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PROPERTY DEVELOPMENT

(BPE 34603)

Prepared By:

Mr. Mat Tawi Yaacob

Dr. Azlina Md. Yassin

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Chapter 2

Property Development

Investment

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Definitions

Foregoing a Capital sum at the

present time for a future income

stream or benefit, known as profit orReturn on Capital.

INVESTMENT

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Return On

Investment

= Anticipated

Income or Profit

Measure of

Return

% of Capital Outlay RM & Sen

1 2

YearlyMonthly

Other Time Frame

3

Profit Index

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Capital outlay - money spent specificallyto increase the value of a particular assetwhether it is for repairs of that asset orotherwise.

The amount used during a particularperiod to acquire or improve long-term

assets such as property, plant orequipment.

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Measurement of return:- yearly / monthly /quarterly

Example:

Housing : 1990 = RM 75,000.00

1998 = RM 140,000.00

Return = RM 65,000.00 / 53.57%

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Type of Profit

Income Rent / Dividen

Capital appreciation

Psychological income

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Types of Investment

Stock and Shares

Loans

Bonds Savings

Unit Trusts

REITS Property

Etc.

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Stock: A type of security that signifies ownership in acorporation and represents a claim on part of

the corporation's assets and earnings.

There are two main types of stock: common andpreferred:

Common stock usually entitles the owner to vote atshareholders' meetings and to receive dividends.

Preferred stock generally does not have voting rights,

but has a higher claim on assets and earnings than thecommon shares. For example, owners of preferred stockreceive dividends before common shareholders andhave priority in the event that a company goes bankruptand is liquidated.

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Investment Portfolio:

A combination of Investments toachieve objectives, and diversifying

investments to reduce risks and

uncertainties.

Investment objectives:

To derive profits from whatever

forms of Investment

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Theory of Portfolio

Portfolio = Grouping of assets.

Fundamental principles ofportfolio =diversification.

dont put all eggs in one basket

Portfoliomanagement:membina portfolio serta menjadikan ianyaberkembang ($$$) untuk mencapai objektifpulangan yang ditentukan oleh pelabur

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Locational Factors

Financial Situations Government Policies

Local Economies

Geographical Factors

Factors To Be Considered

In An Investment

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Many incentives/

facilitiesexist,

but there are controls

and restrictions

governing suchinvestments.

For eg. institutional

and economic factors

play a big part in

property investment

activities, where their

involvement isintricately linked

with govt. legislations

Incentives, Control And Restrictions

To Investment

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Malaysian Incentives Act 1968

Malaysian Investment Tax

Allowances Malaysian Income Tax Act 1967

Malaysian Property Gains Tax

Foreign Investment Guidelines(FIC)

National Land Code

Incentives, Control And Restrictions

To Investment

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State Government Policies

Property Developers Project

Account Scheme

Control of Goods Act

Control of Lending Rates

Malaysian Investment IncentivesAct 1968

Incentives, Control And Restrictions

To Investment

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Property Development Investment

Pro

pertyTy

pes

Residential

Dwellings

Commercial &

Retail

Tourism &Recreational

Institutions &

Public Terminals

Industrial

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Property Classifications

R

esidential

Building

s

Low Cost

High Cost

Medium Cost

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Commercial&

Retail

Hotel

Departmental Stores

Office Building

Commercial Complex

Office & Retail

Retail

Property Classifications

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Industrial

Hi-Tech Industrial

Heavy Scale Industrial

Medium Scale Industrial

Small Scale Industrial

Property Classifications

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Resort / Chalet

Leisure Hotel / Motel

Golf Condotel / Service Apartment

Theme Park

Leisure Centre Cinema

Bowling, Snooker etc.

Tourism And Recreational

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Ports

Airport

Bas / Train / Taxi Terminal

Government Complexes

Stadiums

Institutions & Public Terminals

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ASSETS

Sources of value the business owns

Investment of business

Three usual types of business assets:

1. Current Assets: Converted into cashwithin one operating cycle.

2. Fixed Assets: Have relatively long life3. Other assets: Miscellaneous assets

that are not exactly current assets or

fixed asset.

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LIABILITIES

Claims against the business assets

Financing of business

Two main types of liabilities:1. Current Liabilities: Claims that are due

within one operating/business cycle

(less than one year period).2. Long term Liabilities: Outsiders claims not

due within one operating cycle (due afterone year).

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OWNERS EQUITY

Claims of owners against firm assets Financing of business Summary of accounts showing

contributions Two usual accounts for owners equity:

1. Common Stock2. Retained Earnings

* Partnership often shows only one account forownersequity instead of two.

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Stock that ordinarily has no preference in

the matter of dividends or assets andrepresents the residual ownership of acorporate business.

The percentage of net earnings not paid outas dividends, but retained by the company tobe reinvested in its core business or to paydebt.

RETAINED EARNING

COMMON STOCK

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RISK

RISK = uncertainty regarding the expected

rate of return from an investment

Directly related to investment

RISK = RETURN

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THANK YOU