Forest City’s Chinese buyers to get refunds

KUALA LUMPUR (April 5): Country Garden Holdings has announced it will refund money to mainland Chinese buyers of its mega Forest City development in Johor.

In a report by South China Morning Post (SCMP) today, Zhu Jianmin, vice-president of Country Garden said “they can cancel the transaction and there is no need to pay a forfeit fee”.

These buyers had been caught in a horrible limbo of being unable to finance their purchases in Forest City after putting their down payments owing to the Chinese government’s efforts to crackdown on capital outflows.

In January, Beijing banned its citizens from converting yuan into other currencies for overseas property purchases.

Zhu also told the Hong Kong daily that “the project always abided by the rules and regulations of both Malaysia and China and that only about 5% of buyers were considering withdrawing their purchase”.

Before this latest announcement by Country Garden, the unfortunate Chinese purchasers were facing the daunting prospect of having to pay a penalty of 30% of the purchase price for pulling out of the deal.    

Country Garden is the second-largest developer in China. Aside from Forest City, Country Garden has three other developments in Malaysia, namely Central Park and Danga Bay, which like Forest City are also in Johor, and Diamond City in Semenyih, Selangor.

Forest City, covering 14 sq km of land on four artificial islands in Johor and with a gross development value of RM444 billion, has been successful in attracting Chinese buyers by offering affordable prices and access to Malaysia’s visa programme for long-term stays.

The plight of Forest City’s Chinese buyers had been in the limelight. One of them is Vicky Wu from Guangdong.

According to SCMP, she had been asking Country Garden for a refund of the RM69,300 she paid as a 10% deposit for a 59 sq m flat at Forest City.

She joined a WeChat group of about 50 people “to quit Forest City and get refunds”.

Many Chinese investors liked the fact that they were investing in an “overseas home” and the offer of an affordable project “near Singapore” was the main selling point, SCMP reported. 

Another investor is Laura Zhang, a middle-class Chinese. She told SCMP that Forest City’s “flagship project in Malaysia was not only an asset that would appreciate in value but also one that offered a tropical, garden city lifestyle, access to high quality international education for her son, and a chance for the whole family to become permanent residents of another country”.

All that dream melted when the crackdown on capital outflows hit.

Zhang’s nightmare began when she found out that “no the mainland bank would help her pay for her overseas property dream”and “attempts to transfer money to the vendor’s bank account in Hong Kong in January”, failed, SCMP reported.  

Beijing’s capital controls also meant that Chinese developments in foreign shores will no longer be targeting Chinese citizens.

As for Country Garden, it is planning to attract potential purchasers from Southeast Asia, South Asia and the Middle East for its Forest City development.  

"The capital controls will have an impact on Forest City," Yu Runze, chief strategy officer of Country Garden Pacificview, told Reuters, adding it was an "opportunity to shift our sales strategy to be more international".

He also told Reuters Country Garden will recruit local staff in the targeted markets and boost its advertising budget there.