For $100 Billion Asian City, Builder Looks Beyond Chinese Buyers

(Bloomberg) -- Country Garden Holdings Co. said it's looking to attract customers from countries such as Thailand and Vietnam as some Chinese buyers hit by capital controls have pulled back from the $100 billion Forest City project in southern Malaysia.

China's escalating crackdown on capital outflows this year has spooked buyers seeking to invest in property abroad, with some reconsidering past purchases and others holding off on new purchases. Developers that expanded into Malaysia's Johor area to tap rising demand from Asia's biggest economy are now trying to attract more non-Chinese buyers. Country Garden said it expects to open galleries targeting customers in the Philippines, Indonesia, Vietnam, Thailand, Taiwan and Dubai between August and October, and plans to invest an additional $5 billion ringgit ($1.2 billion) this year in Forest City.

“This year, in the first half, we did see a slowdown. I would be lying if I said there was no impact from everything but that's really why we've diversified our customer base,” Yu Runze, chief strategy officer of Country Garden Pacificview Sdn said in an interview. “Currently, there is no plan to slow down or stop the project,” said Yu.

Country Garden's Forest City development, which houses thousands of residential apartments, has seen less than 60 buyers asking to cancel their bookings out of the total 16,000 units sold last year, according to the company, which declined to provide sales numbers for this year. 

Artificial Islands

Built on four artificial islands in the state of Johor, near the causeway that connects Singapore to Malaysia, the project will house approximately 700,000 people once completed.

The company currently has 15 sales galleries open across Malaysia and will add five more by the end of this month to promote residential apartment unit sales. Country Garden expects to see diversification in its buyer base pick up from the first half of next year, said Yu from Pacificview, a Country Garden unit in Malaysia.

The developer also opened the first of six planned pre-fabrication facilities to manufacture ready-to-assemble concrete structures like staircases, beams and columns. The first facility, the largest in the world by volume, according to the firm, will be able to produce materials for up to one million square meters of built-up area. In three to five years, these facilities will cater to other external projects beyond Forest City, Yu said.

The Forest City projects were first marketed in China with thousands of buyers paying deposits for apartments that cost as much as double the rate per square meter paid by Malaysian home buyers. But since the Chinese government tightened capital controls, some buyers have stopped making installment payments in fear of being held liable under China's foreign exchange rules. The company has since ceased marketing Forest City in its sales offices in China and no longer organizes tours to the Johor projects for potential Chinese buyers.

--With assistance from Emma Dong

To contact the reporter on this story: Melissa Cheok in Singapore at mcheok2@bloomberg.net.

To contact the editors responsible for this story: Sree Vidya Bhaktavatsalam at sbhaktavatsa@bloomberg.net, Stephanie Phang