Investors from mainland China who made down payments to buy property in the controversial Forest City development are in limbo, thanks to China's capital controls.
According to the South China Morning Post, buyers are unable to secure loans from China banks nor transfer funds overseas to make the due payments. Even payments made to a Hong Kong account are rejected, it reported.
This has prompted buyers to seek a refund on their down payments, but to no avail, the Hong Kong-based daily reported.
“Now we understand all further installments need to be paid abroad. But this is not allowed due to the foreign exchange controls from the Chinese government,” said another Forest City purchaser, Vicky Wu from Guangzhou.
“If we do so, we will be put on the government’s black list," she was quoted as saying.
The company's sales centres in mainland China cities were also closed "for renovation" earlier this month, but Forest City developer Country Garden representative denied it was related to Beijing capital controls, SCMP said.
Country Garden is China's third largest developer.
One buyer told the daily she was informed that the apartment in Forest City would offer a chance for her family to become permanent residents of another country.
The property was heavily marketed to middle-class Chinese who cannot afford property in western countries when the China government turned a blind eye to individual investments in overseas property, the daily said.
They were invited by Forest City's Chinese developer Country Garden, to join tours of Singapore and Malaysia, where they were then shown the Johor development costing 20,000 yuan per square metre (about RM1,283.27 per square feet).
This is a quarter of the price of property in downtown Beijing, SCMP said.
"Every potential investor was accompanied by at least one salesperson, and (buyer Laura) Zhang said they described a future in which their children could easily attend an international school in Malaysia or Singapore and in which their parents could enjoy the same social welfare as elderly Malaysians," the daily reported.
Zhang paid RM63,500 using her China UnionPay bank card as 10 percent down payment for a 635 square feet flat, it said.
Johor MB: Capital controls have no impact
Country Garden said the first tranche of apartments in the 14 square kilometre project, built on reclaimed land, will be completed late 2017.
Last year, the developer told SCMP it expects to see at least 20 billion yuan from Forest City sales by the end of 2016.
Johor Menteri Besar reportedly said China's capital controls will not affect Forest City.
China's State Administration of Foreign Exchange (Safe) said its citizens are not allowed to buy properties, make security investments, buy life insurance and such starting early 2017.
However, China envoy to Malaysian Huang Huikang reportedly said China's capital flight control policy would not stop its citizens from making real estate investments overseas.
There has been an ongoing debate over the Forest City development project in Johor, which involves investment from China.
Former prime minister Dr Mahathir Mohamad has repeatedly claimed that the project could undermine Malaysia's sovereignty.- Mkini