Forest City to Allow Refunds for Chinese Buyers

Pavither April 6, 2017

Country Garden, the developer of the Forest City project in Johor, has promised to give back the money paid by home buyers from China who have been negatively affected by the central government’s measures on capital outflows, reported the South China Morning Post.

“They can cancel the transaction and there is no need to pay a forfeit fee”, said Country Garden Vice President Zhu Jianmin. This is for buyers who have paid deposits for their units in Forest City, but can no longer wire money outside the country to pay their balance due to the capital outflow restrictions.

Zhu pointed out that only around five percent of the buyers are considering to pull out their purchase in the multi-billion-ringgit project. He also reiterated that Forest City, the largest overseas development by a China-based developer, has always complied with the rules of China and Malaysia.

To date, Forest City has sold nearly 17,000 units for a total of 20 billion yuan (approx. RM12.85 billion), mostly to buyers from mainland China. Located on four man-made islands off Johor in Malaysia with a combined area of 14 sq km, the large-scale development is backed by the state’s royal family.

Meanwhile, The Straits Times reported that an announcement from Country Garden last night has created confusion on whether Chinese buyers affected by China’s capital outflow restrictions no longer need to pay a forfeit fee to cancel their purchases.

“In the event of home booking cancellation, we would also like to clarify that cancellation after a sales and purchase agreement has been signed is deemed as a breach of contract,” it said in a statement.

“The penalty clause, ranging between 10 percent and 30 percent, only kicks in when a buyer, who has decided to purchase certain promoted residential units, decides to default on the payment or cancels the sales and purchase agreement.”

Furthermore, some buyers said they have not been informed about Country Garden’s new refund policy, and the sales personnel they had spoken to told them that the refund policy remains the same.

Forest City’s clients, some of whom are already in the process of getting back their cash, also complained that the refund is taking too long.

“I called my sales officer on Tuesday (4 April) and he could only say that my refund is still on hold,” said Zhang Guanguang, a 27-year-old teacher from Hefei who paid a 110,000 yuan (RM70,671) deposit in 2016 for a 54 sq m apartment.

“It’s been dragging on for more than a month, and all they can tell me is to wait.”

Experts noted that even if just a small portion of the buyers ask for a refund, this could lead to a slowdown in the entire development, raising fears of a housing glut in Iskandar.

This is because the project posted RM11.54 billion in sales last year. Of the 15,000 units sold back then, 70 percent were made up of Chinese nationals.

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