BY Chris Prasad
Forest City, taking shape off the coast of Johor Bahru, has been billed as a big ticket investment attractor. It certainly had a promising start, reeling in throngs of property seekers from mainland China who were lured by the project’s attractive prices and proximity to Singapore.
Then came the hurdles.
Chinese buyers are currently becoming increasingly frustrated with having to navigate between local policies, contractual clauses and harsh monetary policies being dished out by their own government.
Following Beijing’s intensified crackdown on capital flight last month – which includes a ban on converting yuan into other currencies for overseas property purchases to curb capital outflows – Chinese buyers who now want to back out of a purchase will find it costly.
According to Singapore-based news outlet Today, several Chinese buyers said developer Country Garden PacificView has informed them that they would have to pay a penalty equivalent to 30 per cent of the purchase price for forgoing the deal. However, these buyers claim that this clause was not made clear to them at the time of purchase.
The situation has put them in a “state of limbo” they said. Those who cannot proceed with their purchase after capital controls were introduced by Beijing now face a hefty compensation to the developer if they back out of the deal.
Speaking to Today, some buyers said they had only discovered the clause when they tried to seek refunds for the 10 per cent deposit they had paid earlier.
They said they wanted to cancel their purchases as restrictions on capital outflows introduced by the Chinese government recently have blocked their ability to transfer payments from China.
While the 30 per cent clause was in the sales contract, many buyers contend that this fact was not made clear to them. P360 understands that the contracts were made available in both English and Chinese languages, as the development itself is primarily driven by the China-based Country Garden group.
“Nobody told me anything about this clause, not even the lawyer who was present when I signed the agreement,” said Vicky Wu, a buyer from Guangdong told the Singapore news agency.
Wu had purchased an apartment for about RM693,000 and made the 10 per cent down payment in Johor in December last year. She has since set up a “Quit Forest City and get refunds” WeChat group.
Other members of the 50-strong chat group say they are in a similar predicament.
A Country Garden PacificView representative said buyers who sought refunds belonged to a small group and were not representative of the majority of its buyers.
“We are in discussions with these concerned buyers and will facilitate the refunds based on the terms and conditions in the purchase agreement,” he said.
The developer has not disclosed the number of buyers requesting refunds or whether it is seeking compensation from buyers who decide to break with the sales contract.
Meanwhile, even legal experts from Malaysia are criticising the 30 per cent withdrawal clause, some calling it “not normal” by Malaysian standards.
“In the event the buyers cannot get a loan to finance their purchase, then the down payment (is usually) refunded. If they have breached the agreement, then only the down payment should be forfeited,” said Derek Fernandez, a legal expert on planning and development laws.
The RM443 billion Forest City project is taking shape on four man-made islands off Johor. When completed, it will provide a living, retail and working ecosystem that combines lush beachfront property with upmarket amenities.
The project is a joint venture between Country Garden, China’s third-largest home builder, and Malaysia’s Esplanade Danga 88. Thus far, about 70 per cent of Forest City’s buyers are from mainland China.