In a tough year for the property sector, Mohamad Ismail Gafoor, CEO of PropNex, the Republic’s largest real estate company, claims his firm has achieved a record performance, but is it finally time for property cooling measures to be rolled back? While it would serve his interest that this happens, but he claims to have a more balanced view for good reason.
The road to the success of his property agency, PropNex, was tumultuous one. After building a successful career in the army, Ismail decided in his 30s that he wanted to do something more, something different. However, a falling-out with his business partners in the early years almost brought his progress to a standstill.
Today, PropNex has more than 6,000 salespersons and staff and an annual turnover of S$200 million. His agency has won multiple awards and he himself was recently named the Spirit of Enterprise (SOE) Entrepreneur of the Year.
He spoke with Bharati Jagdish about whether the property market is in need of more cooling, how he keeps his salespeople ethical, what consumers need to do to look out for themselves and how he keeps himself and his children humble and grounded in spite of his wealth.
EPIPHANY AT EIGHTEEN
Mohd Ismail: I come from a family of five boys and my sister is the youngest. My dad was an immigrant. He came to Singapore at a very young age, at about 20 to 21 years old. What drove him to come to Singapore is simply because his family was in such poverty, so much so that when he was young, his mother brought him and his two sisters to a river to drown themselves because they didn’t have enough food or a roof over their head. Fortunately, a fisherman helped them and eventually they stayed in the mosque and that’s how he grew up.
When he came to Singapore, he worked extremely hard, he also became an entrepreneur, and a newsvendor. Therefore my life was simple. From the age of seven, I started waking up at 4am every single day to deliver newspapers. My dad was extremely lucky because the newspaper business was a very labour-intensive job, and he had five boys so he had free labour. That’s grounding that we had. It also gave me discipline, so much so that even today I don’t sleep anything beyond 6am.
Bharati: What did it feel like to be growing up in such circumstances?
Mohd Ismail: I think a lot of responsibility. My dad was not only a newsvendor, he also had a provision shop, and after we delivered newspapers, went to school and came back, we had to do a three-hour-shift in the shop, either in the afternoon or at night. Therefore, we were always focused on helping the family bring home the bread. Our house was a one-bedroom flat. One bedroom for my mom and dad, and the five boys would sleep in the living hall like sardines, but we would bring out the mattresses and we grew up in a very happy and cohesive environment. No doubt we fought every now and then, but our feelings for each other were very much deeper.
Bharati: Did you ever compare yourself to more well-to-do families and wish you could lead their lifestyle?
Mohd Ismail: No, I think when I was young, those things really didn’t impact me. I was just a happy boy doing what I was doing. But it only impacted me when I turned eighteen and I must say, some of my successes today have got to do with my experiences when I was eighteen.
Bharati: What happened?
Mohd Ismail: I was called up for National Service, and I used to take the bus with my buddy. The bus would pass Cavenagh Road, and my buddy told me that his uncle sold a property at Cavenagh Road and made a quarter-million-dollar profit. That was, to me, almost sinful in those days, because we delivered newspapers. Per newspaper, we made 4 cents. I could not imagine how many thousands of papers I needed to deliver to make S$250,000, and I said, “How come the world is like that? People can make so much, but my family was struggling.” But I made a decision that day. When I grow up, I will have four properties. The only reason I thought 4 properties was because it was easier to calculate four times S$250,000 – it would be a million dollars. It was just in the back of my mind, but I just went on in my life as usual.
Bharati: Now, you have more than four. You went to view show-flats regularly and learnt a lot that way I understand. Your first property was a 3-room HDB flat for your family, but I understand you slowly upgraded. You were in the army, your salary wasn’t high, but you were frugal and had the money to make smart investments, one at a time. You even went ahead and bought a landed property in the eighties that people told you not to because they thought it was overpriced, but you ended up making a healthy profit from it. What did you know that other didn’t?
Mohd Ismail: Honest truth? Not much. I’m not expert in the field. In fact, I was a civil servant, but I had one thing that maybe many people dare not do. Whatever I do, it is not about what other people say, but about whether I can hold the property in the long term. I’m not a speculator and I knew from a young age that property investment will appreciate based on inflation in the long term. Speculators, they can get hit very hard. For me, it is a long-term investment.
FORMING THE FIRM
Bharati: You chose a career in the army first though. It was only much later in life, in your 30s that you made the switch to becoming an entrepreneur and setting up a property firm. What led to that?
Mohd Ismail: That’s interesting, I must say. I was in the army for a good 13 years before I left, and after my eighth year in the armed forces, the army offered me a pensionable service, which is a big deal. I asked my manpower officer, “what does it mean to be a pensionable officer?” He said, “Your career will be secure.” And at the end of the day, I knew when I retired at age 50, I would get close to a million dollars in gratuity. But then, 4 to 5 years down the road, I decided to quit. People thought I had gone nuts!
Bharati: So why did you quit?
Mohd Ismail: It just dawned on me. What is it that I really want? When I started to ask this question over and over again, a hundred times, it became very scary. I mean, please don’t try this. If you ever try this at home, especially in the toilet with the dim light at night and look at your own face and ask a hundred times, “What is it that you really want? What is it that you really want?”, then it becomes so scary that when you go back to sleep, you go into some deeper thinking, “Hey, what am I doing?”
Bharati: But you got an answer that set you on a better path.
Mohd Ismail: It is not that I don’t love the army. In fact, I’m still serving as a Brigade Commander, I’m a Colonel in the armed forces. I enjoy the army duty and the work and the responsibility and the challenges. But what dawned on me as I asked the question was this – Will I be a General one day? Is this what I want? Somehow, there was a softer voice telling me, “Maybe you will not be.” It is not that I’m not being optimistic about it, but the fact is I wasn’t a scholar. I was just a rank-and-file officer. Then I said, “What else can I do?” There was a deep desire within me to be an entrepreneur and do something that could make a difference. And that’s why I threw in the towel, I quit, and that was a very tough decision to make, because I left at the age of 32. Today I’m 52; twenty years ago. It was a very tough decision, but I made up my mind to say, “Let me try. I do not want to regret later.” That’s why I walked out.
Bharati: Were you scared?
Mohd Ismail: Yes, I was a bit scared, and I knew I was definitely scared the day I left, because I left the SAF on 1st July, 1995, and on 4th July, 1995, I was hospitalised for chest pains in the middle of the night at 2am., maybe because my stress level went up to its max. Because, suddenly, I realised, “Did I do the right thing?” I was sweating. I was not comfortable. I was warded for two to three days, and eventually the results showed that everything was okay. I was just a stressed soul.
Bharati: How did you overcome the anxiety of having made this decision?
Mohd Ismail: It also dawned on me that there was no turning back. I couldn’t go back and knock the doors of the SAF to say, “I want to come back.” It really didn’t make sense, neither would they accept that. Therefore, at least it became very clear that “Ismail, you have to move forward.” To tell you the honest truth, I was trying to grab anything that came. I started as an insurance agent and a property agent. I was not focused. I didn’t have a crystal clear plan of my journey. After one to two years, I realised, I’m suited for property simply because there are a lot more people whose lives I could enhance with it. And at that stage my wife and I had accumulated a lot of knowledge because as a married couple, we visited show flats every now and then, and we thought we could make a difference to many people’s lives.
Also, in those days, when the rules and regulations were not so tight, there were many agents or salespeople who were not professional enough. We, on the other hand, knew the challenges of owning multiple properties, we knew what things you need to plan and take into account, and that’s why we thought this would be the right path for us to help people.
Bharati: You talk about helping people, making a difference to people’s lives, but isn’t your chief aim as a businessperson centred on money. It’s all about making money, isn’t it?
Mohd Ismail: Yeah, but of course. Beyond doubt it is about money, but do you enjoy the journey purely for the sake of making money, as in the greater motivation, or do you enjoy the journey of the joy of your friends? I wasn’t dealing with strangers. My clients included my very close friends in the armed forces, I knew their families, I knew their children or their spouse. What I wanted was, “Hey, I have enjoyed and benefited, would you like to learn from me or I can show you the path.” And every time when I do a successful deal, and see the joy in their faces, it really enlightened me and at the same time, I see the income as a reward.
Bharati: You said earlier that you are not a speculator, yet you make your money off speculators.
Mohd Ismail: Yup. I cannot totally deny that. In any cycle of a property market, you will expect to see people taking advantage because speculation means a greater level of activity in the real estate market. Therefore people buy sell, buy sell, and from a salesperson’s perspective –
Bharati: – that’s a good thing.
Mohd Ismail: – that’s a good time. That’s a good time.
Bharati: So how does it feel to be capitalising on people whose investment values you claim not to agree with and behaviour that drives the market to sometimes ridiculous levels?
Mohd Ismail: Yeah. I totally agree. But would you blame the salespeople? Or would you say that the policies, the processes and the market allowed such a thing?
Does the agent take advantage by taking a 1 per cent commission or is the buyer taking advantage by making S$100,000? It is not about who is taking advantage. People are just being creative. Yes, it’s true, but what is interesting here is this: I know such speculative things will not last, because there’s a ceiling. When prices go right to the top, the bubble will burst. And when it bursts, a lot of people get hurt, including companies like ours.
KEEPING A “FAIR FALL”
Bharati: So in light of this, how do you feel about the cooling measures currently in place?
Mohd Ismail: I don’t totally disagree to cooling measures, but the fact is the term is “cooling”. So do you cool a market forever, or do you cool for a period of time? It is not permanent. Some policies are structural and I totally support them. For example, TDSR, Total Debt Servicing Ratio which encourages prudence. I think that is something that should be there for the long haul. I’m very, very supportive of it. But there are other cooling measures, such as the Additional Buyer’s Stamp Duty (ABSD) or seller stamp duty. That became a necessity because the market was too hot. Fine. Therefore, it straightaway cooled the market.
But how long should we hold on to such cooling measures? There should come a time when some of these things should be tweaked, and maybe adjusted along the way. It has been three years. Is it timely now? Maybe some it’s worth it. Let me put it this way. For every buyer that enters the market in a year, how many hundred, thousand and million owners are there? Are we being fair to them? Should property prices go lower and lower by as much as 30 to 40 per cent so that the buyers will be happy?
Bharati: But some argue that the fall that we’re seeing now is minuscule compared to the rise that we saw in the years preceding the cooling measures.
Mohd Ismail: I agree with that, and that’s one of the very valid reasons that the authorities and the Government have given for why it’s not time yet. I can accept that. But you must also understand how much of a fall is a fair fall.
Bharati: What do you think is a fair fall?
Mohd Ismail: Public housing today would have come down buy more than 10 per cent in the last four years. Minus the cash-over-valuation, which was also removed, probably even close to 20 per cent in some areas in Singapore. And I think that’s almost a threshold. I think the maximum threshold for public housing is that it shouldn’t go anything lower than 20 percent from the previous peak. We need to ensure a sustainable goal.
Bharati: But you agree that the previous rises were too much?
Mohd Ismail: I think it was beyond logic. We are talking about public housing. This is not an investable product, but a roof over your head.
Bharati: Yet you feel that there needs to be a sustainable appreciation even though some feel that should not be the priority when it comes to public housing.
Mohd Ismail: Yes, it is a home, but the investment angle comes from the perspective that it must be appreciating in a reasonable way, because at the end of the day that is your biggest asset at your retirement. You cannot have public housing that, after 20 years, has not even kept pace with inflation. For most of us, the bulk of our commitment is in subsidised public housing. Do you want this asset to be of zero value after 20 years, versus your friend who could afford to buy a private property that appreciates? Why should the poor become poorer? People shouldn’t speculate, but the product that we buy should keep pace with inflation, with growth, such that you can have options for yourself, when you want to retire, downgrade, so there is a safety net.
COPING WITH COOLING
Bharati: How are you and your people coping with the measures?
Mohd Ismail: The key thing that drives us is the bonding of the people. It’s beyond doubt. I mean, a lot of people will not believe it. We will announce it and it will be up for scrutiny. 2015 generally has been the worst period for the real estate market. People know that the market has dropped by 30 to 40 per cent. For us however, 2015 has seen a record performance since I started the company in terms of the number of transactions, the highest amount of gross commission brought into the company. How is this possible?
Bharati: How is it?
Mohd Ismail: It is just simply the positive energy among our people. The belief that they think that they’re doing the right thing beyond money. We really cannot measure it by money. But the money will come.
Bharati: So how did you make this happen?
Mohd Ismail: I think it’s very unbelievable, maybe it’s because I’m blessed, and my energy level is extremely high, and I’m excited about the little things. And we’re the only company that does four conventions, and every convention we’re talking about two to three thousand people. And for some of these conventions, I will invite Ministers. For example, Minister Shanmugam and Minister Tan Chuan-Jin came to address 3,000 of my people to explain to them the macro reasons for such policies. We just want to anchor the people and show them it is for the long term good of the society and their children. We also do a huge number of programmes for our employees, boot camps, motivation programmes and training. We spent S$1.5 million last year, and S$1.5 million this year, purely on training. Only a well-trained person who can understand the current market can go out there and add value to their clients.
Bharati: Over the years, a lot has been said about unethical practices within the industry, when it comes to marketing local as well as foreign properties – mis-representation when it comes to ads for property developments and salespeople promising sky-high returns, for example. Before the Council for Estate Agencies was formed, other irregularities when it came to salespeople using pressure tactics with no regard for whether the client can actually afford the property.
Mohd Ismail: I can agree to that. But we must understand the situation has changed in Singapore. Five years ago, prior to the existence of Council for Estate Agencies, the real estate market was really a cowboy town, simply because there were no rules, which again means there will be a tremendous amount of pressure tactics, and unscrupulous salespeople will exist. And who’s to be blamed? It’s because we didn’t have an authority to govern these people, and people were just going for a quick buck.
Bharati: But as a businessperson in the sector, surely you have a responsibility to ensure that your people don’t engage in such practices, with or without a regulatory body to police their actions.
Mohd Ismail: I can talk about the moral values of doing business, but how can I ensure, in a basket of 1,000 to 2,000 salespeople, there are no rotten apples.
Bharati: There’s a regulatory mechanism now, but how do you ensure yourself that your people are behaving ethically?
Mohd Ismail: At the moment, I’ve got more than 6,000 agents. Trust in my brand is at stake. Having 10 agents go and spoil it at the expense of another over 5,000 agents who are doing a good job cannot be justified. Why would I want to support these people? The risk to my brand identity far outweighs this. The only way I can do this is through training, and beyond that, when people cross the line, I will flash their faces in our virtual office, or at our conventions so that other people get the message. This is not the place for you if you’re up to your nonsense, and we have reported some of these agents who have crossed the line to the authorities, even made police reports. Even then, there will be one or two agents who, because of tightness in finances, will try to cut corners, or take deposits from the clients and not put it in the bank. It happens. In any profession, you will have some people who are not up to the mark and they should be dealt with.
Bharati: Before CEA was formed, how bad could it get?
Mohd Ismail: I think in those days there were policies that allowed people who earned barely S$2,000, to take on monthly instalments of S$1,500. The policy allowed people to get a 90 per cent maximum loan. Even if it was public housing, you would just qualify for the loan. There was no tight credit assessment being done. I knew some of the salespeople from across the industry have gone to jail. What they did was they inflated the income of people. For instance, for a client who is earning only three or four thousand dollars, the property agent will find a “job” for him and set up even a…
Bharati: Shell company.
Mohd Ismail: A shell company, and they would issue a payslip of S$5,000 or S$6,000, so that the client can go to the bank and get a bigger loan. Over time, it surfaced because suddenly the HDB realised how come so many people employed by a specific company were buying properties. It made no sense. These people were strictly dealt with and many of them were put in prison. Is it now not happening? I tend to think it is almost minimised, but may be happening without even our knowledge.
Bharati: I’m sure not just unethical agents but buyers and their families have been destroyed by such practices.
Mohd Ismail: We have seen families break up because they committed beyond their means. When you can’t afford, you can’t bring bread to the table, and you are liable for so much other debt, things fall apart. And we’ve seen that in the past.
Bharati: Have you ever been tempted to do such things yourself?
Mohd Ismail: Never. Never in my life. Never. Because I don’t pray to money. I’m never so excited about money. Maybe because of my background, the way I was brought up and I grew up in a one-room HDB flat. Every purchase and every upgrade is an achievement for me. Therefore, I have little attachment to money.
MORE THAN JUST MAKING MONEY
Bharati: But you went into this business because of the value of property investments, because of the money. You mentioned earlier it was your friend telling you about his uncle making a S$250,000 profit that got you interested in this business.
Mohd Ismail: But of course, yes. Because it is the key reason if you want to have a breakthrough from where you were, what your family went through, so you take it as a challenge that you want to achieve those things, but I don’t desire creating wealth by cutting corners. I want to be comfortable, but I want to do it the right way.
Bharati: In 2008, you terminated 2,800 of your 5,000 salespeople at one go because you made it compulsory for all PropNex salespeople to buy professional indemnity insurance and they didn’t want to. Why did you take this step?
Mohd Ismail: Yeah. And eventually, overnight, I wasn’t the largest firm. It was not a very highhanded decision. I tried to lovingly explain to them why we needed professional indemnity insurance. It’s simply because we have to go out there and tell the consumers we are there to protect them. Because it was not regulated, people were so cautious about salespeople, and I wanted to give consumers the assurance that if any of my salespeople didn’t do the right thing, we promise to protect you. I wanted to move in that direction. I think we cannot be too blinded by money, because I know when you’re blinded by money, you will cut corners, and when you cut corners, you will short-change the value proposition to your people.
Bharati: If it isn’t for the money, why do you do it, what excites you the most about your work?
Mohd Ismail: Honestly, solving problems. And I think it doesn’t matter if it’s a small problem, solving it is always an achievement, because it makes me feel that I made a difference today in the process, or in the life, or in the motivation of someone. That drives me and that is the satisfaction I get every day. And when you know you have 6,000 agents and their families’ lives are dependent on your strategies, your penetration of the market, it gives me the energy to make sure that every day when I wake up and come to the office, we always think about how else we can make things better.
Bharati: What do you think needs to happen in the property sector next?
Mohd Ismail: I think one of the key things is transparency. I think we can continue to improve many of the ways in which a consumer can get information, so that he or she doesn’t feel pressured into making a decision. With information, he can make a decision that is for his long-term benefit. When you don’t have enough transparency of information, you rely on limited information, and at times, pressure and emotional desires to attain certain things in a scarcity mind-set environment, will lead you to make decisions that may not be right. A greater clarity of these things will help people moving forward.
Bharati: How can this be done?
Mohd Ismail: I think a fair bit of the younger generation today are getting savvy through the Net, through seminars, and so on. But we must also understand that one of the disadvantage of our real estate market is this. It’s so many policies, regulations, grants and incentives and so on. Even a trained salesperson may not be able to remember and understand everything.
Bharati: So is it a matter of simplifying these or a matter of consumers having to become savvier?
Mohd Ismail: Yes, I think it would be good for consumers to go and understand and do some of your own due diligence. Rely on good professionals. And if you’re not comfortable with that particular professional in your first sitting, get a second opinion. When we are sick, when the surgeon says that you need to be operated on, back in your mind you’ll say because he is going to touch me and cut me, I want a second opinion. Instantaneously most of us think like that. I think it should be the same thing when you buy a property because it affects your life in the long-term.
Bharati: You lead a comfortable lifestyle now, you live in a nice house, own several properties and you drive a nice car. How do you keep yourself grounded?
Mohd Ismail: I think these are things that you deserve, but I think you should also be very sensible. You shouldn’t flash your money to show off just because you have that money. You can have money today, but one day, you may not have it anymore. So prudence in terms of how you manage your funds and how people look at you is equally important too.
Bharati: You grew up in difficult circumstances, so maybe you have some perspective. What about your children though? How do you keep them humble?
Mohd Ismail: It’s a big challenge. We spend a lot of time talking to them and I’ve always made it very clear to my children that daddy’s money won’t automatically go to you. I’m prepared to give half or more of my assets to charity. We don’t really give the children whatever they ask, or be too spendthrift. We still want to inculcate good habits. I learnt it the hard way. But they don’t need to go through having to wake up 4am to deliver newspapers. Their lives are so comfortable, but they must know the value of money. In fact, it was very touching when I took my children to the place I grew up – the flat with just bedroom and one hall. The flat still exists. Last year, I took them there and we found a family renting the place. I knocked the door, and I asked them to allow me to come in, because when I was young I lived in this house. I wanted my children to know this was where I grew up.
Bharati: How did they react?
Mohd Ismail: I think I could see a little bit of shock, because I told them it wasn’t just me, but me and all my siblings who lived there. Now, each of them have got a room of their own. We spend time when we go for our dinners and so on, and we talk. I just want to connect with my children emotionally to help them understand that they should not take things for granted.
Bharati: What’s next for you?
Mohd Ismail: I just want to be happy. I want to prepare the next team of my people and I’m very happy that I have got a very strong team that is ready to take over. I think my marathon is also coming to an end soon.
Mohd Ismail: I’m 52. How long do I want to push this energy? Yep. I think the right time should be when I hit 55. The next team should be coming in and I should be guiding them, and I could still remain in the business, but in a different capacity as a chairman. Come 60, I choose to be irrelevant just because I think the next generation must take the lead. Life is not all about work in my view. I want to take a step back and I want to see other things that make sense in life.
Bharati: And what do you think that would be?
Mohd Ismail: I want to be very close to nature and see a lot of greenery. I don’t mind having a hundred sheep and looking after them, clearing their poo and so on. I think it will give me greater sanity than having to drive and drive and drive things.
Source : Channel NewsAsia – 21 Nov 2015