Gafoor (centre) with the management team of his Indonesian master franchise (from left): Lusian, chief marketing officer; Luckyanto, CEO; Hoo Erict, chief operations officer; and Alwin Cahyadi, chairman
After 17 years, local homegrown real estate agency PropNex Realty has finally decided to venture overseas. It is doing so through the master franchise model, starting with PT PropNex Realty Indonesia, which was set up in 2H2016.
The key reason for venturing beyond Singapore was largely due to “the property cooling measures” rolled out in phases over the past seven years, according to Mohamed Ismail Gafoor, CEO of PropNex Realty, at a press conference on March 14.
Indonesia was selected for two reasons, says Gafoor. “Many wealthy Indonesians consider Singapore a safe haven and an ideal place for doing business and for their children’s education.” Another impetus was Indonesia’s population, which is around 262 million, he estimates. “It has the largest population among the Asean countries.”
Over the past six months, PT PropNex Realty Indonesia has signed up 600 property agents across seven agencies, which are largely concentrated in East Java, Jakarta and Surabaya. In the pipeline are plans to grow the number of agents to over 1,000 and to open five more offices in Jakarta by year-end. The target is to double the number of agents to more than 2,000 by next year, with 50 offices across major cities in Indonesia, including Bandung in West Java, Jogjakarta and Marang in Central Java, Makassar in Sulawesi and Balikpapan in Kalimantan.
To be the biggest realtor in Indonesia
Gafoor’s aim is to grow PropNex’s Indonesian arm into the biggest realtor in the country. He says the two largest realtors in Indonesia currently are ERA Realty, with 147 offices and over 5,000 agents; and Ray White, with 169 offices and 3,500 agents.
Luckyanto, the master franchiser and CEO of PT PropNex Realty Indonesia, says the choice of PropNex was due to its brand being “well known”, not just in Singapore but also in Indonesia. Luckyanto reckons that 60% to 70% of his Indonesian client base are interested in investing in Singapore property.
Gafoor observes that most Indonesian buyers prefer freehold, highend properties that are close to amenities such as malls, MRT stations and medical facilities, and particularly in the vicinity of Orchard Road.
Last year, PropNex brought a number of Singapore projects on road shows to Indonesia. These include City Developments’ 174-unit freehold Gramercy Park on Grange Road; the 462-unit 99-year leasehold OUE Twin Peaks on Leonie Hill Road; and the 510-unit, 99-year leasehold V on Shenton by United Industrial Corp on Shenton Way in the CBD.
Gafoor says he expects the expansion into Indonesia to boost PropNex’s group profit by 5% this year. He intends to enter Vietnam in 2H2017 and is in the process of shortlisting potential candidates as a master franchiser, particularly in the key cities of Hanoi and Ho Chi Minh City.
Foray into luxury condo
In Singapore, PropNex has more than 5,700 agents. Despite a challenging 2016, the company recorded a 21.5% y-o-y increase in gross revenue to $279 million. Gafoor attributes the higher sales to better sales performance in the luxury residential and HDB resale segments. Overall transaction volume for the group — new sales, resales and leasing across all sectors — increased to 46,229 deals in 2016, up 10.4% y-o-y from 41,875 in 2015.
Gafoor is targeting to hit $300 million in gross revenue this year. In February 2016, PropNex joined forces with JLL to set up a team specialising in marketing luxury homes. Since then, PropNex has succeeded in marketing GuocoLand’s 381-unit freehold Leedon Residences, in addition to OUE Twin Peaks, Gramercy Park and V on Shenton. Last year, the agents sold a total of 250 luxury residential units, up from about 80 in 2015.
Incidentally, JLL acquired a 20% stake in PropNex International in August 2014. PropNex International is the project marketing arm of PropNex.
This year, PropNex agents brokered 40 out of 50 units sold at The Peak @ Cairnhill II, a 60-unit freehold development by TG Development & TEE Development. They were also instrumental in the sale of 19 out of the 29 units sold at OUE Twin Peaks; 19 out of 32 units at 26 Newton, a 180-unit freehold development by Novelty Group; and eight out of 10 units at Leedon Residences.
More competitive pricing in CCR
Gafoor expects sales in the high-end residential market to remain active this year, with the prospect of a 5% drop in prices as developers attempt to clear unsold inventory in the Core Central Region before they are hit by extension charges under the conditions of the Qualifying Certificate, or before the sell-by date to be eligible for a remission on the additional buyer’s stamp duty (ABSD).
The additional conveyance duty (ACD), which came into effect on March 11, effectively plugged the loophole for developers who used innovative vehicles to offload or monetise their residential assets and, at the same time, circumvent the ABSD.
The new ACD mirrors the ABSD, and may force developers to think of ways to clear their units before the deadline to sell their projects nears.
“There may be greater supply coming on stream in the CCR, where developers had previously been trying to negotiate for bulk sale, which means pricing could be more competitive,” says Gafoor.
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