Malaysian developers are set to benefit from the Johor-Singapore Special Economic Zone (JS-SEZ), while Singapore developers are less likely to see much upside. A recent report by UOB Kay Hian pointed out that IOI Properties Group is underperforming compared to peers like Eco World Development Group, UEM Sunrise and SP Setia, which have emerged as the primary beneficiaries of the JS-SEZ.
In an email interview with IOI Properties, the group revealed that it has a remaining landbank of 3,786.7 acres with an estimated gross development value (GDV) of RM7.24 billion ($2.2 billion) in Johor. This landbank consists of well-matured integrated townships and developments such as Bandar Putra Kulai, Bandar IOI Segamat, Taman Kempas Utama, Taman Lagenda Putra Kulai, and The Platino, in addition to its IOI Industrial Park @ Iskandar Malaysia (formerly known as iSynergy).
“The group is well-positioned to capitalise on the wide range of socio-economic catalysts proposed and planned by the Federal and the local state government, especially the upcoming rail connectivity plans and the proposed JS-SEZ,” adds IOI Properties.
The group adds that all its townships and developments, including IOI Mall Kulai and IOI Industrial Park @ Iskandar Malaysia, except for Bandar IOI Segamat, are located in the proposed JS-SEZ, which will further boost the value propositions of its mall, residential, commercial and industrial products.
IOI Properties is a prime beneficiary of transport infrastructure that is about to be completed for the Gemas-Johor Electrified Double Tracking Rail Project, also known as ETS or Electric Train System.
Rail connectivity will be enhanced for all its townships and developments, especially for Bandar IOI Segamat, which is one of the main stations of the Gemas-Johor Electrified Double Tracking Rail Project and will be located in Segamat. “This rail extension runs from Gemas to Johor Bahru Sentral in the city centre and is expected to be completed this year. It routes 947km right up north to Padang Besar KTMB station, near the border of Thailand,” IOI Properties points out.
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Once the Johor-Gemas section is completed this year (an April date was announced), travellers can take the train from JB Sentral to Ipoh, Taiping and beyond to Padang Besar.
“IOI Properties Group is optimistic [on the JS-SEZ] as it has already established itself in Johor with its integrated townships and developments,” the group says via email.
For FY2025 ending June, the group plans to introduce 12 new launches in Bandar Putra Kulai, Taman Lagenda Putra Kulai, Taman Kempas Utama, and Bandar IOI Segamat, with a mix of over 1,700 units of residential and commercial products and an expected GDV of RM700 million.
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Bandar Puteri Puchong, Bandar Puchong Jaya and IOI Resort City — all within Greater Klang Valley and Bandar Putra Kulai, Johor — are the group’s top-selling townships in sales.
What’s in SEZ for developers
The JS-SEZ will encompass nine flagship zones, including JB City Centre, Iskandar Puteri, Tanjong Pelepas-Tanjong Bin, Pasir Gudang, Senai-Skudai and Sedenak, along with three new zones: Forest City, Pengerang Integrated Petroleum Complex (PIPC) and Desaru.
A key issue in Johor that seems to have been overlooked during The Edge Singapore and EdgeProp Singapore’s visit to a site developed by UEM Sunrise is the lack of transport infrastructure within the JS-SEZ.
During a recent visit to Johor, executives at the Johor unit of Bursa-listed Eco World Development Group expressed hope that an Autonomous Rapid Transit (ART) system would be introduced to complement the Rapid Transit System (RTS) once it begins operating by the end of 2026.
“While public transportation (LRT/ ART) is not included under the infrastructure fund, we understand it remains an ongoing effort to finalise decisions on traffic dispersion methods and transportation within Johor, in view of the upcoming RTS commencement in 2027,” UOB Kay Hian says.
The local broker reckons that Eco World, SP Setia, Mah Sing and UEM Sunrise would be able to capture spillover demand from three new flagship zones (Forest City, Pengerang, and Desaru). According to the UOBKH report, UEM Sunrise has a landbank of 199 acres under its 51%-owned Maris Project in Desaru.
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Mah Sing’s Meridin East, Eco World’s Eco Tropics, and SP Setia’s Taman Rinting township, located in Pasir Gudang, could also benefit from the official inclusion of PIPC and Desaru.
Singapore developers left out
Increasingly, Singapore developers face many challenges. Among them are less than successful attempts at going overseas. They will likely face an uphill battle to lower their interest expense in the short term. During results briefings and investor days, local developers such as City Developments (CDL) and real estate investment managers such as CapitaLand Investment had looked to a turn in the interest rate cycle to boost earnings. That may not materialise.
On Jan 13, Bank of America said: “After a very strong December jobs report, we think the cutting cycle is over. Inflation is stuck above target with upside risks. The conversation should move to hikes, which could be in play if y-o-y core PCE (personal consumption expenditure) exceeds 3%.”
The higher-for-longer rate environment is usually negative for developers, particularly CDL. In 1H2024, CDL had acquired $1.1 billion of assets. This, together with its $846 million (equivalent) share of a land site in Shanghai, could have caused gearing to rise higher than its 3Q2024 business update figure. As of Sept 30, CDL’s net gearing ratio stands at 70%, following the acquisitions including the Hilton Paris Opéra hotel and four Japan (private rental scheme (PRS) properties, the group said in its 3Q2024 business update.
Local developers have occasionally dipped their toes in Johor. In February 2013, CapitaLand Malaysia, Iskandar Waterfront, and Temasek signed a Heads of Agreement to acquire and develop land parcels in Danga Bay jointly.
In a press release in 2013, CapitaLand had said the joint venture would acquire 71.4 acres or 3.1 million square feet of freehold net land in A2 Island for RM811 million or $324 million in February 2013 but would be valued at $245 million today. The press release added that the purchase price will be paid over four and a half years, corresponding with the infrastructure and development phases. CapitaLand Malaysia, Iskandar Waterfront and Temasek will hold 51%, 40% and 9% stakes in the joint venture.
Hongkong Land and mid-cap developers, such as Ho Bee Land and UOL Group-Singapore Land, have limited exposure to Malaysia. Ho Bee Land has invested in the UK where it is nursing revaluation declines. Hongkong Land is exposed to the troubled commercial real estate market in Hong Kong. UOL-SingLand recently completed the acquisition of a 50% stake in an office building in Sydney.
