Friday, June 11, 2010

Investors call for regulation of land banking

Having failed to get their dues back from Singapore-based investment firm Profitable Plots and left to fend for themselves, a group of investors is now calling for better regulation of land banking here.

Unable to get back a sum totalling more than $2 million, they have not been able to get help from any regulatory body as land banking is not regulated in Singapore.

In an advisory yesterday, the Monetary Authority of Singapore (MAS) said it does not regulate land banking, as it involves investors acquiring direct interests in real estate, rather than securities related to real estate.

The investors are hence calling for a petition tomorrow to appeal to the authorities to issue some form of regulation and to investigate the practices of Profitable Plots (Corrected at 02:00 PM Jun 11, 2010).

One of the investors who drafted the petition, a 38-year-old who declined to be named, said “a nicely worded friendly petition … for a plea to the authorities to take the case seriously” has been put together.

Another investor, Kok T L, who invested more than $30,000 and has consulted a lawyer, said the authorities should step in and provide some form of regulation and aid.

Ex-NTUC Income chief executive Tan Kin Lian, who has blogged extensively about land banking, told MediaCorp that any product sold as an investment should be regulated – especially if it is advertised through the media to the general public.

Land investment company Walton International Group Singapore said it did not believe a real estate investment like theirs needed to be regulated by the authorities (Corrected at 02:00 PM Jun 11, 2010).

But the chief operating officer of Walton Singapore, Ms Lusi, said the company – which has over 18,000 investors and has operated in Singapore for 14 years – would respect any regulatory decision reached.

It hopes the firm would be consulted before any regulatory regime is put in place.

Dr Tan Tee Khoon, chief executive officer of Singapore Accredited Estate Agencies, noted that “the regulation route is always an appealing one to take when something goes awry”. Investors, however, “may be the best persons to protect themselves”. They should do the necessary checks before making an investment.

Profitable Plots is also on the MAS Investor Alert List.

Responding to a letter to Today querying if companies on the list should be allowed to advertise, Ms Lily Tay, executive director of Singapore Advertisers Association, said the list only warns consumers that they will not be protected under the law if they deal with these unregulated companies.

Consumers should be more careful in responding to such advertisements. And while not impossible, it may be difficult for the local media to verify the authenticity of all advertisements, including those in the financial sector, she added.

From MAS’ advisory

What is land banking?

- The practice of buying undeveloped land, usually in the city outskirts, to sell for profit later, often to developers. Land banking firms typically sell small plots to investors, promising high returns

What are the key risks?

- The land may have little or no chance of being developed as, for instance, it could be a protected plot and a sale would be difficult. Investments may be stuck for longer than projected
- Investors could be exposed to foreign exchange fluctuations

Before investing:

- See the land, do ample research; don’t just rely on the salesman’s advice
- Be aware of property, land development laws of that country and area
- Know the company you are investing in; check its credibility
- Be sure of the contract details, such as payout frequency, duration of investment and access to information on changes to the land value

Source: Today, 11 Jun 2010

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