Weekly Industry News

Lower plot ratios for properties in KL would dent earnings

Weekly Industry News

THE introduction of a plot ratio for new Kuala Lumpur (KL)-based property projects to a maximum of 1:10 will affect the projects’ profitability and developers’ profit margins, industry experts said.

All future projects are required to abide by the ratio, but according to Federal Territories Minister Khalid Abdul Samad, the ministry will also look into applications which have been previously approved in principle, on a case-by-case basis.

The plot ratio is included in the KL City Plan 2020 (KLCP 2020) with the objective to control the size of city developments and to curb the incoming supply of office and residential units in the city’s property market.

An industry analyst said developers that are required to change the project scope to comply to KLCP 2020 are expected to face reduced profitability.

“Because the land was initially bought with an intended built-up land area, the change to a 1:10 ratio could translate into depressed margins for the affected developers,” the analyst, who spoke under condition of anonymity, said.

“The impact to margins will depend on what kind of changes to the plot ratio are required under the new requirement following a fresh application. This will be determined on a case-by-case basis.”

Media Title:  The Malaysian Reserve

Date:  01 Mar 2019

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