Naza to ensure quality despite higher costs

By Sharen Kaur
Published in NST on November 21, 2014

Naza TTDI’s SM Faliq SM Nasimuddin says property prices will rise next year but will not solely be due to GST.

NAZA TTDI Sdn Bhd, the property development arm of the Naza group, says house buyers should be aware that the Goods and Services Tax (GST) is not an avenue for developers to make money.

“GST payments go straight to the government. In fact, our information and communication technology system is being upgraded to prepare for this change, as our finance division will have to submit GST filings to the government starting April next year,” says Naza TTDI deputy executive chairman and group managing director SM Faliq SM Nasimuddin.

He adds that he does anticipate property prices to increase next year, especially the commercial units, but they will not solely be due to GST.

“The reality is, although purchasers of residential units will not take on the cost incurred due to GST, as developers, we are still paying the six per cent input tax, such as contractors’ claim, consultant fees and marketing cost. There is also a need to invest in ICT system upgrade and training for staff when GST takes effect. The increase in cost will impact developers.

“To mitigate the expected rise in cost, Naza TTDI is looking to reengineer value and cost efficiency strategies without compromising on quality. But we cannot control the increase in prices of land and some building materials, which will eventually lead to increase in house prices.”

Faliq, however, expects sales to soften and some challenges in margin management.

“Since the GST will be replacing the usual sales and service tax, prices of some materials are expected to be competitive. The profit margin will fall to between three and four per cent.

“The financing structure will be affected, too, especially on commercial properties. Another challenge would be to absorb GST for the completed and unsold stock. We can expect fewer transactions for six to nine months post-GST as the market digests its impact and recovers.”

Faliq does not expect the GST to impact its high-profile developments, notably the RM4 billion Platinum Park and the RM20 billion KL Metropolis integrated mixed development in Kuala Lumpur.

“We do not foresee the take-up rate to drop drastically. These two projects are targeting niche, premium and corporate buyers. These two high-impact projects will not suffer as much, because it will be priced competitively.”

Faliq says despite the implementation of the GST next year and its expected outcome, Naza TTDI will continue to launch a mix of township development products and premium properties in TTDI Alam Impian, TTDI Grove and TTDI Sentralis.

He says a showcase of the company’s existing product offerings should take place pre-GST, while a combination of mixed-development launches will take place post-GST.

Faliq said Naza TTDI will emphasis on its brand value — Value, Innovation and Quality — when selling its products.

“Not everybody buys based on product pricing. Some will look for trust, brand quality and also the developer behind the product. We are looking into value and innovative added services to maintain the quality of relationship with our purchasers.

“While cost is increasing, we are exploring other alternatives, such as going green with electronic and digital systems, to sustain sales. But in the end, relationship and customised service are the key in any kind of business, whether in good times or bad times, and this is what we are focused on,” Faliq said.