Analysts warn that the financial district project, first announced two years ago, risked destabilising the entire KLCC property market.
KUALA LUMPUR: Prime Minister Najib Tun Razak today launched the Kuala Lumpur International Financial District here amid warnings that the project may create a property glut and distort the capital city’s property market.
The project, which Najib said would generate RM26 billion in gross development value and 500,000 jobs, is aimed to make the country’s capital the region’s financial hub.
Its developer, Putrajaya’s development arm 1Malaysia Development Bhd, said the state of the art infrastructure and technology used to construct the district named after Najib’s father, the Tun Razak Exchange, was expected to attract global players to relocate here.
The KLFID was one of several key infrastructure projects listed under the 10th Malaysian Plan along with other mega constructions like the redevelopment of Sungai Besi and Kampung Baru meant to boost the city’s potentials under Najib’s grand Economic Transformation Plan.
But analysts said the project, which was first announced two years ago, risked destabilising the entire KLCC property market, which was already suffering from a high 17% vacancy rate and could create “deplorable” traffic conditions that would erode the attractiveness of KLCC as a place for corporates.
“Similar to the impact from redevelopment of Kampung Baru, these projects (the KL Financial District project and the Sungai Besi airport redevelopment) particularly the Dataran Perdana (KL Financial District) could threaten the prospects of commercial properties in the Golden Triangle and in the long run the larger part of the Klang Valley, too,” said a 2010 report by OSK Research.
It added that outlying commercial hubs such as Petaling Jaya, KL Sentral, Mid Valley, Damansara Heights, Mutiara Damansara and Damansara Perdana would likely benefit from a potential exodus from the city centre within the next five years as worsening traffic congestion in the city and existing high rentals drove tenants out.
Putrajaya had yet to respond but today Najib said TRX would help position KL as a “nucleus of global talent”, a centre for new technologies and a focal point for exchange of ideas and information.
He added that it would become a “haven” for new investment and encompass world-leading international designs and progressive planning tenets.
“Its buildings and infrastructure will conform to the highest levels of sustainability; pedestrians will be able to walk and play in green public areas; and it will have seamless links to public transport including the MRT,” he said at the project’s launch here.
The first phase of development was due for completion in 2016 and was expected to generate RM3.6 billion in foreign direct investments.
The prime minister said his government would ensure the success of the project with the announcement of several incentives including a 10-year 100% income tax exemption and easing business regulations.
Critics of the project said the KLFID showed the inability of the ruling coalition to develop new areas of growth and relied too heavily on pump-priming that characterised the era of then prime minister Dr Mahathir Mohamad.
Najib had said that his ETP aimed to cut Malaysia’s reliance on exports, constructions and strengthen domestic economy through innovation.