With no regulator here policing the land-banking business, agents who promote direct investments in real estate have a free rein; the more unscrupulous among them could not only pose a risk to local retail investors’ well-being but also dent Singapore’s reputation as a financial centre in the region, analysts said.
The Monetary Authority of Singapore (MAS) said on its website it doesn’t regulate land-banking investments because these “typically involve investors acquiring direct interests in real estate rather than securities related to real estate.”
Land banking is the practice of purchasing undeveloped land, usually a site on the outskirts of a growing city, with the intention of holding on to it and selling it at a profit at a future date when urban development pushes up its value. Land-banking companies carve out the parcel into small plots and sell them to investors, promising them high potential returns and often even regular payouts for a fixed period.
Hopes of another regulator stepping into the void are unlikely to materialise any time soon, with another government agency — one that’s been set up to police the conduct of property brokers — clarifying that land banking does not fall under its purview either.
The Council of Estate Agents (CEA), which was launched in October, told MediaCorp that “due to the nature of land banking, agents marketing land banking products are more likely to provide financial investment advice than to make representations on a property.
“As such, persons who solely market land-banking products will not be regulated under the Estate Agents Act 2010.”
CEA said it has consulted the land-banking industry and considered its views on the issue in reaching its decision.
It added consumers should practise caution and exercise due diligence when investing in these products.
Agents selling products for land-banking companies currently do not require a licence by authorities to practise.
“Our sales consultants currently do not require any external licensing. We strongly believe in corporate governance. Although we are a privately-owned company, we have established a board of advisors to help ensure our corporate activities are reviewed thoroughly” said Wyman Chan, executive vice president of Marketing and Training, Walton International Group.
A “buyer-beware” approach, analysts say, doesn’t go far enough because Singapore’s reputation is at stake.
Complaints against Singapore-registered land-banking company Profitable Plots, which sold investors plots of UK land and other products such as investments into lubricants, have come from as far as Pakistan and the Middle East.
“The investors tell me they had actually invested in the company because it operated out of Singapore and they trusted the Singapore brand name,” said Louis Lim, partner at William Poh & Louis Lim, which represented some disgruntled investors earlier this year in their legal challenge against Profitable Plots.
“But many of them have been concerned over their investments after seeing the company under negative news publicity.”
Profitable Plots is facing at least 174 complaints in Singapore involving more than S$18 million, according to the preliminary findings of the Commercial Affairs Department (CAD), which has asked a Singapore court for more time to complete its investigations.
Neither Profitable Plots nor its lawyer responded to MediaCorp’s queries.
Neither the Securities and Futures Act nor the Financial Advisers Act covers land-banking investment, MAS says.
On Friday, the Ministry for National Development issued an order exempting land-banking agents from the purview of the Estate Agents Act 2010 and the Estate Agents (Estate Agency Work) Regulations 2010.
In the UK, the Land Registry department makes it clear in an information guide that while land banking is an unregulated business, “the Department of Business, Enterprise and Regulatory Reform may be able to take action against such schemes under existing laws where members of the public are misled”.
Observers in Singapore said the sector needs closer attention from authorities.
This is so that “consumers know which particular agencies or ministries they can seek redress with,” said Donald Han, vice-chairman at Cushman & Wakefield.
Some observers said guidelines on what’s permissible under land-banking will help.
For example, lawyers say they understand there is no requirement for a company to prove ownership of a piece of land before marketing it, which creates ample scope for mis-selling.
Also, unlike equities or bonds, land-bank investments don’t come with a standardised contract; thus, the level of investor protection possible under one scheme may be very different from what’s offered by another product.
Source : Channel NewsAsia – 18 Dec 2010