Disappointment among investors as Malaysia’s Forest City Project struggles to match futuristic vision

MALAYSIA: The vision of a futuristic, eco-friendly city showcased in extravagant marketing materials for Malaysia’s Forest City project still eludes investors, particularly Singaporeans.

Despite purchasing apartments four years ago, many individuals are disheartened by the lack of development in the surrounding region, according to a Hong Kong media platform.

Lured by lower prices than in Singapore and retirement prospects, one Singapore buyer paid RM700,000 (US$153,000) in 2019 for her 635-square-foot unit in Johor Bahru.

But construction lagged far behind the glitzy scale model at the sales gallery, which showed a bustling city of residential towers, yachts, and shopping complexes.

“All around are pockets of empty, underutilised space. But the 3D model showed so much more,” said the 48-year-old finance professional.

Her concerns grew with the recent news that Forest City’s China-based developer Country Garden edged towards default, raising fears that the remainder of the project could be left an unfinished “ghost town”.

“It’s worrying. Can they still finish what they planned?” she asked.

Property analysts agree that her concerns are well-founded, considering Country Garden’s actions to sell off projects in other locations due to a significant drop in its share price.

Debt-stricken developer casts shadow over Malaysia’s mega project as default looms

The debt-stricken firm was China’s largest developer before 2023.

But it recently suspended bond trading to facilitate restructuring negotiations, after missing payments. It now has a grace period until reportedly early September before formal default.

While concentrated in mainland China, Country Garden has subsidiaries running three major projects in Johor state, including the US$100 billion Forest City development.

The four artificial island project was launched in 2015 across 20 square kilometres. As of August 2023, only 15% was actually completed.

The company stated this month it remains committed to the masterplan until 2025. But residents fear parent firm issues may derail completion, hitting property values in the largely vacant complexes.

“It seems very unlikely the whole project will be finished now. I’m worried my apartment’s value will drop further,” said the buyer, who partly bought for investment.

Units currently range from RM400,000 to RM4.8 million. But prices have already fallen, while tenants pay less due to missing amenities.

In Australia, there are reports indicating that Country Garden, burdened by debt, is in the process of selling its land assets.

This has raised worries that sluggish sales in Malaysia might also lead to divestment, potentially causing construction to come to a halt.

At Country Garden’s other Johor project, Danga Bay, one unfinished foundation has become a mosquito breeding ground, upsetting residents.

The developer indicated it may opt not to complete the final residential block, citing less crowding. But residents lament the eyesore and health hazard left behind.

Some Danga Bay owners also await strata titles as proof of ownership, fearing they may not materialise if the firm liquidates.

A lawyer suggests that a potential default in China could necessitate the sale of assets, which might include Country Garden’s Malaysian subsidiaries.

Residents lacking titles may then have to verify ownership claims, potentially paying liquidator fees.

If the subsidiary undergoes liquidation, individuals without titles might need to demonstrate their unit purchase, likely leading to the payment of thousands of ringgit to liquidators.

The developer also has a third project in Johor Bahru called Central Park, which is still under development. The project is scheduled to be completed by next year and is valued at RM4.6 billion (US$990 million).