Highlight Selangor’s deferred projects to get nod only in 2017

by **Cals** Tue 18 Mar 2014, 19:30

Highlight Selangor’s deferred projects to get nod only in 2017

Business & Markets 2014

Written by Kamarul Anwar of theedgemalaysia.com

Tuesday, 18 March 2014 15:01

SOME 781 projects in Selangor, which have been delayed due to the finite supply of treated water, will only obtain approval in 2017 when the contentious Langat 2 water treatment plant and its distribution system (LRAL2) are expected to be ready for operation.

Thus, developers will probably be burdened with land holding costs and will not see any income from project launches due to the failure to obtain approval to kick-start development projects.

This could create a ripple effect in the local property market.

One property developer says waiting for LRAL2 could be too little, too late to mitigate the economic impact from the deferment of development approvals. As the plant is expected to be completed in 2017, these delayed projects could only be completed in 2019 at the earliest.

“Based on the sales and purchase agreement, a developer needs to complete a landed property within two years while a high-rise property has a timeframe of three years. If the developers have to sit on the sidelines while paying the [land holding] costs, they may need to keep on paying for a really long time,” says the property developer, who spoke on condition of anonymity.

When contacted, Datuk Seri Michael Yam Kong Choy, national council president of the Real Estate and Housing Developers’ Association of Malaysia (Rehda), says the delay in the approvals could pose “dire consequences” for property developers, which will affect the whole supply chain.

“This is a tremendous cost to the developers that have an interest in the deferred development. They have to bear the interest cost for the purchased land and have employees to pay; yet they can’t get the projects completed in time.”

The delays, he says, could also result in an escalation in property prices as supply gets tight. “For one, with the added costs, property developers will have to pass on the costs to customers. And according to the simple economic theory of supply and demand, there could be an increase in property prices when supply is lacking [due to the delays].”

Last November, Suruhanjaya Perkhidmatan Air Negara (SPAN) told The Edge that the maximum distributable capacity that can be supplied by all 34 treatment plants to Selangor, Kuala Lumpur and Putrajaya is 4,868 million litres per day (mld), a 6.23% increase from that in August 2012.

Yet, the reserve margin as at November was only 1.6%, which could hardly be considered as a margin. Between September and November, the average daily production from the existing water treatment plants was 4,611 mld, according to SPAN.

SPAN CEO Datuk Teo Yen Hua tells The Edge that since January 2012, the commission has deferred water supply approvals to new projects, except for the ones that require water in the capacity of less than 45,000 litres per day.

Last November, SPAN told The Edge that 841 developments had been put on hold due to the inadequate water supply in Selangor. According to Teo, the number is currently 781, with these projects requiring about 703.86 million litres of water per day.

Breaking down the numbers, Teo says the projects comprise five types of development. The most number of deferred projects fall under the “commercial” category, with 325, followed by “domestic” (306), “industry” (88), “mixed development” (53) and “institution” (nine).

However, SPAN provides exemption to the following types of development — religious buildings, hospitals (public and private), schools, educational institutions, colleges and universities (public and private), government buildings, low-cost housing/the government’s affordable and PR1MA projects, industries and commercial projects under the Economic Transformation Programme and Selangor government initiatives, and development projects that have been approved by local authorities (though not approved by Syarikat Bekalan Air Selangor Sdn Bhd [Syabas] as the certifying agency for SPAN) with more than 50% progress.

“With the Langat 2 water treatment plant expected to be ready in 2017, SPAN is considering approving water supply to projects requiring water after Langat 2’s completion,” Teo reveals.

However, Teo says SPAN will need to look into the additional mitigation projects proposed by the Selangor government to facilitate the approval of projects that do not meet the criteria of those exempted from deferment.

One treatment plant proposed by the state government is the Hybrid Off-River Augmentation System, which will ensure sufficient raw water for the “overloading” of the existing water treatment plants while awaiting the completion of LRAL2.

Teo says the Selangor government has proposed to SPAN to overload some of the existing treatment plants to meet the additional demand.

Rehda Selangor chairman Datuk Khor Chap Jen says Syabas has honoured its commitment by providing water supply to all remaining phases of projects previously approved.

“What is important for Rehda Selangor is the assurance of adequate supply, be it from the Langat 2 water treatment plant in 2017 or from any other new water treatment schemes,” he explains.

This article first appeared in The Edge Malaysia Weekly, on March 10, 2014.