 107 5. INDUSTRY OVERVIEW (Cont’d) In Malaysia, commercial properties comprise retail lots in shopping complexes, purpose-built offices, and shops units. The annual average value of commercial properties in Malaysia grew by 6.9% to RM676,505 per unit in 2012. While this subsector experienced a slump in 2008 and 2009, as a result of the 2008 global financial crisis, it recovered the following year, with a record 21.9% growth in the average value per unit. Thereafter, the annual average value of commercial properties in Malaysia grew by 5.6% and 6.9% in 2011 and 2012 respectively, reaching RM676,505 in 2012. (Source: IMRR) Annual Average Value of Commercial Properties in Malaysia from 2008 to 2012 GrowthAve””lle V”,lue (RM) …………….. . . ………………..•.~ ..••. ~, 25.0%
15.0% 500,000 ………………………/., ];7u.50″ ,2.0.0%
700,000 600,000 10.0% 400,000 5.0% 0.0% 200,000 300.000 -5.0% 100,000 -10.0% ·15.0%o 200B 2009 2010 2011 2012 (Source: IMRR) As of 03 2013, the mean sales price of a 2 to 2.5-storey shop unit in Kuala Lumpur was RM1, 156,238, up from the mean sales price of RM917,300 in the previous quarter. Comparatively, prices of a similar shop unit were sUbstantially lower in Seiangor, with a mean price of RM695,741 in 03 2013 and in Johor, at RM405,496. Rental price of properties varies across the different states in Malaysia. This section will only focus on selected properties in Kuala Lumpur, Selangor, Johor and Putrajaya, where applicable, as these are the growth areas in Malaysia as well as IOIPG’s main focus in the country. The average rental prices of residential properties in Kuala Lumpur and Johor experienced stable growth from 2009 to 2012. In 2012, the average price of residential properties across all types of properties, including single or double terraces, semi-detached, detached, apartments and condominiums in Kuala Lumpur, was approximately RM2,326.90 per unit. Historically, rental of housing units is the highest in Kuala Lumpur, and rental rates grew by 19.0% from 2009 to 2012. Similarly, average rental price in Johor grew by a CAGR of 0.5% from 2009 to 2012, reaching RM523.25 per unit in 2012. In contrast, the rental price of residential properties in Selangor declined by a CAGR of 1.4% over the same period. The average rental prices of a residential unit in Selangor stood at RM764.14 in 2012, from RM795.90 in 2009. In Kuala Lumpur, non-landed properties, mainly condominiums and apartments, are more expensive than landed units, with an average rental price of RM2,790.03 per unit in 2012, compared to RM2,082.00 per unit for landed properties in the same year. Some of the most expensive properties in the state are found in prime estates such as the Central Town area and Hartamas. Likewise, the rental prices of non-landed properties in Johor are higher than landed properties, with an average rental price of RM861.79 for non-landed properties in 2012, as compared to RM481.22 per unit for landed properties. (Source: JMRR)
5. INDUSTRY OVERVIEW (Cont’d) Average Rental Prices of Residential Properties in Selected States of Malaysia from 2009 to 2012 RM per Unit Rent;il f’J’ices orResidential Properlies 3,000 1,563.95 2,500 +—————————­2,000 j. 1,500 1······························,[,””,4,’—. 1,000 + —-…..,… o 2009 2010 1011 r:Uohor • S”langor • Kual”il LUlllpur 1012 Notes: Based on un~weighted median average prices across all available residential property types, except for low cost flats. Does not include Putrajaya, due to incomplete data. Data presented is for full years for annual comparison. Note that data for 2008 is available for half~year only, and, is. are not reflecled In the chart above. (Source: IMRR) Rental prices of office space in Kuala Lumpur saw a gradual increase over the past few years. The average rental price in 04 2012 was RM4.19 per square lool (“psf’), up by 4.8% Irom RM4.00 psi in 03 2012, with an occupancy rate of 76.9%. Office space in the Kuala Lumpur City Centre-Golden Triangle District commanded a 20.5% premium over other districts in Kuala Lumpur, with an average rental price of RM4.86 psf. The average rental price of offices in the Central Business District, within the City Centre and the other outlying areas stood at RM3.12, RM3.83 and RM3.62 respectively, in the same quarter. The average rental price across all office grades in Kuala Lumpur was RM4.10 per square foot per month (“psf pm”) in 2011, having witnessed consistent growth since 2009. Rental prices of retail space in Kuala Lumpur remained the highest among the four states, at RM13.38 psf pm in 2012, with a higher concentration of major and luxury brands choosing to establish themselves in that area. On the other hand, the overall average rental prices of retail space in all states, except Johor, have declined, as a result of new influx of shopping complexes and retail malis. (Source: IMRR) 5. INDUSTRY OVERVIEW (Cont’d) Rental Prices of Purpose-Built Office Space and Retail Space in Shopping Complexes in Malaysia from 2009 102012 ·——-·-·–·
RMpslpm Rent.,1 Prices of l’lIrI’OW’-lluilt Office Space I; 00
rI 5 50 4.00 3.00 2.00 1.00
2010 1.011 1.012 BKl.lill” Lurl1lJllr Rtml<ll Plio’s or rlel’lll Space-in Shopping (omplr:>xes
Note: Average prices are based on non-weighted median average of properties across aJl grades. (SDurce: IMRR) Rental prices of office space in shop units in Kuala Lumpur, Selangor and Johor declined from 2009 to 2010. Rental prices for these states rebounded in 2011 and continued its growth in 2012, with the exception of Johor, which saw rates continuing to fall. Overall, rental prices of office space in shop units in Kuala Lumpur fell by a CAGR of 0.3% from 2009 to 2012, whereas rental prices for offices in shop units in Selangor increased by a CAGR of 5.7% during the period, reachin9 RM1 ,695.52 per unil in 2012. A short tenn decline in average rental rates may indicate that supply for high value, prime retail space in shopping complexes such as ground floor or areas with high traffic have been taken up, while lower value retail space remains available in the market. The decrease in rental rates for retail space in the market may also be an outcome of temporary lower price anticipation, as new retail projects are completed or planned in Kuala Lumpur, Selangor and Putrajaya. Rental prices of shop units are still relatively higher in Kuala Lumpur than in Johor and Selangor. Areas such as HuJu Langat in Selangor, Johor Baru and Muar, and Mukim Kuala Lumpur in Kuala Lumpur are more expensive than in other districts in their respective states. (Source.” IMRR) 5. INDUSTRY OVERVIEW (Cont’d) Average Rental Prices of Offices Space in Shop Units in Selected States of Malaysia from 2009 to 2012 ,—————————–, Rental Pri”IIRM!Unlt) 2,200.00
2..064.70 1,047.33 2,000.00
1,800.00 1,GOO,00 l,400.::JO 1,200.00 1,000.00 800.00 600.00 2009 .Johor

Noles: Based on un~weighted median average prices across all available office in shop units in fhe respective states. Does not include Putrajaya, due to incomplete data.
(Source: IMRR) While the occupancy rates for purpose-built offices and shopping complexes saw consistent growth since 2008, new supply has caused the occupancy rates to decline. In 2012, 61.4 million sq ft out of 80.7 million sq ft of purpose-built office space in Malaysia was occupied, representing an occupancy rate of 76.11)/1), which is a 4.3% decrease over 2011. Occupancy of shopping complexes saw a marginal decrease of 0.4%, with 102.3 million sq ft metres of occupied space. Meanwhile, the sales performance of shop units has been on the rise since 2010. It rose to 70.1%, with 11,350 units sold in 2012. (Source: IMRR) 5. INDUSTRY OVERVIEW (Cont’d) Occupied Space and Occupancy Rate of Shopping Complex and Purpose-Built Office in Malaysia from 2008
to 2012  Occupied Sp.M’e  Occupancy Rate  [Millioll 5″qu~re  120.0  84.0%

2008 2009 2010 2011 2012 ….PurpD~…·BuHt Dffk… .sJ7~ce .tiIil!IlIlI.shoppi~Comple>;-Space _Purpo~e· BuiltOfficeOccupill’lC'( ‘~·’m”’-ShopplnE”COmpl6; OCJ:upancv Note: Based on completed properties. (Sourr;e: IMRR) In Q3 2013, the occupancy rate of purpose-built offices in private buildings throughout Malaysia increased to 77.1% from 76.7%. Kuala Lumpur saw a 0.9% increase in its office space occupancy rate. There was a decrease in the occupancy rate of 0.9% in Johor, whereas the rate in Selangor remained unchanged. As of 032013, retail properties in shopping complexes posted an occupancy rate of 79.5%. Number of Shop Units Sold and Sales Performance in Malaysia from 2008 to 2012 , Sales PerforMlIol\ce U I I 14,UOU Units sold “1 /4.U%112,/t?J 2008 2009 2010 2011 2012 i Note: Based on completed properties. (Source: IMRR) Overhang is defined as the number of properties that are ready for occupation, but remained unsold for more than nine months. The commercial overhang rate in 2012 indicated that the subsector is gradually recovering, and is
RDoms Available (unl[sj  Occupllncy Rate?fi  190,000 L __.._:, 195,000 1············~:::·:·~:·~···············-··············………. 200,000  .  . ..’>93..”0″.’_’  68.0% l’l’>,44′) 66.0% . –..’-”­ 185,000  f···–·–‘Ic  64.0%  180,00[1 +—-.-.—-‘\,  62.0%  175,000  170,000 ~——-‘–“””’I  60.0%  165,000  58.0%  155,000 160,OOi)  56_0%  150,000  54.0%
5. INDUSTRY OVERVIEW (Cont’d) beginning to see its upward trade cycle. The number of retail units built, but not sold, has decreased by 11.5% in 2012, with 4,849 units, compared to 5,482 units unsold In 2011. Although the take up rate of offices shrank by 60.2% as a result of new influx of office space in 2012, all states recorded positive take-up rate growth, with the exception of Sabah. Kuala Lumpur recorded the highest annual take·up rate of 1,173,416 sq It in 2012, from 555,088 sq It in 2011. The occupancy rate of offices in Kuala Lumpur decreased to 76.8% in 2012, in view of new supply of office space in the area. Leisure and Hospitality The leisure and hospitality industry in Malaysia is on an upward trend in its business cycle. There were 2,724 registered and rated hotels and 195,445 hotel rooms in Malaysia in 2012. In that year, the occupancy rate of hotel rooms was at 62.4%, an increase of 1.8% from 2011. Even though occupancy rates have not recovered to pre-2009 levels, the industry has risen from a low of 59.3% in both 2010 and 2009. Hotels throughout Malaysia catered to 56.1 million guests in 2012, out of which 53.3% are locals. Hotels in Kuala Lumpur are the most prolific, with 26.8 million hotel guests, or close to half of the entire nation’s hotels guests. Further to this, the 10MP has set out a plan to revamp and remodel the tourism industry. Malaysia plans to attract 36.0 million tourist arrivals and RM168 billion in tourism receipts by 2020. (Source: lMRR) Available Stock of Hotel Rooms and Occupancy Rates in Malaysia. from 2008 to 2012 l008 2009 2010 2011 2012 (Source: IMRR) 2.3.2 Singapore Residential and Commercial Properties Singapore’s property development industry has seen consistent growth over the last 10 years, in terms of investments and sales performance. Singapore has seen a marked increase in residential and commercial property prices, prompting the government to intervene and implement cooling measures in the second half of 2012. Despite stricter control, including housing loans and added regulations on property developers and their agents, the price indices for non-landed properties in the core downtown area has increased by 27.6% in a quarter-on-quarter comparison for the period 2009 and 2012. 5. INDUSTRY OVERVIEW (Cont’d) Quarterly Median Price of Non-landed Residential Properties per Square Foot from 01 2008 to 04 2012 SGD per square foot
(Source: IMRR) As of 04 2012, the available stock of private residential units In Singapore stands at 277,620 which is equivalent to 21.2% of the combined public and private housing stock. Of private residential homes, 25.4% of the available stock are landed properties, which includes detached, semi-detached and terrace houses, while the remaining 74.6% are non-landed properties. In 2012,18.1% of resident households stay in private housing, while 81.6% stay in public housing. Private residential properties in the ‘core central area’ are the most costly, followed by residential properties in the ‘rest of central region’ and those ‘outside the central region’. The core central area comprises districts nine, ten, eleven, the downtown core area of Shenton Way and Beach Road, and Sentosa, while the rest of the central area encompass Outram, Museum, Newton, River Valley, Singapore River, Marina South, Marina East, Straits View and Rocher, excluding the core downtown area. Outside central area refers to the rest of Singapore, excluding the central region mentioned. The supply of residential and commercial properties in Singapore is largely biased towards the core central region, reflecting the trend towards location as a prime consideration for the purchase or leasing of properties. In January 2013, the Singapore government announced a set of cooling measures in the wake of excessive speculation in the market. The measures include stricter loan limits and additional stamp duties. This was followed by another set of property market curbs, with the introduction of the Total Debt Servicing Ratio Framework (TDSR) for financial institutions to observe when providing property loans. The cooling measures came at a time when inflation and affordability grew into two key economic issues for the nation. The effects of these measures are expected to moderate the cyclical trend of property prices in the short tenn, before a rebound, on the back of robust domestic demand. The demand for private residential properties is characterised by a consistently low vacancy rate, with a median rate of 5.8% in 2012, and 5.5% in 2011. As of 04 2012, there were 55,260 uncompleted private residential units launched. Of those, 90.7% or 51,023 units were sold, indicating strong underlying demand for private residential units in spite of the cooling measures. Property transaction is dominated by the residential subsector, making up 79.0% of the total transaction value in Singapore in 2012. In terms of transaction volume, the private residential subsector constituted 83.0%, or 34,417 transactions out of the total number of transactions in 2012. (Source: IMRR)
5. INDUSTRY OVERVIEW (Cont’d) Property Transaction Volume and Value According to Property Type in 2012 CommerCIal, 7,205,475,582, 10.9% (Source: IMRR) In 2012, there were 96,230 residential units available in the property market. The supply of residential properties in Singapore has increased by 44.9% since 2009, as demand towards property occupancy and/or investment recovered since the global financial crisis in 2008. In a similar trend, the supply of commercial properties grew by 31.0% over the same period. As at 03 2013, there are 90,725 residential units designated for development from 2013 until 2017. This translates into approximately 18,145 units annually allocated over the frve year period. (Source: /MRR) 5. INDUSTRY OVERVIEW (Cont’d) Residential and Commercial Property Supply in Singapore for the Period 2008 to 2012
Resldenllal Commercial properties In sq. ft ! Units I 2006 1009 1.010 2:011 2012 _ SUPilivol PrivatI’ R€!sidential Units –SUI)ply OfCOllllllPICi,d PmlJerties
(Source: lMRR) In the property investment sector, rental prices were affected by the 2008 global financial crisis. With the exception of rental for retail space, rental of residential and commercial properties dipped during the crisis. Based on median prices across the country, the average residential rental price psf pm dropped to SGD2.55 in 2009, compared to SGD2.91 In 2008. Average Rental Price for Residential Properties in Singapore, per Square Metre per Month. from 2008 to 2012. SGD psfpm Growth
Note: Average rental price is based on median prices of all private residential properties except for Executive Condominiums. (Source: IMRR) The average rental prices of residential properties recovered in 2010, and stood at SG03.45 pst pm in 2012. Rental prices in Singapore are largely dependent on location, size and condition of the property, as well as the amenities available within and around the property. Typically, the rental of a condominium unit can cost more than SG02,500 per month, while a bungalow or a penthouse unit may cost more than SG014,OOO per month. Rental prices of office space remained subdued after the 2008 global financial crisis. It regained momentum in 2011, with an average price of SG05.43 psf pm, and grew to S805.67 psf pm in 2012. Rental prices of shophouses grew at a moderate rate from 2009 to 2011, but picked up its pace in 2012, with 15.9% growth to SGD4.37 psf pm. MeanWhile, growth of rental prices of retail space in Singapore remained robust and consistent throughout the five­year period from 2008 and 2012 Rental price of retail space grew by 11.8% in 2012 to SGD11 ~ 19 psf pm from SGD1 0~01 psf pm in 2011 ~ It was the only subsector to record pOSitive growth despite the 2008 global financial crisls~ (Source: IMRR) I Company No: 1035807-A I 5. INDUSTRY OVERVIEW (Cont’d) Average Rental Price for Commercial Properties in Singapore per Square Foot per Month from 2008 to 2012. SGD psf pnl  ~2.00  c·················  10.01  .10.00  887  -­ B.l.3  — 8.00  6 00  6.02  5.67  4.90  -‘ ­ 4.00  3.50  “3.77  2.00
0.00 200S 2009 2010 2011 2012 – –Offi<::c Shops. -·–~-ShophoLISCS (Source: IMRR) Leisure and Hospitality The leisure and hospitality industry in Singapore performed well since 2010. Growth in demand for short-term accommodations overtook the growth in hotel supply. In 2012, the number of rooms available was 12.5 million room nights, to an annual 14.4 million foreign tourists. Total room revenue was estimated to be approximately SGD2.8 billion for 2012. Number of Available Room Nights. Gross Lettable Units and Occupancy Rates in Singapore from 2008 to 2012.
Roomunlts Occupancy% ———–.-.-.-..–.—–.—, 88.0%14.0 12..0 10.0 8.0 ­6.0 ‘0 j :: l 2008 2009 2010 2011 LOlLI) ‘f},’/;;iSi Gross ll’ttings _ AVilJI::lul€ roonl nights –StarllbrdOccupancy Rate
Notes: Room lenings paid for by hotel guests. Available room nights = Maximum rooms -Rooms under renovation, for staff use, others, indicates supply of short lerm accomodations. Gross lettings (Room Nights) = Adjusted Paid lettings + Complimentary letlings, indicates demand for short-term accomodations. (Source: IMRR) Revenue for the hospitality industry in Singapore is witnessing an upward trend in recent years. The total room revenue in 2012 stood at SGD2.8 billion, a 5.0% increase from the previous year’s revenue of SGD2.6 billion. Although growth rates have slowed down in 2012, as compared to those in the previous two years, revenue indicates a positive trend for the industry. 5. INDUSTRY OVERVIEW (Cont’d) Total Room Revenue of Hotels in Singapore from 2008 to 2012 (SGO Billion) Growlh% 3.0 40,D% ‘”8
2008 2009 2010 2011 2012fJ I!IlIli1!Ii!D I olill Koom tt.evenul:” (stJU Million) –{Jrowtll Kate Note: “p” -preliminary. (Source: IMRR) 2.3.3 The PRC Residential and Commercial Properties The PRe has the largest property market in the Asia Pacific. Despite cooling measures in 2010, and the global economic crisis in 2008, the Chinese property market continues to attract local and foreign investment, and property prices per square foot have been consistently moving upwards. Scarcity of development land in built up cities, namely Beijing and Shanghai, has redirected the focus to emerging cities like Xi amen. Completed real estate projects have been on the rise in the PRC. From 2007 to 2011, the value of completed projects in the country grew by a CAGR of 21.6%, reaching RMB2,198 billion in 2011. During the period, growth rates In the value of real estate projects increased steadily, with the exception of 2010, which saw the growth rate decline slightly to 19.4%. This may be due to the impact of the cooling measures on the property mar1<et. Nonetheless, sentiments of PRe buyers continue to thrive, resulting in a rebound in the growth rate to 25.3% in 2011. Values of Completed Real Estate Projects in the PRC from 2007 to 2011 RMB (Billion) Growth 2,500 ,——————,-,-,-r 30.0%
2,197.6 25.0% 20.0% 15.0% 10.0% 5.0% oo~2010 2011 —~-Nole: Latest dala is for 2011. (Source: IMRR)

5. INDUSTRY OVERVIEW (Cont’d) While the total value of property transactions in the PRe have been on the rise since 2008, the growth rate slowed down from 2010. In 2010, the PRe government implemented tightening measures to cool the property market in the country. The effect of these tightening measures is evident, which resulted in a significant decline in the pace of increase, from 76.9% in 2009, to 10.0% in 2012. Value of Property Transactions from 2008 to 2012
Growth 7,000,0 .,—-­100.0% 76.9% 58589 6,000.0 -I——”ji’-‘–:..,-,..,—.. ”’–­80.0% 6D.O% 40.0% 20.0% 0.0% -20.0% 2008 2009 _2_01_0 2011 __
:~_:~:J (Source: JMRR) Residential property sales accounted for 83.0%) of (he entire property transactions, or RMB5,346.7 billion in 2012. This was followed by commercial property transactions at 15.0%. In terms of volume in units, transactions of residential properties have also increased over the past five years. In 2012, a total of 9.4 mHiion units of residential buildings were sold in the PRC, a 3.4% increase from 2011. However, growth was significantly lower compared to the that in 2009 and 2010, which were 44.5% and 9.7% respectively. Volume of Residential Property Transactions from 2008 to 2012 Residential Units Growth 10,000,000 T~—_····_·_—-~—–4.1.5%—-9,446;4-14–‘T 50.0%
9,139,672 9,OOO,CXXl -1­8,000,000 I ———–. 7,000,000 “1”‘———–….. 30.0″/0 6,000,000 t_5.5.65.8lL…..~ -­
lOJI”’A. 5,000,000 ~
10.1)%qpoo,ooo I.” 3,000,000 -t–­ 0.0% I 2,000,000 +—-­-10.0% 1,000,000
o ·20.0″.41 2008 2009 2010 2011
(Source: IMRR) Although the tightening measures appear to have reaped some success in cooling the market, the average price levels remain high The average residential property prices in 2012 registered at approximately RMB505 per square foot, which rose 8.8% from 2011. It was reported that the average price for deluxe villas and apartments reached a new level of RMB1 ,021 psf in 2011. Despite the Chinese government’s reiterated efforts to curb property prices, the continued increase of the property prices was due to the effort of the People’s Bank of China, in cuffing down the interest rates and bank’s reserve requirement ratio in order to deal with slOWing economy in the past few years.
!012 I … _… _—_. ~I
2008 5. INDUSTRY OVERVIEW (Con,,-t,,-‘d,,-~ _ Annual Average Residential Property Price from 2008 to 2012 GrowthRMB!Square Foot GOD.D T········ .-. 30.00% 24.G9% 2~.OO%500.0 20.00% 400.0 15.00%
300.0 10.00%
200.0 5.00% lOU.U 0.00% 00 -5.00% 2009 2010 2011 2012 ——-_._-_._—-_._—–._-._—–_.­(Source: IMRR) In 2012, the sales perfonnance of residential floor space rose by 2.1 % to 10.6 billion thousand sq ft over 2011, which was significantly higher than unsold floor space of 2.5 billion thousand sq ft. Sales Performance and Percentage of Residential Properties Sold (Floor Space) in 2012
–III (Source: IMRR) The supply of new residential properties in the PRe is growing at a stable and moderate rate. There were 7.6 million new and completed residential units in 2012, a 5.9% increase compared to 2011. The growth indicated the return of consumer confidence in the market, despite the cooling measures. 5. INDUSTRY OVERVIEW (Cont’d) New Completed Residential Property (Units) from 2008 to 2012
2008 2009 2010 2011 2011 _____.._.__.._•••_.__….J.~~ ~ (Source: IMRR) Xiamen Xiamen’s real estate sector has enjoyed significant growth from government~implemented policies, such as the preferential tax policies and development incentives, in recent years. Investments in real estate development for Xiamen recorded a CAGR of 12.5% for the past five years. Real Estate Development Investment in Xiamen from 2008 to 2012 l 2008 2010 2011 2012′—-o._o~~~~~~_2009 (Source: IMRR) Despite a slight decline in 2011 in terms of growth rate, growth in the total investment for the real estate sedor saw a rebound in 2012, with an increase of 18.9% from RMB43.6 billion in 2011 to RMB51.9 in 2012. This increase signifies the return of investors’ confidence in Xiamen real estate sector, following the support from the local government. The value of real estate transactions recorded a CAGR of 33.4% for the five-year period from 2008 to 2012. In 2012, the total value of property transactions in 2012 showed a 54.8% increase from 2011, with the highest value of RMB75.6 billion being recorded during the period.


5. INDUSTRY OVERVIEW (Cont’d) Value of Property Transactions in Xiamen from 2008 to 2012 RMB (Billion) Growth
2008 2009 2010 2011 2012 ‘—–­(Source: fMRR) Residential property transactions form the majority of all property transactions in Xiamen, making up 82.3% of the total property transaction value in 2012. Over the past five years, Xiamen residential property transaction value grew 3.7 times, from RMB16.9 billion in 2008 to RMB62.2 billion in 2012. Value of Residential Property Transactions in Xiamen from 2008 to 2012 RMB{Billion} Growth 70.0 120.0% l 100.0%60.0 +-~t-.+ __——–­80.0% 50.0 +—-J—–\———-­60.0% 40.0 -1–J—..”..,,—\…——-_L­40.0% 30.0 -1—-­20.0% 20.0 +–.,;,<l–­• 0.0% 10,0 -20.0% -40.0%0.0 (Source: IMRR) In term of volume in sq ft, transactions of residential properties have also seen a general increase over the past five years. In 2011, a total of 28.0 million sq ft of residential buildings was sold in Xiamen. This accounted for an 82.1% increase from 2011, which is almost eight times that of the growth rate in 2011. 2008 2009 2010 2011 2012 5. INDUSTRY OVERVIEW (Cont’d) Volume of Residential Property Transactions in Xiamen from 2008 to 2012
SQuare feet (Million)  Growth  60.0  160.0%  ItlO.O%  50.0  120,0%  100.0%  40.0
30.0 20.0%Jon 10.0 ‘,_”‘ll.” ~~:~~%
4I-O.U% 0.0 -60.0% 2008 2009 2010 lOll 2012 (Source: iMRR) The average price of residential properties in Xiamen has also significantly increased for the past few years. Despite the government’s cooling measures targeting specifically at residential properties, the average residential properties price in 2012 was a record high of RMB1,287.0 per sq ft, which was an increase of 3.2% from 2011. Annual Average Residential Property Price in Xiamen from 2008 to 2012 RMB/Square Foot Growth
(Source’IMRR) The average rental prices for residential properties recorded a 7.3% increase from 2011, to reach a value of RMB3.0 per square foot. On the other hand, average rental prices for commercial properties reflected a slight decline of 0.5% from 2011, to reach RMB5.7 per square foot in 2012. However, note that data available for 2010 is only based on nine months, as published by the Xiamen Municipal Government.
I Company No: 1035807-A I 5. INDUSTRY OVERVIEW (Cont’d) Average Rental Prices of Residential and Commercial Properties in Xiamen RMB psf 70 G., G.O
2.0 1.0 0.0 2010 2011 • Residential I§ Commercial Notes: Average prices are calculated based on available data released by the Xi amen Municipal Government. Average prices for 201 0, 2011, and 2012 are based on 9 months, 11 months and 11 months respectively. Commercial include commercial properties, hotels/offices, factory/offices, and offices. (Source: fMRR) Rental prices for residential properties in Xiamen has been rising in the past few years, which may have affected take­up rate, and, in turn, further influencing the average rental prices. After the government’s implementation of tightening measures in early 2013, the demand for leasehold properties increased, causing rental prices to rise as well. It is expected that rental prices for residential properties will continue to rise, following strong demand from consumers’ shift of purchase to rental of flats. Along with the tightening measures for the residential property sector, investors may also venture to commercial properties, and, thus, increasing the demand and rental prices for such properties.
Leisure and Hospitality The leisure and hospitality industry in the PRC is dependent on domestic tourists to drive demand for leisure services. There remains untapped potential for the tourism industry in the PRC, as the country focuses on primary industries, namely manufacturing. The number of quality leisure hospitality properties deflated in 2010, and the number of starred hotels dropped 1.7% to 13,991 hotels in 2010, from 14,237 hotels the previous year.
Number of Hotet Rooms in the PRe for the Period 2008 to 2012 Number of Hotel Rooms (Million) Growth —.. ….1.7 … -.._ __ ········….–,8.0% 1.67 6.0% -_._-­1.65 4.0% =–‘_—-1 2.0%1.6 – ._~ 1:9% 0.0% 1.55 —,1..’-..2″” 1.50 .1.5 -6.0%1.47″-Jj-4.0% 1.45 -8.0%..–I .-10.0% .., ——‘ _——-.. -12.0% .. , ._–. ­-14.0%1.35 2011 20122008 2009 2010 (Source: /MRR) The total number of hotel rooms in the PRC recorded 1,5 million in 2012, a slight increase of 1.9% from 2011. The figure above reflects a growing trend in the number of hotel rooms from 2008 to 2009, before a decline was observed in the following two years. The increasing number of hotel rooms then was probably attributed to major events in the country. ICompany No: 1035807-A I 5. INDUSTRY OVERVIEW 3 Market Size and Ranking 3.1 Estimated Market Size of the Property Development and Property Investments Industry The market size of Malaysia’s property market, based on sales transactions for residential and commercial properties, was worth RM95.6 billion in 2012. In Singapore, the property market for the residentiai and commercial subsectors was worth SGD62.7 billion in 2012, based on sales transactions. (Source: fMRR) 3.2 Market Ranking of IOIPG in Malaysia IOIPG is among the top eight (8) property companies listed on Bursa Malaysia based on revenue for FY2013In terms of profitability. IOIPG is one of the most profitabie among the top comparable majors in Malaysia -first placing based on profit before tax margin, and gross profit margin. The company reported profit before tax margin of 53.9% in FY2012, and this is approximately 1.7 times thai of the average profit before tax margin among the top eight (8) comparable public-listed property companies in the country. Comparison of the Financial Performance of the Top Comparable Public-Listed Property Companies in Malaysia
101 Properties Group I 30 June 2013 I 8,252~ Berhad+ UQA
I 31 December IDevelopment 2.893.92012Berhad Eastern & 30 March Oriental I 2,223.42013Berhad UEM Sunrise 31 December Berhad 2012 IJM Land 31 March2013Berhad SP Selia 31 October Berhad 2012 Sunway 31 December Berhad 2012 Mah Sing 31 December Group Berhad 2012 Notes: 10,438.9 4.286.7 7,671,2 4.825.9 2.984.9 I 95.6 I  100.0  I  94.6  1o<J.O 4.236.5 99.9 39.0* 88.2
• Order of ranking in this table is based on profit before tax margin. I 1,323 I 797 I905 i714I 60.2 I 1 I 68.4 I  799  I  382  I  414  I  326  I  47.8  I  2  I  51.8  I  2  I  606 1.940 1.250 2,527 3.849 1,775  I I I I I I  279 708 439 863 1,268 523  I I I I I I  187 535 438 568 723 316  I I I I I I  137 448 231 390 598 232  I I I I I I  46.0% 36.5 35.1 34.2 32.9 29.5  I I I I I I  3 4 5 5 6 8  \ I I I I I  30.9 27.6 25.6 22.5 18.8 17.8  I I I I I I  3 4 5 6 7 8
125 I Company No: 1035807-A I 5. INDUSTRY OVERVIEW The Jist is derived based on assessment of public-listed property companies in Malaysia, after taking into account of preliminary qualifiers such as market capitalisation above RM1.0 billion, at least 60% of total business in property, inclusion of overseas development. focus of domestic property activities in Peninsular Malaysia, major concentration of property-related business in property development, profit after tax of RM100.0 million and above for the past two financial periods, and subsequently, their overall revenues. Financials for the comparable companies are based on FY2012 and FY2011, or FY2013 and FY2012, whichever is more current and available.
• Financial data presented jn the table are based on Group basis unless stated otherwise.
• Figures for Market Capitalisation are as at 11 November 2013.

+ Based on pro-forma financials,* Although Sunway Berhad’s property~related business contributed less than 60% to its total revenue, revenue generated from its propertywrelated segments were substantial, and is thus included as one of the comparables. II UOA Development Berhad is also included in the top 10 majors by virtue of its SUbstantial revenue derived from property-related activities. Note that UOA Development Berhad does not have overseas developments, as per one of the prewqualjfjers set. A The indicative market cap of IOIPG is based on the assumption that all the outstanding options granted under IOIC’s ESOS as at 14 May 2013 will be exercised prior to the Entitlement Date and all existing treasury shares resold to the market with no further share buy-backs being made. (Source: IMRR) Based on the table above, IOIPG’s high profit margins may be due to IOIPG being a township property devaloper, with proven track record, and has sizeable land banks in strategic locations that were mostly acquired at competitive prices for its current and future developments. Its existing land banks in Malaysia are located in populated areas with high growth potential such as Klang Valley, Negeri Sembilan, Malacca and Johor, and are suitable for township development. The IOIPG Group believes that with its existing land bank, it is able to maintain such healthy profit margins, as township development is expected to provide IOIPG Group with the advantage of planning and managing launches! types of development (for example, residentiall commerciall industrial development or landed! high rise) depending on market demand, cost of construction and prevailing economic conditions. Such healthy margins are also attributable to the management’s expertise, wealth of experience and prudence in managing the property development and their costs. In addition, due to IOIPG’s size of operations and strong financial position, IOIPG is able to undertake development projects with a long gestation period, allowing its developments to mature and increase in value over time. This is because township development provides IOIPG Group with the benefits of capitalising the values of land banks progressively, in tandem with the maturing stages of such township (i.e. as township matures and becomes more established, prices for products increases progressively). Moving forward, similar to most property developers, IOIPG Group will continue to replenish its future land banks at competitive prices when opportunities arise. However, future land banks to be acquired by IOIPG may be at higher prices. The IOIPG Group will take into account the cost of these acquisitions in pricing its products at the point of launches in order to sustain its profit margins. It should be noted that there can be no assurance that such profit margins be perpetually in view of the increasing land costs, the cost of building materials, operating costs and growing competition. However, IOIPG Group may serve to mitigate this risk by leveraging on its management expertise, prudence and wealth of experiences in the property development industry and its other core competitive strengths. (Source: IOIPG Management) 126
L<::9mpany No: 1035807-A I 5. INDUSTRY OVERVIEW (Cont’d) 3.3 Market Share Of IOIPG 3.3.1 Malaysia In 2012, Malaysia registered sales of 27,264 new residential units, of which 16,314 units were accounted by Klang Valley (Putrajaya, Kuala Lumpur and Selangor), Johor and Pulau Pinang. IOIPG sold 1,791 residential units in Malaysia in the same year, which translates to approximately 6.6% market share country-wide. As IOIPG’s residential sales for 2012 are centred on projects located within Klang Valley. Johor and Pulau Pinang, lts market share based on these stated regions is 11.0%. In terms of commercial properties, IOIPG sold RM318 million worth of commercial units, or othelWlse 280 units. Notes: There are no rellable official sources to tabulale market share by sales value in Malaysia. Market share based on commercial properties cannot be tabulated due to differentials in data reporting from official sources. (Source: fMRR) 3.3.2 Singapore Singapore posted 1B,053 new sales of residential units worth SGD20.B billion in 2012. For 2012, IOIPG’s Singapore jointly-owned entities sold 116 residential units, or othelWise, generated SGD212 million. As compared to a total of 18,053 newly launched residential units sold in Singapore, IOIPG’s Singapore jointly-owned entities would have achieved 0.6% market share in Singapore. Based on sales value, IOIPG’s Singapore jointly-owned entities would have posted approximately 1.0% market share in Singapore. (Source: IMRR) 4 Key Trends 4.1 Malaysia 4.1.1 Collaborative Singapore-Malaysia Efforts In 2010, Singapore and Malaysia announced the development of a high speed train project, which will provide a 90­minute link between Singapore and Kuala Lumpur. This collaboration improves the connectiVity, and is expected to bring forth significant economic benefits to both countries, especially for the real estate sector in the Iskandar region. 4.1.2 Malaysia My Second Home Programme The Malaysia My Second Home programme is promoted by the Malaysian government to allow foreigners, who fulfill the criteria, to stay in Malaysia for as long as possible on a multiple-entry social visit pass. This programme has insofar successfully attracted 20,430 foreign buyers of residential homes, with 1,659 properties worth RM1.5 billion were purchased under the programme from 2007 to 2012. The programme is still supported by the Malaysian government, and will continue to attract more foreign property buyers for the next few years. 4.1.3 Infrastructure Projects to Spur Domestic Growth In the latest revision of the HP, 131 Entry Point Projects (“EPP”) was proposed to achieve the objective of the 10MP. These projects have been identified as key enablers in driving sustained growth in the core clusters pertinent to the Malaysian economy_ The initiation of the Klang Valley Mass Rapid Transit (KV MRT) network in Kuala Lumpur is one of the nine flagship projects to transform the GKUKV into a world-class metropolis. The population of GKUKV is expected to reach 10 million by 2020. The extensive KV MRT project will allow greater connectivity, thus, extending the boundary of the existing city centre. Once completed, the KV MRT will connect outlying areas to the city centre, serving as the link between townships. GKUKV is expected to playa significant role in increasing the appeal of residential and commercial properties around individual nodes. It is set to trigger a purchase pattern towards properties located adjacent to MRT stations. Other significant projects that will likely boost the property development and investment sector inclUde the proposed Tun Razak Exchange and the River of Life project along the Klang River. 4.1.4 Iskandar Malaysia Continues to Attract Investors In the first nine months of 2013, Iskandar Malaysia managed to attract more than RM9.2 billion in committed investment, bringing the total cumulative investment in the special development zone in Johor in excess of RM128.2 billion. Manufacturing proved to be the highest investment target, with the sector constituting approximately RM45.7 billion. The signing of mega projects costing billions in real estate in Iskandar Malaysia ~ndicates confidence in the Malaysian economy by foreign investors. Despite the Eurozone financial crisis that has influenced the global investment climate, Iskandar Malaysia shows resilience toward the crisis, and has Set a target of capturing RM20 billion in investments at the end of 2013. 5. INDUSTRY OVERVIEW (Cont’d) 4.1.5 More Singapore Companies and Singaporeans Are Moving to Iskandar It is reported that bank loans to Singapore’s small and medium-sized enterprises setting up operations in Iskandar Malaysia, or already operating there, have doubled in 2012. Singapore firms are seeking new pastures amidst rising business costs and labour shortages in the country. The overall savings when operating in Iskandar Malaysia is reported to be an estimated 30.0%, which is a strong pull factor. Iskandar Malaysia is attractive, as Singapore businesses and Singapore residents alike can get more space for the same amount of money. Moreover, with the high speed train project undergoing, more Singapore residents are expected to be drawn to Iskandar Malaysia. It is further reported that Singaporeans are looking to Iskandar Malaysia as their principal or alternative home, with majority buying for their own stay or retirement. 4.1.6 Low Interbank Rates Fuel Demand Residential properties in Malaysia, across all housing types, have experienced a significant price increase. This may be attributed to high demand brought about by favourable macro~economic, high affordability ratio, and low interest rate environment. Malaysia’s Overnight Interbank Offered Rate is stable at approximately 3.0% since October 2013, and is considered low compared to interest rates in other Asian countries, such as 3.0% to 5.2% in the PRe, and average of 5.7% in Indonesia. Thus, it is expected to be a catalyst for demand for residential properties. (Source: IMRR) 4.2 Singapore 4.2.1 Measures for the Property Sector Increase in the population and influx of foreigners have led to a rise in demand for housing in the country. Prices of houses have risen significantly over the past few years. The Urban Redevelopment Authority (“URAN reported the ) rise in private residential price index to 0,4%% in 03 2013. The Singapore government has introduced a string of measures in order to cool and minimise over-speculation in the property sector. In December 2011, it announced the introduction of the Additional Buyer Stamp Duty (“ABSD”), which is mandatory to those who purchase residential properties on or after 8 December 2011. In January 2013, the Singapore government further revised the ABSD, stating that foreigners would have to pay ABSD of 15.0% on the purchase, or acquisition, of any residential property. Priorto this, foreigners had to pay 10.0% of ABSD. This results in a total of 18.0% of stamp duty applicable to foreigners wishing to purchase a residential property in Singapore. In 2013, the Seller’s Stamp Duty (“SSD”) on industrial properties was introduced to discourage short-term speCUlative activity, which is capable of distorting the underlying prices of industrial properties and, thus, raising costs for businesses. There would be a charge of 15.0% of the SSD if the property is sold within the first year of purchase. Thereafter, the SSD is reduced to 10.0% if the property is sold in the second year of purchase, and 5.0% for the third year of purchase. In June 2013, the Monetary Authority of Singapore (“MAS”) introduced the TOSR framework to control imprUdent lending practices among financial institutions. The framework requires financial institutions to compute TDSR based on the borrowers’ eXisting loans and income. (See section on Debt Servicing Framework for Property Loans), 4.2.2 Moderate Demand for Private Residential Properties Private residential properties continue to be attractive to buyers in the mar1<et, despite the implementation of additional ABSD in the beginning of 2013. In 01 2013, 5,412 private residential units were sold, which reflected a 24.0% increase on a y-o-y basis. However, this figure fell to 2,430 units sold in 03 2013, suggesting that the successive rounds of cooling measures have moderated demand in the domestic property market. 4.2.3 Commercial Sector Growth Fuelled by Restrictive Government Policies Measures to cool the residential property sector in Singapore have Jed to the growth in demand for commercial properties over the past few years, where the value of transactions for commercial properties have increased three times over the past four years. In addition, along with the latest cooling measure implemented in 2013 that are targeted at the residential and industrial property sectors, it is expected that demand for investments in commercial properties will continue to rise. While the latest round of cooling measures implemented by the government in January increased the amount of tax payable for transactions in the residential and industrial markets, there were no further restrictions imposed on the commercial property market. It was reported that cooling measures have generated more interest in ‘strata’ commercial investments, where a commercial building is sold off in floors or sub-units that are affordable to private buyers. 5. INDUSTRY OVERVIEW (Cont’d) 4.2.4 Office Building Demand Dampened by European Crisis Due to the persisting Eurozone debt crisis and the slowing growth momentum in Asia, the demand for office buildings in Singapore is suppressed. According to Singapore’s real estate statistics, rentals for office space continued to fall, decreasing 0.2% in Q1 2013, after declining 0.3% in 04 2012. It recovered in 032013, with a growth of 4.4% from a 0.1 % decrease in 02 2013 4.2.5 Low Interest Rates for Property Purchases One of the major factors that led to the increase in demand for property in Singapore is the low interest rates. The Singapore Interbank Offered Rate (“SIBOR”), a benchmark rate for home loans, reached a near record low at 0.3% in August 2013. This interest rate is one of the lowest in Asia, and raises the affordability to bUy a residential property in the country. With the Singapore Rental Index on a consistent growth trend in 2013, more people will choose to bUy a residential property at low interest rates, rather than rent an expensive house. (Source.< fMRR) 4.3 The PRe 4.3.1 Measures to Counteract the Overheated Housing Sector Prices of housing properties in the PRC boomed in recent years, prompting the PRC government to implement several cooling measures so as to control the rising housing prices. In 2010, the PRC government started to introduce several nationwide policies, such as increasing the required down payment from 20.0% to 30.0% for the first mortgage (for residential property with floor area no more than gO square metres), and restricting mortgage loans to non-local residents. In March 2013, the PRC government continued with other tightening property measures by raising the tax on profit of second home sales to 20.0%, from 1.0% to 2.0(1/(1 previously, increasing down payments and mortgage interest rates, and stricter purchase requirements. Although the PRC government’s tightening policies may restrict the growth of the real estate sector, it is expected that housing demand will continue to grow in tandem with other economic factors. such as rising income and growing population within the country. 4.3.2 Shift of Focus to Commercial Real Estate Sector Following a series of cooling measures implemented by the PRC government on the residential property sector, many developers have begun to shift their focus towards the commercial real estate sector. This sector is experiencing rapid development due to increase in office rentals, as well as retailers’ fast expansion needs. It has been reported that investors and developers are refocusing on first-tier cities such as Beijing and Shanghai, where prime offices are close to full occupancy, and rents are on par with cities such as New York and Sydney. 4.3.3 Increasing Demand in Second and Third Tier Cities Interest in the PRC’s second and third-tier cities have grown qUickly in recent years, with Chongqing, Tianjin and Shenyang becoming especially popular destinations. These areas offer more opportunities as compared to the urban areas of first-tier cities, where there are cheaper land and more relaxed regulations. It is expected that these cities will also benefit from the building of the national high-speed rail net\ovork in the country, which increases accessibility. Second and third-tier cities in the PRC are expected to reap maximum gains from the country’s ongoing urbanisation gain. The interests are not only in housing residential properties, but also in high-end luxury real estate developments. 4.3.4 Increase in Demand for Hospitality Developments Demand for hospitality real estate in the PRC is also on an uptrend, with over 1,000 hotel construction projects on­going in the country. The massive size of the country and strong tourism demand will continue to push the demand for hospitality developments. The emerging middle class population will also spur the demand for tourism-related developments, such as hotel rooms. 4.3.5 12th Five-Year Plan (2011-2015) The government’s 1ih Five-Year Plan (2011-2015) has stipulated three key points for developing the country’s real estate sector. The three key points include improving the living standards by raising the supply of housing for low and medium income households, support the development of green buildings to reach energy conservation targets, and encouraging domestic consumption. 5. INDUSTRY OVERVIEW (Cont’d) For the development of green buildings, the State Council has approved the country’s Plan for Green Construction. Twenty percent (20%) of urban new construction buildings are aimed at achieving green construction standards by 2015. New green buildings are expected to achieve one billion square metres by 2015. The central government will support private developers to construct more green bUildings through subsidisation, at RMB45 per square metre for two-star rated buildings and RMB80 psm for three-star bUildings. With the support from the PRe government, the concept of green buildings will be a new key trend in the PRe’s real estate sector. (Source: IMRR) 5 COMPETITIVE LANDSCAPE Competition within the property development and investment industry is highly intensive, as there are many industry players in the market. While there are many players operating on smaller-scales, the prominence is still dominated by the larger players, who have the resources and access to bigger parcels of land, as well as land banks in prime areas. With greater resources at their disposal, projects by established developers are likely to contain innovative, and niche elements that are readily marketable. This section is focused on Malaysia and Singapore. 5.1 Number of Players There is no official documentation on the number of property developers and property investors in Malaysia and Singapore as at the date of this report. According to the Real Estate and Housing Developers’ Association (“REHDAn ), there are more than 1,000 registered members in Malaysia, of which 399 memberships are with REHDA Kuala Lumpur and Selangor, and 109 with REHDA Johor. In Singapore, there are less than 200 companies that are known to be registered as property developers and/or investors. These memberships do not represent the actual number of players in the industry, as memberships with such associations are voluntary. 5.2 Comparable Properly Developments This section lists the property developments of other developers that are in the vicinity of IOIPG’s key projects. Comoarison of Prooertv Develooments in the Vicinitv of IOIPG’s Kev Proiects Item Pro’eet Name TVDe Of Development Developer Name I Location 16 Sierra Semi-DITerracel Hap Seng Land Sdn Bhd1. Alpinia Beside 16 SierraLink BunQalow/CondolShoD Office Perfect Eagle02 Residency Condominium2. Seri KembanganDevelooment Sdn Bhd 3, Garden Residence Semi-OfBunQalow Mah Sino Group Cvberiava Putrajaya Holdings Sdn4, Tamara Residence Terrace/Bungalow CyberjayaBhd 5. Setia Eco Glades Semi-OfTerrace SP Selia Berhad Cvberiava Terrace/Semi-DICondaminium6. Svmohonv Hill UEM Graua Cvberiava TerracelSemi-DICondo/Shop Bukit Hitam Development Bandar Bukit Puchong 7. Bandar Bukit PuchongSdn Bhd Bandar Puteri and Bandar Puchong Java Officellndustrial 1. Bandar Kinrara Residential-Landed Prooerties I&P Group Bandar Kinrara Mixed Residential and Commercial, 2. Bandar Sunway High Rise Condominiums & Landed Sunway Group Bandar SUflway Properties 3. One Citv Commercial & Retail MGT Consortium Berhad One Citv Sime Darby Properties 4. Mixed Residential and CommercialPutra Heights Pulra HeightsBerhad Mixed Residential, High Rise & Bukit Hitam Development 5. Bandar Bukil Puchong Bandar Bukit PuchongLanded ProDerties Sdn Bhd Johor {Bandar Putra KUlal, Taman Kempas Utama and Plentonal Township1. Indahoura Gentina Berhad Bandar Putra Kulai Mixed industrial 2. Senai Industrial Estate Scientex Berhad Bandar Putra Kulai Township and industrial Sena; Airport Terminal 3. Airport City project Bandar Putra Kulai Services Sdn Bhd Townshi SP Setia Berhad4. Setia Trooika Taman Kemoas Utama Khoo Soon Lee Realty5. Taman Kempas rndah Township Taman Kempas UlamaSdn Bhd Kern as Industrial Industrial Tiong Nam Group6. Taman Kemoas Utama 7, Pare Regency Service Apartments Malaysia Land Sdn. Bhd. Plentong Aosrtments Johor (Taman La enda Pufra and Platina) Near Taman lagenda1, Taman Putri Kulai Mixed Residential PJO Group Putra Near Taman LagendaTaman Tropika Mixed Residential Multimax Group 2. Putra 5. INDUSTRY OVERVIEW (Cont’d) Developer NameItem Pro·ect Name Tvpe Of Development Location KeC Development (M) Near Taman Lagenda 3. Taman Gemilang Mixed Residential Sdn Bhd Putfa Near Taman Lagenda Taman Oesa Baidur; Mixed Residential 81m Lian Group Ltd4. Putra Near Taman Lagenda Mixed Residential Taman Gunung PuJai Multimax Group 5. PutTa The Seed Townhouse/Low rise Aoartments Tanah Sutera Sdn Bhd Near Plalina 6. Greenfield Regency HiQh-rise Service Apartments Alpha Astral Sdn Bhd Near Platina 7. 8. Twin Residences Hiah-rise Service Aoartments Johor Land Berhad Near Platina Scientex (Skudai) Sdn High-rise Service Apartments The Garden residences Near Platina Bhd Johor (Bandar Putra 5eaamat) Khoo Soon Lee Realty Mixed Residential 1. Taman Makmur 2 Bukit Siput Sdn Bhd 2. Taman Kenan II Mixed ResidentIal Dvnastv Deoth Sdn Bhd Bukit Siout Sinder Sdn Bhd 3. Taman Desa Mixed Residential Near Kampung Sedeng Near Bandar Putra Taman Putra Mixed Residential Tumpuan Rezeki Sdn Bhd 4. SeQamat Notes: Projects listed in the table consist of types of properties that are deemed as comparabtes to key projects of IOtPG. (Source’ IOJPG Management) 5.3 Factors Affecting Competition Factors affecting competition may vary, or be of different intensity in different countries. This section focuses on the broad key factors. 5.3.1 Land Access and Ownership One of the key factors affecting competition is property developers’ access to land, particUlarly in prime areas. Properties located on prime land are generally viewed positively by consumers, and are usually able to command better prices. Prime lands are often located within growth areas, close to amenities, and provide potential for capital growth. 5.3.2 Reputation in the Market A property developer’s competitive edge is strongly linked to its reputation in the market place. Those with a good reputation and a strong track record will be in a more advantageous position, in tenns of land access and acquisition, as land-owners select joint venture partners based the developers’ track records in the market place. Property developers with good track records have already gained the confidence of consumers, in tenns of quality finishings as well as returns from properties. 5.3.3 Scale of Projects Projects of bigger scale are able to showcase property developers’ capabilities, and push forth the developers’ prominence in the property scene. However, such major undertakings require good financial standing, strong project management skills, and big parcels of land, among others, which usually bigger players have better access to. Smaller players would be In a less advantageous position to embark on bigger-scale projects. 5.3.4 Development Portfolio Another way that property developers differentiate themselves from competition is to instil diversity in their portfolio. The project portfolios of smaller players are usually smaller, with little diverse project nature as compared to the bigger players. Major players, with their technical know-how and wider exposure, are able to undertake work on different types of development projects, such as mixed developments, as weH as niche developments, or even leisure/hospitality projects. (Source: IMRR) 5. INDUSTRY OVERVIEW (Cont’d) 6 GOVERNMENT LEGISLATION, POLICIES, REQUIREMENTS AND INCENTIVES WITHIN THE INDUSTRY IN MALAYSIA, SINGAPORE AND THE PRC 6.1 Malaysia The property development sector in Malaysia is governed on three (3) levels -the Federal Government, State Government and Local Government. The Federal Government issues legislations governing property development activities such as environmental protection, issuance of developer’s licenses and formulation of national housing policies, whereas the State Governments have sale jurisdiction over land issues, covering issuance of land titles, conversions of land usage and subdivision of land in their respective stales. The Local Government oversees matters perlaining to administrations and maintenance, namely building inspection, and provision of maintenance services for infrastructure such as roads, pedestrian walkways, street lighting and refuse disposal and approval of building plans. The property development and investment activities in Malaysia are governed by the following acts: Control 01 Renl (Repeal) Act 1997 • Environmental Quality Act 1974 Housing Development (Control and Licensing) Regulations 1989 Housing Development (Control and Licensing) Act 1966 Housing Development (Housing Development Account) Regulations 1991 Housing Development (The Tribunal for Homebuyer Claims) Regulations 2002 Housing Development (Compounding of Offences) Regulations 2002

• Land Acquisition Act 1976 Land Conservation Act 1960 Local Government Act 1976 Malay Reservation Enactment F.M.S. Cap 142

• National Land Code 1965 Real Property Gains Tax Act 1976 Stamp ACI 1949

• Sirata Titles Act 1985 Street, Drainage and Building Act 1974

• Town and Country Planning Act 1976 Uniform Suilding by~laws 1984


This list does not include legislations by the respective state governments on property development and investment. The following entities are responsible for regUlating and enforcing the above·mentioned acts, in their areas of expertise. Ministry of Urban Wellbeing, Housing and Local Government (“MUWHLG’J Formerly known as the Ministry of Housing and Local Government, the ministry is responsible for Ihe development, control and licensing of residential properties in Malaysia. It ensures that residential projects are completed within a stipulaled timeframe, and are in compliance with the Housing and Development (Control and Licensing) Acl 1966 through a monitoring and enforcement division. Following the 13th General election, the ministry was reorganised to lake on an additional role of implementing programmes to improve the quality of life of citizens in the city. [t was renamed MUWHLG e!fective15 May 2013. Construction Industry Development Board Malaysia (“CIDB”) The CIDB. a body established under the Malaysian Construction Industry Development Board Ac! 1994 (“CIDB Act”), oversees the construction industry, with the primary mission of developing the industry by acting as the registration, qualifying and licensing body for construction contractors in areas of residential and commercial properties construction, civil engineering construction and mechanical engineering in Malaysia. Additionally, the Building and Common Property (Maintenance and Management) Act 2007 makes it mandatory lor property developers or bUilding conslructors to obtain a CCC upon successful completion of a project. The CCC certifies that the building is fit for occupation, and replaces the Certificate of Fitness for Occupation scheme in 2007. On the other hand, the Siale Authority Consent permits the sale and transfer of the property by the Vendor to the Purchaser. All property acquisitions by foreigners require approval from State Authority, as land is a state matter, and il is important 10 check state laws before making any commitment, taking into account that the minimum purchase price is nol standardised belween states. Real Properly Gains Tax (“RPGT”) Effective from 1 January 2012, RPGT is charged on gains arising from the disposal of rea! properly in Malaysia. The charge is also applicable to interesl, options or other rights over such properties, as well as disposal of shares in real estate companies. Gains from the chargeable activities are taxed up to 30.0%, depending on the holding period of the properties. 5. INDUSTRY OVERVIEW (Cont’d) Under the scheme, RPGT exemptions are given to genuine property owners under the following conditions: • Exemption amount is limited to RM10,OOO, or 10% of the net gains, whichever is higher.
• RPGT is charged only on net gains alter deduction of all related costs, such as purchase price, renovation costs and incidental cost. Exemption for gains on disposal for transactions between parents and children, husband and wife, grandparents and grandchildren. Exemption is applicable for net gains from disposal of one unit of residential property, once in a lifetime by a citizen or permanent resident of Malaysia.

In October 2013, the Malaysian government revised the RPGT from 15% to 30% for gains on properties sold by individual citizens within a period of up to 3 years. For properties sold wilhin a holding period of four and rive years, the new rates will be increased to 20% and 15% respectively. For non·citizens, the RPGT is imposed at 30% for properties sold within a holding period of up to 5 years. The revised rates will come into effecl on 1 January 2014.
Stamp Duly In addition, property purchases are liable to a stamp duty of up to 3.0%. Valuation of the stamp duty is charged on the execution of the Sales and Purchase Agreement. Transactions that are valued below RM100,000 are charged a 1,0% stamp duty, whereas transactions valued from RM100,001 to RM500,000 are charged a 2.0% stamp duty. Transactions in excess of RM500,000 are charged 3.0% stamp duty,
First time house buyers are exempted from stamp duty for Sales and Purchase Agreements executed lrom 1 January 2011 to 1 December 2014, sUbject to a property price cap of RM400,000.
Guidelines on Responsible Financing In 2011, guidelines on responsible financing were issued to financial inslilutions across the country. Part of the guideline’s objectives is to curb national household indebtedness. Under this guideline, the loan to value ratio (“LTV”) for third housing loan onwards is capped at 70.0% of the property value. Financial institutions are required to increase risk weights for housing loans with LTV 01 more than 90.0% on personal financing with tenure of more than five years. Excessive investment and speculative activities in property industry in Malaysia is expected to be moderated with the new guidelines. Under this guideline, home loans are now controlled and are based on the individual’s net salary instead or gross salary,
My First Home Scheme In 2011, the Malaysian government announced the My First Home Scheme to assist young adults, who have just joined the workforce, to own their tirst home. Under this scheme, the larget group will be able to obtain up to 100.0% financing to purchase residential properties in Malaysia. As per the scheme criteria, the applicant must be aged 35 and below, is a first-time home buyer, with gross income nol exceeding RM5,000 per month. The value of the property must not fall below RM100,00 and exceed RM400,000. This is expected to encourage demand for medium and low cost properties in Malaysia.
Developer Interest Bearing Scheme (“DIBS”) DIBS is a financing scheme offered by properly developers to reduce capital overheads for property investors. Under this scheme, property developers absorb interest charged on home loans for the duration until the completion .of projects. Home buyers are only required to pay a downpayment and all associated costs, such as legal and administrative fees, to have the rights over the property under development. The loan amount is disbursed in stages to property developers to finance the development of the project. In October 2013, the Malaysian government announced under Ihe 2014 budget that the scheme has been effectively prohibited, and developers are not allowed to implement projects with DIBS, and financial institutions are prohibiled from providing final funding for DIBS.
Loans 10 Value (“”LTV”) Ratio In a circular sent to banks and financial institutions on 15 November 2013, Bank Negara Malaysia requires banks to give out housing loans based on net selling price, which excludes rebates and discounts, rather than on gross selling price. Prior to the ruling, banks relied on the sale and purchase value in calculating the LTV. The circular also placed the emphasis for banks to have sound policies and procedures to ensure valuation of properties is reasonable
Restriction on Foreign Ownership The Malaysia government has imposed a minimum price for properties that can be purchased by foreigners. In the 2014 Budget, which was unveiled in October 2013, the minimum price was increased from RM500,000 to RM1 ,000,000. To enforce transparency in the industry, property developers are also required to display detailed sales price including all benefits and incentives that includes exemption of legal fees, stamp duty and cash rebates.
Affordable Home Ownership for Citizens The Malaysian government estimates that an additional 223,000 new houses (private and public housing) to be built in 2014, and a total of RM724 million to be allocated for pUblic housing. Under Pr1 ma, a programme to provide housing for middle income households, an additional 80,000 housing units will be buill, with an allocated budget of RM1 billion. The government will also introduce the Private Affordable Ownership Housing Scheme to encourage development of low and medium cost units by the private sector. Under this programme, a sUbsidy of RM30,000 will be provided 10 private property developers every unit built. Only housing projects approved effective 1 January 2014 will be considered for this scheme.
(Source: IMRR) 5. INDUSTRY OVERVIEW (Cont’d)
6.2 Singapore

Land development management in Singapore is under the joint purview of the Singapore Land Authority (“SLA”) and the Ministry of National Development (“MND”). In accordance to the Singapore Land Act, SLA operates as a statutory board under the Ministry of Law, to optimise Singapore’s limited land resources. SLA also manages land sales, leases, acquisition and allocation, developing and marketing land-related information and state land and buildings, among others, and assumes the role of a national land registration authority. Land leases are administered through SLA’s Public and Private Land Operations’ divisIons. The Building and Construction Authority and the Urban Redevelopment Authority handle matters pertaining to residential development and investments. In general, property development and investments activities in Singapore are governed by the following key acts: • Planning Act (Cap. 232)
• BUilding Control Act
• Building Maintenance and Strata Management Act
• Conveyancing and Law of Property Act
• Housing Developers (Control and Licensing) Act
• Land Acquisition Act (Chapter 152)
• Land Titles Act Land TItles (Strata) Act

• Property Tax Act
• Registration of Deeds Act
• Residential Property Act
• State Lands Act
• Street Works Act
• Control of Rent (Abolition) Act 2001
• Parks and Trees Act (Cap. 216)
• Preservation of Monument Act

Urban Redevelopment Authority (“URA “) URA controls and regulates land use according to the changing needs of the nation. It acts as an agent to carry out land sales for commercial, private residential and industrial development, and hotels. It set out, in its 2008 Master plan, to gazette the five regions of North, North-East, East, West and Central Singapore for residential, commercial and other purposes, with consideration for controlled development, conservation and preservation requirements.
Suilding and Construction Authority(“SCA “) BCA is an agency under the MND, responsible for the development of built environment excellence in Singapore. “Built environment” refers to buildings, structures and infrastructure in our surroundings that provide the setting for the community’s activities. BCA also regUlates and develop Singapore’s Building and Construction industry.
As of October 2013, the property industry in Singapore witnessed eight rounds of cooling measures, since September 2009. The following are some of the more recent cooling measures implemented.
Debt Servicing Framework for Property Loans and Revision of Loan-to~ValueRatio In 2013, the MAS introduced the Total Debt Servicing Ratio (“TDSR”) framework for all property loans granted to individuals. Under this framework. MAS aims to eliminate uneven practices with respect to the application of debt servicing ratio and draw out an improved methodology to serve as a guideline to financial institutions when assessing the debt servicing ability of the borrower.
The TDSR framework also includes the refinement of rules related to the application of L1V limits. For individuals obtaining a second housing loan, the LTV limits will be lowered to 50.0%, or 30.0%, if the loan tenure exceeds 30 years or the loan period extends beyond the borrower’s retirement age of 65. As for individuals obtaining third or subsequent housing loans, the LTV limits will be lowered to 40.0%, or 20.0%, if the loan tenure exceeds 30 years or the loan period extends beyond the borrower’s retirement age of 65. For non-individual borrowers, the L1V limit of 40.0% is lowered to 20.0%. The TDSR framework will proVide financial institutions with a basis for assessing the debt servicing ability of borrowers applying for property loans, taking into consideration their other outstanding debt obligations. Financial institutions will be required to compute the TDSR, or the percentage of total monthly debt obligations to gross monthly income, on a consistent basis. The TDSR will apply to loans for the purchase of all types of property, loans secured on property and the re-financing of all such loans. Financial Institutions are required to:
• Take into account the monthly repayment for the property loan that the borrower is applying for, plus the monthly repayments on all other outstanding property and non-property debt obligations of the borrower;
• Apply a specified medium-term interest rate or the prevailing market interest rate, whichever is higher, to the property loan that the borrower is applying for when calculating the TDSR;
• Apply a haircut of at least 30% to all variable income (e.g. bonuses) and rental income; and

5. INDUSTRY OVERVIEW (Cont’d) • Apply haircuts to and amortise the value of any eligible financial assets taken into consideration in assessing the borrower’s debt servidng ability, in order to convert them into ‘income streams’ in computing the TDSR. MAS considers any property loan extended by financial institutions in excess of a 60% TDSR to be imprudent. Revision of Property Tax Structure In February 2013, the Singapore government announced the introduction of a progressive property tax structure. The revised progressive tax will be rolled out in two phases on 1 January 2014 and 1 January 2015. The new tax rate with a maximum of 16.0% is chargeable for owner occupied properties with an annual value in excess of 8G0130,000. Revision of Additional Buyer’s Stamp Duty The Singapore government announced a revision of the Additional Buyer’s Stamp Duty (“ASSD”), and with effect on 12 January 2013, ABSD is raised between five to seven percentage points across the board. ABSD is imposed on Singaporeans and Pennanent Residents on their second and sUbsequent home purchases. ABSD for foreigners was increased from 10.0% to 15.0%, regardless of the number of home purchases. Assn Rates in Sinaaoore as of Januarv 2013 ABSD on First Purchase  ABSD on Second Purchase  ABSD on Third and Subsequent Purchase  Singapore Citizens  – Previous: NA Revised: 7%  Previous: 3% Revised: 10%  Permanent Residents  Previous: NA Revised: 5%  Previous: 3% Revised: 10%  Previous: 3% Revised: 10%  Foreigners and non~ individuals  Previous: 10% Revised: 15%  Previous: 10% Revised: 15%  Previous: 10% Revised: 15%
(Source: fMRR) 6.3 The PRe The property development and property investments industry in the PRC is governed on two (2) levels -the central government and the local authorities (provinces, cities or counties). The central govemment provides general guidelines to the industry for the whole country, whereas local authorities post regional regulations and policies that are applied only to particular local jurisdictions. The property development and investment activities in the PRC are governed by the following laws and regulations: • Urban Land Regulation 1990 .. Development and Management of Tracts of Land by Foreign Investor Regulation 1990 .. Development of Urban Real Estate Regulation 1998 .. Land Administration Law 1998

• Construction Law 1998
• Bidding and Tendering Law 1999
• Qualification Certificate of Real Estate Developer Regulation 2000
• Acceptance and Examination of the Construction Projects Regulation 2000
• Construction Quality Regulation 2000
• Grant of State-owned land Use Rights R”llulation 2003
• Real Estate Management Regulation 2003
• Property Law 2007 .. Energy Efficiency for Civil Buildings Regulation 2008


The list of the key Ministries and Commissions responsible for the industry is as follows: Ministry ofHousing and Urban-Rural Development The main responsibilities of the ministry include gUiding the planning and construction of rural and urban areas in the PRC, drawing up national standards of construction, guiding construction activity and regulating construction market of the PRC, and administrating the housing and real estate industry. Ministry of Land and Resources The Ministry of Land and Resources focuses on the management, protection and utilisation of land, mineral and marine resources. National Development and Reform Commission The National Development and Reform Commission is a macroeconomic management agency under the State Council, which studies and formulates policies for economic and social development. The commission is responsible for the examination and approval of the major construction projects in the PRC. In July 2007, the PRC government implemented a regulation restricting the ability of foreign-invested real estate companies to raise funds offshore for the purpose of funding such companies, either through capital increase or by way of shareholder loans. 5. INDUSTRY OVERVIEW (Cont’d) In January 2011, the State Council announced that families restricted to purchase additional properties. In April 2012, a total of 35 municipal governments of first and second-tier cities in the PRC issued a price control regulation for property, For example, the Shanghai municipal government announced tax of 0.4% for properties priced at, or below RMB2,641 per sq ft, and 0.6% for those priced above RMB2,641 per sq ft These tightening measures are expected to be an obstacle to residents opting to upgrade their properties, while promoting demand for mass market developments. In July 2012, the PRC cut interest rate twice in less than a month, in order to combat a deepening slowdown as Europe’s debt crisis threatens global growth. The country’s benchmark one-year lending rate was decreased by 31 basis points, and the benchmark deposit rate was cut by 25 basis points. In March 2013, the central government raised the tax on profit of second home sales from 1.0%-2.0%, to 20.0%. {Source: (MRR) 7 DEMAND CONDITIONS AND SUPPLY DEPENDENCIES OF THE INDUSTRY The following sections discuss the various demand conditions and supply dependencies for lhe properly market in the three economies. 7.1 Demand Conditions 7.1.1 Domestic Demand for Housing Domestic demand for residential properties is driven by growth factors in household income and population. On the other hand, the performance in the commercial subsector is driven by market forces, including the two factors mentioned above, along with business expectancy and government policies on trade. NotWithstanding the effects of the global economic crisis in 2008, the average income of the populations of Malaysia, Singapore and the PRC has been growing. A stable job markel and a slrong economy contribute to increasing purchasing power and wealth, and has, historically, been the driving 1aclor behind domestic demand. Under such conditions, more households can afford to move into the higher-value segments in the residential subsector, such as condominiums and detached residences. This trend is mirrored in the perlormance of the residential and commercial properties’ subsectors, where the property transaction value of both subsectors recorded consistent growth, with the exception of 2009. Population for these three economies are expected to grow, thus, further fuelling demand for housing, and consumer goods and services. 7.1.2 Increasing Influx of Expatriates and Migrant Workers With the globalisation of corporate operations and the lack of indigenous workers, the influx of expatriates and migrant workers will form a substantial demand segment. A counlry with open immigration rules, liberal government policies, and a thriving economy will likely attract more foreign investments. This will bring about demand for commercial space to accommodate business expansion. The influx of expatriates and foreign workers will create demand for residential properties. The Malaysia My Second Home programme and the TalentCorp Malaysia programme under the 10MP and ETP are some of the initiatives that the Malaysian government is taking, to boost its economy by altracling foreign investments and talents. Upon the success of this programme, the Malaysian property and investment sector is expected to witness additional growth from Ihis segment. Singapore has been an attractive destination for expatriates and neighbouring migrant workers. Until recently, Singapore had a comparatively moderate stance on work permits and foreign workers, as it is facing the effects of an aging local population. As of 2012, non-residents constituted 28.0% of the total population. The demand for high~end dwellings among the expatriate and foreign talent community had been a significant driving factor behind the increase in price and rental rates of residential properties. 7.1.3 Government Incentives and Policies on Economic Growth Demand is also dependant on the government policies on property ownership and investments. Implementation of restrictive policies, such as the recent cooling measures in Singapore and Ihe PRC, were designed to curb demands and investment aclivilies. Growth in the price movement or both residential and commercial properties slowed in early 2013 in these two countries, after the implementation of additional measures in January 2013. In the PRC, local governments are required to step in to control and regulate price movement of the property market, and in a recent exercise, the drop in property sales was more prominent in first tier cities, namely Guangzhou and Shanghai. The Malaysian property market witnessed relatively minimal government intervention compared to the other two markets. As such, property prices have been on a natural growth trajectory, allowing demand to pace behind supply of both residential and commercial properties. 5. INDUSTRY OVERVIEW (Cont’d) 7.1.4 Increasing Commercial Activities in Growth-focused Areas The concentration of commercial activities ;s among the key proponents to demand and prices of properties. The Iskandar Malaysia projects in Johor and the GKUKV have become the focus of economic renewal under the 1OMP. Malaysia has allocated several initiatives, or ‘entry point projects’ to improve connectivity in Kuala Lumpur. The expansion of the Mass Rapid Transit infrastructure is one such project to increase the vibrancy of Kuala Lumpur, in line with its ambition to be one of the world’s most liveable cities. InvestKL is tasked to attract foreign multinational finns and foreign investments into Kuala Lumpur, and the success of its efforts is expected to create a spill-over effect into the property development and investment sector in the city. Likewise, Iskandar Malaysia has set itself an objective of attracting RM73 billion worth of investments by 2015, shaping itself to be the centre for catalysts of growth in high value services and manufacturing sectors. A total of 54,758.9 hectares of residential land had been allocated to support the growth of commercial activities in Iskandar Malaysia. Meanwhile, the PRC’s first-tier cities, such as Shanghai and Beijing, are home to established industrial and commercial areas, which have some of the highest property prices among the provinces in the country. This trend has caused the emergence of second tier cities as alternative commercial centres. 7.1.5 Prices of Properties in the Region The variance in property prices may result in the movement of households and businesses among different countries, or locations within a country, thus, affecting the demand of properties in a specific location. Commercial entities may choose a specific location, or relocate, so as to defray rental andlor operating costs. For example, the Iskandar Malaysia project was designed to take advantage of its proximity to Singapore, and complement Singapore’s land scarcity, so as to attract investors and individuals to live and work in Malaysia. The relative low price of Malaysian properties, as compared to Singapore, is one of the main factors attracting foreign interests. Residential and commercial properties are offered at a fraction of its equivalent in Singapore. Such difference between the property prices also serves to fill the gap between down and up cycles in the respective countries. As prices of properties increase and the difference in the rate of return heightens, investments will move into locations, sectors or countries that are going through its boom cycle, such as those in Malaysia. 7.1.6 Social Political Dynamics Demand for properties is also affected by the political and social stability of the country. Malaysia was ranked 20th out of 158 countries in the Global Peace Index and was placed in the 52nd percentile for political stability and absence of violence. Singapore, on the other hand, ranked 23rd out of 159 countries in the Global Peace Index, but scored higher in the political stability and absence of violence index, with a position in the 90th percentile. The PRC was placed 89th position in the Global Peace Index, out of 158 countries, and was placed in the 25th percentile for political stability and absence of violence. Comparatively, these countries are considered politically stable and safe, contributing to demand for residences and investments. (Sounoe: IMRR) 7.2 Supply Dependences 7.2.1 Inflow of D;rect Investments on Real Estate The inflow of direct investments is one of the supply dependencies for the real estate sector. Property developers are highly dependent on the availability of sufficient financial resources before they can undertake any property development or investment activity. Without possession or access to adequate financial resources, it would be difficult, or even impossible, for developers to acquire land and appoint main contractors to undertake the actual construction activities. One of the key sources of finance for property developers is bank borrowings. Very often, application and utilisation of bank-approved funds are key requisites before plans for property development can commence. The availability of bank draft facilities or loans will also determine a property developer’s ability to ensure the continuation of their development projects. 7.2.2 Scarcity of Land The supply of land available for development is a key supply factor in the property market. In an area that commands high demand, the prices of properties will be higher than the prices in other areas. The supply of development land will not be replenished until the expiry of leaseholds. To overcome this problem, some property developers resort to a buyout of mature properties in a costly en-bloc exercise. With increased competition for prime parcels of land, companies seeking to develop properties will have to factor in the increased cost of acquiring that land over the expected returns from the sales and rental of it. 5. INDUSTRY OVERVIEW (Cont’d) 7.2.3 Building Materials Property developers are highly dependent on the availability of raw materials to carry out building and construction activities. The main raw materials used within the property development sector include cement and concrete products, iron and steel products, non-ferrous metals, as well as wood and wood products. A number of raw materials for construction activities are traded commodities, and have seen upward trends in their prices. This drives up construction costs and, in turn, may require developers to scale down their activities, leading to a decrease in supply. 7.2.4 Labour Supply The property development and construction industry is adversely affected by shortage of labour. New laws on minimum wages or restrictions on migrant workers will drive up the construction costs of new projects. The issue on labour shortage has been a key concern of construction firms in developed countries, as it is expected to marginalise future income. This is especially exacerbated by the dependency on foreign workers or skill requirements in specialised roles, such as carpentry or masonry. Even when the additional costs have been passed on to consumers and end-users, some property developers and constructions firms will find it a challenge to scale-up and undertake bigger projects, as they have to compete from a limited pool of available manpower. 7.2.5 Availability of Skilled Main and Sub·contractors Property developers, especially those that do not undertake their own construction activities, are subject to the availability and network of main contractors/subcontractors who possess the expertise to undertake their required work. While there are many contractors registered with the relevant construction authorities, new property developers who have had no prior working relationships with main or subcontractors would have to exercise extra caution in scouting and selecting the right partners to work within their property development undertaking. (Source: [MRR) 8 SUBSTITUTE PRODUCTS AND SERVICES IN THE COUNTRY Properties are built to meet specific purpose and usage, some of which cannot be substituted. For example, residential properties are constructed for owners/tenants to live in, whereas commercial properties are meant for companies to conduct business operations in. These usages are not interchangeable. However, substitutability exists, to some extent, within the segments of the property industry. Property developers observe the market tends, and decide which types of properties to develop. For example, a prime land intended for residential development may be used for commercial or mixed developments instead. (Sou”,.: fMRR) 9 INDUSTRY RELIANCE ON, AND THE VULNERABLITY TO COMPETITION 9.1 Availability of Raw Materials Property development is reliant on raw materials, such as cement, sand, bricks and steel, among others, which are required for the construction of buildings However, the vulnerability on this dependency is perceived to be insignificant in Malaysia and the PRC due to the wide availability of most of these building materials. However, Singapore is highly dependent on imports, for example sand, to meet its building needs. As such, overall construction costs and development tend to be higher in the country. 9.2 Labour Force Property development and construction is a labour-intensive business, requiring both skilled and unskilled labour. Both Malaysia and Singapore face issues on shortage of domestic manpower and, thus, are heavily reliant on foreign labour. However, manpower continues to be unresolved issues in these countries, as the Malaysian and Singapore governments are taking a serious stand in protecting domestic workers, and has put a restriction on the recruitment of foreign workers. (Source: IMRR) 10 PROSPECTS AND OUTLOOK OF THE PROPERTY DEVELOPMENT AND PROPERTY INVESTMENTS INDUSTRY IN MALAYSIA, SINGAPORE AND THE PRC 10.1 Growth The property development and property investments industry (collectively known as “the property industry”) of Malaysia, Singapore and the PRC is expected to continue to see positive developments, with respective market growth projections ranging from 5.0% to 20.0%. 5. INDUSTRY OVERVIEW (Cont’d) 10.1.1 Malaysia Sentiments regarding the Malaysian property market, specifically the residential and commercial 5ubsectors, are still running high, with growth expected to range from 10.0% to 20.0%). Based on these projections, Malaysia’s property market, for residential and commercial sectors, is estimated to reach between RM127.2 billion to RM165.1 billion in terms of property transactions. Estimated Value of Property Transactions (Residential and Commercial] in Malaysia from 2012 to 201S. RM{eililon) 180.0 -.—–I_. –m” ! 160.0 t-­140.0 120.0 –=-==-~,:-­100.0 95.0-105.1 80.0 j—–. i 60.0 -i­’:: f.·.-_-­———-,——-..—–.. -·——T [ 1012 lOB 2014 2015 -lD~.grlJwlh –20%growth (Source: IMRR) Certain regions like GKUKL, which witnesses sustained urbanisation and domestic migration, will lead the momentum in Malaysia’s property market growth. The overall property market in GKUKV is expected to grow from 15.0% to 20.0%) over the next few years. The estimated total value of property transactions in Selangor is expected to reach between RM39.2 billion to RM40.9 billion in 2013, while Kuala Lumpur’s total property transaction value is forecasted to be between RM21.1 billion and RM22.0 billion in the same year. Sentiments in the property development industry in Johor are buoyed by prospects in the Iskandar Malaysia Project. Foreign investments, especially from Singapore, are expected to propel the demand for residential, commercial and industrial properties. The agreement on developing a Mass Rapid Transit system linking Johor and Singapore, and numerous high profile, joint-venture projects between Malaysian and Singaporean developers, are expected to enhance Johor’s prospect as a high growth area for property. The estimated total value of property transactions for commercial and residential developments for Johor is expected to reach RM9.5 billion to RM10.4 billion in 2013. In the arena of property investments, rental yields in Malaysia for residential and commercial properties are expected to reach 4.0% to 5.0% from 2013 to 2015. Overall, GKUKV is going through an expansionary phase in terms of property investments prospects, with focal development areas such as Sungai Buloh, Shah Alam, Subang Jaya, Cybe~aya, Puchong, and the south of Klang Valley. Infrastructure projects like the Mass Rapid Transit in Klang Valley and new highways will playa key role in the performance of the property market in the region. Rental yields of residential properties in GKUKV are expected to register 3.0% to 4.0% annually over the next three years, while rental yields of commercial properties for the area are expected grow to about 5.0% over the same forecast period. In the southern state of Johor, rental yields of non-landed residential properties are estimated to grow from 4.0% to 5.0%, while non-landed properties will grow to by approximately 2.0% annually from 2013 to 2015. (Source: fMRR) 10.1.2 Singapore Take-up rate for properties in Singapore is expected to rebound on the back of robust domestic demand, with overall sales growth of the domestic property industry in Singapore expected to reach 3.0% to 7.0% from 2013 to 2015. By 2015, the estimated value of transactions in Singapore for residential and commercial properties is projected to range from SGD68.5 billion to SGD76.8 billion.
5. INDUSTRY OVERVIEW (Cont’d) Estimated Value of Property Transactions (Residential and Commercial) in Singapore from 2012 to 2015 –~–~——-­——————.-.———–.——­SGD (B,llIon) BO 0 76.B r7>0 70.0 (,.5.0 62.7
“S.D <;O.D 2012 201,3 2014 ).015 –:~%gl’owth –7’H,s:n~v! rh (Source: JMRR) With cooling measures aimed at the residential subsector, the lower tax rate of commercial properties in Singapore and the prospect of superior marginal returns have made commercial properties into alternative investments. While sales of residential properties are expected to moderate to 3.0% to 4.0%, sales of commercial properties is likely to reach between 3.0% and 7.0%. Although the property investment market in Singapore retains it cautious outlook, rental yield on residential properties may grow between 2.0 to 4.0% annually for the next three to five years, barring further government intervention. Growth of rental yields on commercial properties is more optimistic, with an estimated growth rate of 5.0% to 7.0%. 10.1.3 The PRC Prices of residential properties are expected to remain constant in high growth cities like Xiamen. The lUXUry segment in the PRC’s residential property market is likely to grow by 5.0% in 2013. While prices of commercial properties are expected to drop, in view of current oversupply, transaction volume will grow between 10.0% and 12.0%. The PRC’s overall property market is estimated to grow from 10.0% to 20.0% from 2013 to 2015, reaching RMB8,579.1 billion to RMB11,138.0 billion by 2015 in transactional value. Estimated Value of Overall Property Transactions (All Types) in the PRC from 2012 to 2015 –~~-·-(-·-“‘-‘O-“-)._-~—~~_._-~~~–~—.~—-~_…_-._._–_._–­I 12.000.0 1.::1.,138.0 ]1.000.P. ]0.000.0 +—-~——–. I 9.1JOO.0 ———=-_.._-­8000.0 7.”199.2 7.00(LO 60LlI).1J s.OOO.u 4.000.0 W::U ,o13 20:15 __10%gnJwth __20%,.-.-owth
(Source: IMRR) In Xiamen, property transactions are expected to reach RMB100.6 billion to RMB130.6 billion by 2015, aided by multiple perks such as good location, commercial activities and a growing middle class population. I Company No: 1035807-A I 5. INDUSTRY OVERVIEW (Cont’d) Estimated Value of Property Transactions in Xiamen from 2012 to 2015 RMB 811lion ——-l.30.6 _140.0 -,—-­::::: ~i-.–7S-S6-7——·-~-90—1.—..—-“~——..,.-…-=,.,.,'”.,.,..~,..– …·-::···_:…·-,-00-6-,­…-_-.-.—·-·'”9·”‘···.H,~,.,..,.,.,,-..,.~,.,W-:::80.0 ..~-~-…._==:::::::::::::::;:~~.,..t—; ===::=~::.—–_=oc”–­83.1 __J~,~~L __GO.(1 400+—-~——————–­20.0  i0.0 +–“­ 2(\11  2013  2014  2Q15  -+-10% Growth  __lO%Growth  ——-~_.._­
(Source: IMRR) Rental yields in Xiamen are also expected to continue to grow, with demand from consumers shifting from purchase of flats to rental of flats, due to the government’s tightening measures on residential properties, as well as the growing demand for commercial properties. Rental yields of both residential properties and commercial properties are expected to grow 2.0% to 5.0% annually from 2013 to 2015. Prospects in the property market for the three countries are expected to be boosted by the following key factors. (Source: JMRR) 10.2 Outlook 10.2.1 Performances of the Three Economies The performances of the Malaysian, Singapore and the PRC economies are key contributing factors leading towards the growth in property markets in the respective countries. Malaysia’s economy is expected to grow by 5.0% to 6.0% in 2013, and has set itself a goal to become a nation of high income by 2020. The states of Kuala Lumpur, Selangor and Penang are predominantly among the biggest contributors of Malaysia’s GOP, while emerging states like Johor and Melaka are experiencing high growth rates. Singapore’s economy is expected to grow by 1.0%. to 3.0% in 2013. While Singapore’s economic growth is marginal, as compared to Malaysia, the property market in the country is expected to remain resilient on the back of domestic demand. Singapore’s properties are also deemed attractive to foreign investors, in view of the stability of the economy and government. Among the three economies. the PRC is expected to experience the largest economic growth of 8.2% in 2013, and 8.0% in 2014. Property ownership is deemed as important in the Chinese culture, and high disposable incomes, brought about by strong economic growth, will sustain demand for these assets. Strong economic growth is also a precursor for developments in tourism and hospitality, as the overall wealth of the nation will lead to better infrastructure and increased consumerism, both of which are determinants to its attractiveness as a tourism destination. The optimistic outlook will, thus, lead to increased demand for hotels and hospitality related services. 10.2.2 Government Policies The development of the property market is SUbjected to policies implemented by the government. While the property market in the three economies may affected by cooling measures, other government policies may provide platforms which will aid further growth in this industry. Policies under Malaysia’s 10MP, including the TalentCorp and Malaysia My Second Home (MM2H) programmes, support demand for residential and commercial properties in the long run. The policies in Malaysia are largely favourable to foreign investments, and in the case of Iskandar Malaysia in Johor, are targeted specifically to attract investments and talents from neighbouring countries. Foreign and local investments will be attracted to new property developments that are easy to access, in terms of transportation, and are strategically located in located in hotspot areas that offer key amenities. The development of infrastructures, such as the Mass Rapid Transit systems and, roads and highway improvements will enhance connectivity, allowing property development to expand geographically into outlying areas. 5. INDUSTRY OVERVIEW (Cont’d) Under the Singapore BUdget 2013, property tax rates for high-end residential properties will be increased progressively with effect from 1 January 2014, with the largest increases applying to investment properties that are not occupied by their owners. New marginal tax rates for non-owner occupied residential properties can range from 12.0% to 20.0%, as compared to the previous flat tax rate of 10.0%. This may influence investors’ decisions in investing in Singapore properties, particularly for high value residential properties, and for investment or rental purpose. However, this has created a pocket of opportunity for investments in commercial properties. likewise, the Chinese government is pursuing a policy to balance the supply and demand of residential and commercial properties through the respective state governments. The Chinese government is pushing in two directions, as it seeks to slow price increases so as to avoid a property bubble. It is, on the other hand, lowering borrowing costs for first-time homebuyers to encourage purchases of residential properties. Incentives schemes such as easing mortgage financing for first-time buyers and enhancing development of mass-market products, as well as solid demand and continuing urbanisation will lead to improved sales within the property market. These policies will shape the overall property market over the next few years in the respective countries. 10.2.3 Demographics Population growth of the country will affect the demand within the property market. Malaysia’s population is expected to grow by a CAGR of 1.6% over the next three years, fuelling future expectation of the residential properties subsector. Malaysia also has a relatively young population, with a median age of 26.2 in 2010. In addition, the country has witnessed a rapidly urbanising population over the past few years, with a 7:3 composition between urban and rural population. With a higher percentage of its population expected to reside in cities like Kuala Lumpur and Selangor, the new generation of Malaysians are shifting towards modern and planned housing estates. The demand for properties is further supplemented by the increased inflow of migrant workers and expatriates as part of the programme to attract talent and suitable manpower into the country. Singapore’s population is expected to reach 5.8 to 6.0 million by 2020, supported by government policies in anticipation of an ageing population. Singapore has a structured migration policy based on a selective process of foreign talent to complement its future population growth. The future plans on population growth were outlined in the white paper on population in 2012. This represents both an opportunity and a challenge for property developers in a land scarce nation. The PRC is the most popUlous country in the world, with 1.35 billion residents in 2012, and growing at about 0.5% annually. Coupled with rapid urbanisation, the demand for residential properties in the PRC is set to grow further, in line with the population trend. 10.2.4 Consumer Trend The sentiments of consumers, as well as consumer habits, will affect the overall purchasing pattern in the country. Malaysian consumers are generally optimistic about the economy. The Consumer Sentiments index moved 4.2 points in a quarter-on-quarter comparison to 122.9 points, indicating positive consumer sentiments on the economy. This was echoed in the PRC, as the Consumer Confidence index rose to 108 points in 04 2012. It is expected that the trend will continue throughout 2013. On the other hand, Singapore’s Consumer Confidence index is expected to dip in 2013, as a consequence of concerns over uncertainties in disposable incomes and job prospects. Domestic demand for residenfial properties is expected to remain robust, and form the core driver for the property development industry in the three respective countries. The growing middle class will impact home ownership rates, as younger families seek and acquire their own residential properties. On the other hand, affluent and wealthy consumers move into the higher end segments, and will likely indulge in big-ticket items such as luxurious accommodations and housing. Singaporeans have been moving from public to private housing over the recent years. The property investments and development industry will have a positive correlation with consumer sentiments, while consumerism, in general, will prop up industries such as food and beverage and entertainment, which are vital to tourism and hospitality. (Source: IMRR) 5. INDUSTRY OVERVIEW (Cont’d) Converging Knowledge Sdn Bhd has prepared this report in an independent and objective manner and has taken adequate care to ensure the accuracy and completeness of the report. We believe that this report represents a true and fair view of the industry within the boundaries and limitations of secondary statistics, primary research and continued industry movements. Our research has been conducted to present a view of the overall industry and may not necessarily reflect the performance of individual companies in this industry. We are not responsible for the decisions andl or actions of the readers of this report. This report should also not be considered as a recommendation to bUy or not to buy the shares of any company or companies.
EDDY TAN KONG YIAM Director Converging Knowledge Sdn Bhd



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