Country Garden Restarts Work on Scaled Back $121B Malaysian Project

Chinese developer Country Garden is restarting work on a scaled back version of a residential real estate project in southern Malaysia’s Johor state after complaints from local citizens and the Singapore government.

Country Garden’s Forest City development was originally planned to cover nearly 2000 hectares of land, constituted almost entirely of reclaimed land creating four new islands in a bay between Malaysia and Singapore.

However, work was halted on the project more than eight months ago after the land reclamation was blamed for massive fish deaths and Singapore reportedly sent two diplomatic notes to the Malaysian government. The Singaporeans were said to be concerned over the environmental impact of the project which is slated to be the largest in southern Malaysia.

Forest City is the second project for Country Garden in Malaysia, and the Guangzhou-based developer is one of several Chinese companies rushing to build new homes for sale in the Southeast Asian nation’s Iskandar development zone.

25 Percent Reduction in Investment Value

A representative of the Country Garden joint venture that is building the project revealed last week that the reduction in the project size will also shrink the projected development value of Forest City from the previous target of RM600 billion ($162 billion) to RM450 billion ($121 billion), according to an account in the Malaysian media.

Country Garden is developing Forest City in a 66:34 joint venture with a company belonging to the Sultan of Johor, the nominal ruler of the Malaysian state bordering Singapore.

A spokesman for the joint venture company said that the smaller scale size was intended to preserve sea grasses in the area, after the complaints about environmental damage. Johor residents, particularly its fishermen, had complained of shrinking catches and mass fish deaths since reclamation works began.

The company is also now said to be planning to bring the project online in four phases, to be completed by 2045, with work restarting now only on phase one of the project.

Migration City

Besides Country Garden’s Forest City and its initial project in Danga Bay, other Chinese developers including Greenland Group and Guangzhou R&F are building new real estate projects in Malaysia causing some analysts to predict a property glut in the newly developing area.

With at least seven Chinese developers joining Malaysia and Singaporean companies in building new homes in the Iskandar region, market researchers at Malaysia’s Maybank recently predicted that “Oversupply of apartments/retail spaces in hotspots such as the Nusajaya-Medini and Danga Bay areas may cause a decline in property values over the medium term.”

Guangzhou R&F paid $1.4 billion for six sites in Johor’s Danga Bay area during 2013.

Country Garden, however, appears confident that its projects will not be affected by the local market. Company representative Datuk Md Othman Yusof told the local media that Forest City is “a migration city” which will serve as a destination for buyers not only from Malaysia and Singapore, but also from other countries.

In 2013, Country Garden shocked the local market when it booked sales of 6000 out of 9,400 units in its Danga Bay development within one month of launch. Many of the buyers of units in that project are said to be from the company’s existing customer base in Mainland China.