The real estate sector in the Brunei Darussalam has undergone a series of transformations in the past few years that have changed the landscape considerably for buyers and sellers alike. These developments encompass changes to title law, loan regulations, ownership and the market itself in terms of demand and the type of housing being built to supply that demand.
Behind it all, the government remains the main actor in the sector, regulating most aspects of real estate transfers and building most of the new structures – though that is set to change, too, as officials look to the private sector to join in on ambitious plans to transform the capital city.
By law residents of Brunei Darussalam are allowed to buy freehold land, houses and shop houses. Freehold ownership is equivalent to permanent ownership of property. Under the Land Code (Strata Act) 2009, local residents can also purchase apartments, which they retain ownership of for up to 99 years, after which time ownership of the property is returned to the landowner. The Sultanate’s title registration system for land consists of temporary occupation permits over state land for agricultural, commercial, housing or industrial purposes. These licences are granted by the government for renewable annual terms.
The main types of land tenure are freehold and leasehold. A registered title in freehold tenure may be granted in perpetuity, and ownership may be transferred with approval of His Majesty Sultan Haji Hassanal Bolkiah. For leasehold tenures, the state may grant a registered title in landed property for a term of 25, 50 or 99 years. These titles may be transferred and extended upon expiry of the lease term with approval from Sultan Bolkiah and the payment of a premium. Registered landowners may grant long-term leases of commercial and residential property for up to 60 years, and lessees of these properties may sublet them in turn. Leases of more than seven years require registration and approval from Sultan Bolkiah.
National Housing History
Traditionally and historically, many Bruneians have lived in water villages, one of which, Kampong Ayer in Bandar Seri Begawan (BSB), remains inhabited by thousands of Bruneians to this day. Once known as “the Venice of the East”, Kampong Ayer is a village consisting of stilted houses with modern conveniences, connected by wooden walkways.
However, there has been a drive to move these water villagers onto dry land since 1952, when the Resettlement to Dry Land Department (later the Resettlement Department) was established. That year, the first families were relocated from Kampong Ayer and Kampong Burong Pingai Berakas to Mukim Kilanas and Berakas, respectively. In 1954 another housing resettlement programme saw increasing numbers of families and civil servants moved to dry land, with acreage for planting trees often included in the housing packages.
Then, in 1976, the government performed a survey of housing needs in the country that resulted in the establishment of the National Housing Programme (RPN). The programme was designed to help landless Bruneians become homeowners by subsidising home prices and offering 20-30-year loans. RPN houses are built in modern villages equipped with roads, education facilities, mosques, community centres and utilities. Since its inception, the RPN has become a significant national development programme.
In 1984 the Resettlement Department was renamed the Housing Development Department. In 2000 the Landless Indigenous Citizens Housing Scheme (STKRJ), which allocates homes to landless Bruneian citizens, was introduced. From 1970 to 2013 the RPN and STKRJ provided about 19,900 houses, which is around half of the 37,974 houses needed for citizens applying through the RPN. In 2014 the RPN built 6258 more houses, bringing the total number of homes to more than 26,000, according to the Ministry of Development (MoD). RPN land covers a total of 3055 ha in Brunei-Muara District, 1155 ha in Belait District and 609 ha in Tutong District. In Temburong District, RPN and STKRJ lands together comprise 64 ha.
Although the only group currently eligible for government-subsidised housing is Bruneian citizens, Bahrin Abdullah, minister of development, said in March 2016 during the 12th Legislative Council session that a housing focus group is expected to examine a proposal to extend eligibility to permanent residents. The focus group was established to bring an end to lengthy delays in granting government housing and is tasked with providing officials with appropriate recommendations to meet the country’s housing needs, including issues surrounding design and construction quality.
“At present, the National Housing Scheme is only for the citizens of His Majesty the Sultan, namely those who hold yellow identity cards,” the minister also said during the council meeting. “Therefore, permanent residents can’t be considered at this time.” The minister was responding to a question raised by a Legislative Council member who voiced concern about the rising number of permanent residents in Temburong District who are in need of affordable housing.
The government of Brunei Darussalam continues to pay close attention to housing provision for its people, and the RPN and STKRJ programmes are still successfully housing applicants. However, because 57% of the country’s land area is protected under the Heart of Borneo conservation initiative and land is needed for agricultural and industrial development, land for housing projects is running short. Just 5% of the Sultanate’s land area is available for development, and because of this shortage the MoD has announced that dedicating substantial areas of land to housing projects is no longer feasible. Yet, the demand for RPN and STKRJ housing remains. More than 10,000 applicants are seeking properties in Brunei-Muara, according to the Housing Development Department, with some of these applications submitted more than 15 years ago.
In order to meet this demand, the MoD is building up instead of out, moving from single-family housing to high-rise apartments. The country’s first high-rise housing project development under the RPN, a BN$55m ($39.1m) development at Lambak Kanan/Salambigar, will be composed of 300 units housed in 10 six-storey buildings.
The energy-efficient residential development will include a multi-storey car park, and recreational and sports facilities such as its own football field. It is being built by Dara Construction following a green building concept and utilising solar power, with tap water, window glass and electrical appliance features that will enable tenants to save both water and energy. Each 170-sq-metre unit being built consists of one master bedroom, three other bedrooms, a living room, dining room, kitchen, store room, three toilets, a balcony and a laundry area, according to Dara Construction. The apartments are expected to be ready for habitation in the spring of 2017.
All indications are that the citizens of the Sultanate are ready for high-rise living. As many as 75% of respondents to a 2015 MoD survey measuring opinions on vertical housing project said they liked the design, and a 2010 survey for the second BSB Development Master Plan found that 95% of respondents were in favour of vertical housing. In fact, the results were so favourable with regard to high-rise living that more of these buildings are scheduled to be constructed, according to Pehin Dato Suyoi Osman, former minister of development. These will include 2500 high-rise units earmarked for Lumapas and 420 units in Lambak Kanan.
The new turn to high-rise apartments should also help somewhat to overcome complaints about the substandard quality of some RPN and STKRJ houses. Former development minister Suyoi fielded complaints recently about issues ranging from water leaks and holes in roofs to poorly designed interiors. “Looking back, we have learned our lesson from this episode,” he told The and the type or designs of roofing adopted were incompatible with the climate here.”
Back To The Water
A movement that would relieve some of the pressure on land for housing, as well as see more citizens return to traditional housing on the water, has generated some excitement, but the government has not yet decided whether it will back it with national housing scheme funding. In early 2015 Legislative Council members suggested that more national housing should be built in the Kampong Ayer water village.
In the 1980s the population of Kampong Ayer was estimated to be as high as 40,000, but it has since ebbed to 13,162, according to the 2012 national census. In addition to preserving the population and cultural heritage of the citizens still living there, building housing on the water would also be in line with the BSB Development Master Plan for restoring the village’s infrastructure to accommodate the tourism industry.
Kampong Ayer is already home to two RPN projects and 64 eco-friendly houses that are part of the Upgrading Kampong Ayer Pilot Project, which maintains the traditional characteristics of homes in the water villager in a sustainable manner and offers modern facilities. Phase two of the revitalisation project for Kampong Ayer, which is part of the BSB master plan, involved 548 residents and received an allocation of BN$26.33m ($18.7m).
Pehin Badaruddin Othman, head of the Ministry of Home Affairs (MHA), said the recommendation to extend the RPN to Kampong Ayer would require review by government officials and by the public. He cited a survey of families involved in a recent relocation project that found a majority of respondents did not wish to be relocated. Only 60 families agreed to relocate, while the rest either declined or said they would consider the idea at a later date, he added in response to the Legislative Council’s suggestions, according to a March 2016 report from The Brunei Times.
Back To The Land
Whether or not more housing will be built in Kampong Ayer is still unknown, but another scheme discussed recently by the Town and Country Planning Department (TCPD) would see residential developments built in several villages in Tutong. These developments would be used to house labourers in the agricultural sector in the district, Mawarni Haji Ahmad, a planning officer for the TCPD, told The Brunei Times. Under the Tutong District Plan, a strategic document that guides the planning and development of Tutong through 2025, developments in Pengkalan Mau and Kebia would be able to accommodate more than 3000 new residents in some 700 homes.
A River City
The BSB Development Master Plan, unveiled in 2010, laid out ambitious designs to transform Brunei Darussalam’s capital into a modern city centre. In addition to renewing the condition of BSB’s existing infrastructure, the plan charts a vision for improving the city’s liveability, as well as a way to drive economic diversification.
Commissioned by design, architecture and engineering firm HOK International Asia-Pacific, the master plan is led by HOK with a team including real estate consultancy JLL, engineering firm Meinhardt, transportation consultancy MVA and Bruneian architecture firm OWMP International. It laid out specific recommendations for developments within key nodes of the city.
For instance, HOK’s planners identified numerous government-owned buildings and areas of land in the downtown/central business district that could be redeveloped, relocated or adapted. This encompassed performing extensive environmental rehabilitation to create a riverfront eco-corridor for the Kedayan River that would boast commercial and retail real estate.
The Kedayan promenade, which falls under the master plan’s Riverfront Eco-Corridor Project, received a total allocation of BN$40m ($28.5m) in 2015. The funds will go towards the first stage of the project, which involves demolishing vacant houses and the homes of families that have been relocated to government-provided accommodation, according to the MHA. Along with a rejuvenated waterfront, the design identified new commercial nodes to be developed along the river.
Seeking New Partners
Yet, to date the master plan has been only partially implemented and its overall progress is, as yet, uncertain. With the economic outlook uncertain, the government, through stakeholders for the BSB Development Master Plan, such as the TCPD, the Land Department and the Public Works Department, has begun to look to the private sector.
In March 2015 the minister of home affairs spoke about several projects within the BSB Development Master Plan, including the proposal to rebuild 12 existing shop houses along Jalan Sultan Omar Ali Saifuddien. The shop houses are set to be revamped in order to ensure that the properties along the road are “more attractive” for businesses and investors, the minister said, adding that an open invitation for the proposal to invest, build and operate the units had been offered to interested parties and requests for proposal documents had been distributed.
Indeed, the MHA and the BSB Municipal Department are now actively promoting potential public-private partnership (PPP) projects for the BSB Development Master Plan. At a seminar held in February 2016 for the purpose of reviewing progress on the BSB Development Master Plan, Abdul Rahman bin Haji Ismail, chairman of the BSB Municipal Board, stressed the importance of cooperation between government agencies in the implementation of PPP projects that have already been identified. “It is the vision of the MHA, through the BSB Municipal Board, to implement more PPP projects that will transform BSB’s landscape,” Rahman said.
However, the BSB Municipal Board is still trying to identify land and properties that can be redeveloped under such PPP programmes. At the same seminar, Junaidi Haji Bakar, head of the masterplan unit at the BSB Municipal Department, said land issues remain one of the biggest challenges to implementing PPP projects under the BSB Development Master Plan. This is because some of the areas covered by the master plan are gazetted by other government agencies, while some are privately owned, according to Junaidi. In consequence, the government must compensate the private owners before the PPP process can be carried out.
Adding to the challenges are uncertainties surrounding the application and implementation of the PPP concept. Because it is a relatively new method for project development in Brunei Darussalam, guidelines on the provision and enactment of projects via PPPs can be difficult to identify. At the same seminar, Aminuddin Haji Mohd Taib, planning director at the Department of Economic Planning and Development, reiterated that the main factor preventing the implementation of PPPs for the master plan is the preparation of allocated lands by the government. “If we have that land upfront, it will not be a factor in the delay of PPP projects,” Aminuddin said. The director went on to urge the use of parallel execution or negotiation in the contract agreements for acquiring land for PPP projects. “PPP is doable,” Aminuddin said. “We are just going through negotiation phases and building blocks to do it.”
With Brunei Darussalam trying to diversify away from the hydrocarbons industries into other sectors, some real estate sector analysts have been noticing a trend for demand for second homes and housing in closer proximity to the border with Malaysia. According to an interview with Bruneian lawyer Colin Ong by legal research firm Who’s Who Legal, one reason for this could be a robust amount of weekend traffic crossing the border to Malaysia, driven by the steady devaluation of the Malaysian ringgit, as well as Malaysia’s more relaxed laws.
Another trend that is emerging appears to include more and more young adults looking to own homes. Statistics from Bank Islam Brunei Darussalam (BIBD), indicate an increase in home purchases among young adults in 2015. “We at BIBD are also seeing not only a strong demand in housing purchases, but also an increase in the number of young people buying a house either to live in or for investment,” Javed Ahmad, managing director of the BIBD, told the Borneo Bulletin in October 2015 during the launch of the BIBD Home Showcase 2015. Home financing also increased to more than BN$1.45bn ($1.03bn) in the second quarter of 2015, which is a 12.4% year-on-year increase over 2014, according to the Monetary Authority of Brunei Darussalam (AMBD).
Home Loans Reworked
The increased interest among younger buyers could be the result of actions taken by the central bank several years ago to make obtaining home loans easier and less burdensome on buyers’ personal finances. “There has been an increasing trend in home financing, and this could suggest that the population is shifting their preferences to appreciating assets, such as homes, and away from rapidly depreciating new cars,” according to a BIBD report.
In October 2014 Brunei Darussalam’s central bank deregulated rates on housing loans, cancelling previous regulations regarding profit rates on residential property financing for Islamic banks and interest rates on residential property loans for banks. Speaking to OBG at the time, Ahmad said the new regulations had been helpful in establishing a fixed-rate pricing framework, limiting the amount of personal financing and setting a minimum deposit rate for investors.
Then, in May 2015 the AMBD introduced new loan requirements, including a loan cap known as the Total Debt Service Ratio (TDSR) aimed at reducing personal debt burden. Banks, finance companies and Islamic finance institute Perbadanan Tabung Amanah Islam Brunei implemented the new requirements in June 2015. The TDSR applies not just to those applying for home loans, but to all customers applying for financing with the goal of limiting monthly debt obligations and ensuring Bruneians have access to adequate amounts of disposable income. Of note for the real estate sector is an exemption for home improvement financing in the new regulations.
“Financial institutions are required to ensure that customers will not be over-burdened with the credit/financing facilities,” the central bank said in its statement regarding the new loan cap. The TDSR is set at 60% for those earning a minimum net salary of BN$1750 ($1240). If a borrower’s net salary is less than BN$1750 ($1240), a loan is subject to the bank’s lending policies, according to the AMBD, which also set a limit on the maximum loan amount any individual can obtain. The new limit is up to 18 times a person’s net salary, whereas previously it was up to 12 times a person’s monthly gross salary. These regulations were eased later in 2015, with a loan eligible to be restructured or topped up when 50% of the original tenor has lapsed, subject to certain conditions.
Brunei Darussalam’s real estate sector is currently undergoing a series of major changes. These run from building on land to building high-rise apartments, from selling to younger rather than more established buyers, and transitioning from a foreign to domestic investment climate. These changes are a consequence of government officials looking to the future and planning accordingly in the best interests of the citizenry, as well as the all-too-real issue of land scarcity.
Meanwhile, the push to implement the many projects included in the BSB Development Master Plan continues, with much of the success for this plan now in the hands of private investors. While all of this is in progress, the Sultanate’s government is also maintaining a focus on providing public housing for its subjects, whether it be on land or water, through the RPN and STKRJ programmes.