ACKNOWLEDGEMENT

Bissmillahirrahmanirrahim,

Alhamdulillah. Thanks to Allah SWT, whom with His willing giving me the opportunity to complete this assignment which is title VALUATION PROSPECT. This assignment was prepared for Faculty of technology management, business and entrepreneurship, Universiti Tun Hussien Onn Malaysia (UTHM). This assignment is based on the methods use in Malaysia and other country. Firstly, I would like to express my deepest thanks to, Pn Burhaida Bt Burhan, a lecturer at Faculty of technology management, business and entrepreneurship, who had guided me to finish this project. I also want to thanks the staffs of library UTHM for their cooperation during I complete this assignment Deepest thanks and appreciation to my parents, family, and others for their cooperation, encouragement, constructive suggestion and full of support for the assignment completion, from the beginning till the end. Also thanks to all of my friends and everyone, that have been contributed by supporting my work.

VALUER
Who is Valuer?
Valuer is a professional who has been educated and trained to determine the value of fixed property, execute feasibility studies and provide expert advice on property related matters. An independent Valuer can provide impartial and motivated reports on the value of real or limited rights in land. The Valuer requires a combination of a number of professional qualities and capabilities, and needs a thorough knowledge and understanding of the interacting influences which create, maintain or diminish the value of property or rights therein. The Valuer does not invent value, but interprets market forces, which determine the value. Valuer is a profession related to real estate. A Valuer determines the value of property based upon market conditions at a given time. One of the frequent applications of the Valuer's skill is to determine values for purchase or sale, and for insurance purposes. Valuers are qualified to undertake valuations in all classes of properties, including commercial and industrial properties; all types of residential properties, agricultural and special use properties. However, most Valuers tend to specialize and do not undertake the full range of valuations. It is therefore vitally important for clients to select and appoint a registered Valuer with the relevant practical experience required to undertake the specific valuation. While it is essential as professional, the Valuers are governed by The Board of Valuers, Appraisers and Estate Agents under provision of Valuers, Appraisers and Estate Agents Act 1981. Its primary function is to regulate the Valuers, Appraisers and Estate Agents practicing in Malaysia.

Valuation method use in Malaysia

1. Comparison Method
The 'Comparison Method' is also called 'Comparable Sales Method' of property value. This method estimates the value of a house by comparing it to the prices of like-kind properties sold in similar locations within a recent period of time. The basic assumption is therefore that a property is worth what it will sell for, in the absence of undue stress and if reasonable time is given. This method estimates the actual market value of homes by examining factual data. It is the most prevalent method in the residential property market and works with general trends and projections. Procedure: The central task is to systematically collect data on comparable properties. Basically, the forces influencing value have to be weighed against each other. The relevant elements to look for can be split up as follows: 1. Transaction Characteristics - Date of transaction, means of payment, transaction speed, etc. 2. Asset Characteristics - Size, location, conditions, utility, building regulations, business climate, etc. The best way to compare property would obviously be to inspect it in person. Since this option is very time-consuming and not always possible, the next best solution is to search property transaction databases. An ideal database will contain information relating to transaction date, price paid, property features and size etc. Most of the valuation firms in Malaysia are using this method to perform their property valuation request. Example: let's say you were the owner of No. 54 ABC Street and were looking to sell. A search on the valuation database using method No.1 above would tell you that identical houses on the same terrace all sold for between RM125,000 and RM135,000 while the end-of-terrace house sold for RM158,000 - all within the last six months. A search using method No. 2 would show there were also four similar terrace houses sold on the parallel ABC Street for between
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RM122,500 and RM140,000. Armed with this information, the seller can confidently assume that his house price should be no less than RM120,000 and could possibly fetch RM140,000.

Comparison Method Advantage: 1. It is the most easy and straightforward method and has become general practice in the residential housing market. 2. It leads to an objective valuation being placed on the property. The answer is connected to the actual market value as opposed to an individual's preferences.

Comparison Method Disadvantag 1. Sometimes it might be difficult to locate enough similar property transactions to draw meaningful conclusions with regards to what the value should be.

2. Market value and price might differ due to "unreasonable" actions by other actors.

2. Income Methode
In this method, the present worth of a property is estimated on the grounds of projected future net income (in rent, for example) and re-sale value. Using this technique, a buyer can estimate whether a certain property would be a profitable investment. The method uses the discounted cash flow (DCF) model to determine the present value of an investment. One underlying assumption of this approach is the principle of opportunity cost of capital, i.e. that money is of more value to its holder today than in the future. Although complex, this method is essential to any property valuation, especially for buyto-let investments. It is frequently employed by financial and investment professionals when valuing assets.

Procedure: First, the prospective income and re-sale value have to be estimated. This valuation is based on the principle of highest and best use and on comparable data.

Example: Mr. X want to buy a three-bedroom condominium and let it out. Historical data show that Mr. X can expect a 50% increase in market value within 10 years. Market analysis tells Mr. X that the average rent of comparable properties in a similar location is RM12,000 per annum. In order to calculate the present value of a property, prospective future income has to be discounted to reflect the cost of equity capital. This is part of the discounted cash flow (DCF). The opportunity cost of capital can be interpreted as the income that would otherwise have been generated had the capital been invested in an asset of similar risk instead (eg. an 8% interest rate in a high-yield ISA account). The difficult part in calculating the DCF is how to estimate the risk involved. In property dealings, these estimates are usually based upon historical data on house price volatility. This volatility is broadly in line with the general market volatility and our 8% example as the cost of equity capital can be safely justified.

The way to calculate present value (PV) is to divide the future value of a house by (discount rate + 1) no. of years. Example: A three-bedroom condominium costs RM220,000. Mr. X expect to be able to sell it for RM330,000 in 10 years. Mr. X set his discount rate at 8%. The calculation looks like this: Sale PV = RM330,000 / (1 + 0.08) = RM152,853.85

A property also generates income, however. This has to be incorporated into the calculation. A buy-to-let property produces a constant cash flow in the form of rent, whereas if Mr. X buy a house to live in himself, Mr. X increase his income by saving on rent. Example: The three-bedroom condominium generating RM12,000 per year in rent costs RM2000 in expenses. Meaning that Mr. X have an annual income of RM10,000. Mr. X set his discount rate at 8%. The calculation for the net present value of the first year's income is: PV = RM10,000 / (1 + 0.08) 1. PV = RM9259.25 It results that the present value of Mr. X new income in year 1 is RM9259.25. The valuation that this method generates is highly sensitive to the following variable assumptions: Rental Net Income: RM10,000 Re-Sale Value after 10 years: RM330,000 Discount Rate: 8%

Income Methode Advantage: - It focuses directly on the value of the property to the individual concerned. - Income analyses are very detailed and derive specific conclusions (in contrast to the more general approach practiced in the Comparison Method. Income Methoden Disadvantage: - This method is more complex and less intuitive than the Comparison Method. This is one of the reasons why it is often overlooked. - This method ignores the actual market prices for property by neglecting the Comparison Method analysis and fragile market economy.

3. Cost Method
The Cost Method estimates the replacement value of a property by analyzing the cost component of the specific land and building. It lies somewhere between the inferred and the intrinsic methods, and is not a fully autonomous valuation method. Value is calculated by adding the free market value of the land as if vacant to the reconstruction cost of the building, minus depreciation suffered over the years in comparison to a new building.

Procedure: - Estimate the value of the land as if vacant, by comparing it to similar properties. - Estimate the replacement cost of the building at present. Factors to be considered include site preparation, utilities, types of building improvements, tenant improvements, and soft costs. - Assess the depreciation that has occurred to the building and deduct the figure from the replacement cost new. - Add the estimated worth of the land. The resulting figure will be an indication of the value of the property. Example: Market value of land: RM100,000 Replacement cost of the building: RM500,000 Depreciation: RM75,000 Value of property: RM525,000

Cost Methode Advantage:

- Sets the value at the actual cost or price of the property.

Cost Methode Disadvantage:

- Relies upon other valuation methods to derive the value of the land. - Neglects the difference between cost and value, namely that one property might be cheaper than another but generate a much higher net income.

4. Investment Method
The 'Investment Method' is used for trading properties where evidence of rates is slight, such as hotels, cinema, car park and etc. In normal circumstances, a three-year average of operating income (derived from the profit and loss or income statement) is capitalized using an appropriate yield. Note that since the variables used are inherent to the property and are not market-derived, therefore unless appropriate adjustments are made, the resulting value will be Value-in-Use or Investment Value, not Market Value. Although it is complex, this method is essential to any property valuation, especially for buy-to-operate investments. It is frequently employed by financial and investment professionals when valuing assets.

5. Residual Method
Residual Method allows to estimate the maximum value, which the potential investor may pay for the real estate in its present condition in connection with the investment project envisaged for implementation. Residual Method is implemented when determining the value of real estate which can be subject to development, expansion, modernization or other improvements. The value of the property can be specified solely for the land, for the land with its components before the improvements or for the land components separately. It is used in analyzing and preparing development projects for real estates. These situations usually require determining the value of individual components of the real estate, i.e. specifying the value of the land or building objects in the value of the real estate. The value of the real estate is defined as the difference between the value the real estate will reach after the planned investment is implemented and the value of the costs ensuing from the project implementation (costs of construction, design and monitoring, costs of securing the financing and the anticipated developers profit). The remainder is the value of the property in its present condition, on the day of the appraisal.

6. Factor Analysis
This technique is used to analyze interrelationships among a large number of variables and to explain these variables in terms of their common underlying factors. The objective is to find a way of condensing the information contained in a number of originals into a smaller set of factors or composite variables. The basic form of factor analysis is Principal Component Analysis which assumes that all the variation in a data set is capable of association with a set of components or factors. Applications in property market research include the identification of sub-market, summarizing demographic data and the construction of main factors affecting property values. Lockwood demonstrates the applications of factor analysis in valuation, used in conjunction with regression analysis to reduce multicollinearity (Lockwood, 1984).

7. Correlation Analysis
This analysis explores and measures the relationship between any two variables. It determines the degree of similarities which exist between any two characteristics. In valuation the correlation analysis provides a starting point in gaining an overview of data characteristics and variables can be screened for significant and to test assumptions about the type of relationship expected. The main objective of correlation analysis is to measure the association of two variables. If the price of a house is greater when the area of the building is larger, than we may assume that there is a relationship between price and area. This situation can be defined as having a positive correlation. On the other hand, if the price of land is less at the suburban than it is at the city center, we can assume an inverse relationship between price and distance translated to mean a negative correlation. Correlation between two variables can be measured by a correlation coefficient. Several techniques can be used such as graphical, mathematical formulas and statistical analysis where Pearson Product-Moment correlation has been applied. The correlation coefficient has a value ranging from"-I" to "+I" indicating a positive and negative correlation among those variables. The value of zero is representing no relationship between them. From the analysis, the valuer should be able to decide which variable deserves attention in the valuation process and which are less important.
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8. Inferential technique
Inferential statistics involve making predictions of value that are not really known. It is applied to establish if there is a relation between variables. This relationship later can be used to predict the value of other which is unknown. The most common techniques used are correlation analysis and regression analysis.

9. Sensitivity analysis
The residual valuations could be expressed in the form ofa simple equation where the answer is the residue (a sum left over) after deducting the cost of development from the value of development. Risks are minimized by using current costs and incomes with no estimation of likely changes during the development period. The assumption is that incomes and costs would change at similar rates so that effects would Cancel themselves out. The variables which have the greatest impact on the site value are reflected in the "All Risk Yield". A high risks will represents a higher yield. The value for each variable and the market site value is based on the best possible single value with deterministic approach. Unfortunately, the magnitudes of these variables are not certain. The valuer often makes an educated guess as to the true magnitude of the particular variable. If the site value is sensitive to the development value and development cost variable, an error in judgment will lead to a substantial error in the site value. It is therefore important that in residual valuation, the valuers use quantitative method, in this case, to test the sensitivity of site value. Sensitivity analysis is useful when we want to detennine to what extent one variable is affected by another variable with the assumption that others remain constant. (Source: Objectivity In Valuation Techniques, Buletin Ukur, Jld. 7, No.3, ms. 190-197, Disember 1996, Penerbitan Akademik Fakulti Kejuruteraan dan Sains Geoinformasi Universiti Teknologi Malaysia Skudai Johor)

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Conclusion on valuation method use in Malaysia

The application of traditional methods of valuation is exclusively and generally accepted by Malaysian valuers with no evidence of questioning their suitability or accuracy (Md. Yusof A, 1992). The valuer is continuing to apply the standards developed in 1930's, or before which have been made obsolete by new advances in theory and technology. Current traditional methods of valuation which are commonly practiced throughout the real estate world, seemed to be associated with uncertainties and subjective elements. Comparison method which is generally considered as the best and most reliable method is full of subjective elements in the adjustment process.

The weakness of cost method is the assumption cost is equal to value, and the calculation of depreciation where most of the valuers only consider physical aspects. The limitation of residual method is only suitable for site value. The method does not consider the existence of risk and uncertainty elements in the valuation process.

The income or investment approach is used to value property with income flow (rental). Most of it were based on the mean or maximum number of occurrence of the rental. They neglected the actual total number of occurrences by using frequency distribution such as normal distribution and weighted rental.

Having regards to the weakness and limitation of traditional methodology, the application of risk analysis and statistical approach should be imbedded into the valuation techniques. Some of them have been applied successfully in some countries like Australia, New Zealand and United States of America. The main methods are Discounted Cash Flow and Regression Analysis, whilst the other relevant one, is the Multivariate Analysis. There is a need to reevaluate and improve the valuation techniques. These improvements are needed to produce a more objective and acceptable value estimates and it may well be provided by the statistical-based approach and risk analysis.
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ESTATE AGENT

Who is Real Estate Agent?

Real Estate Agent is person who acts as a go-between for the owner and the buyer, assisting with their negotiations to reach an agreed sale price for the property. The real estate agent continues to follow up with the owner until the property is legally transferred to the new owner. For these services the real estate agent receives a payment (known as a commission) from the owner.

In Malaysia, Real Estate Agents are governed by The Board of Valuers, Appraisers and Estate Agents under provision of Valuers, Appraisers and Estate Agents Act 1981. Its primary function is to regulate the Valuers, Appraisers and Estate Agents practicing in Malaysia.

How To Become A Licensed Real Estate Agent in Malaysia?

To become such a professional in Malaysia, a Candidate has to sit for a two-part real estate examinations offered by the Board of Valuers, Appraisers and Estate Agents. These examinations will be held only once a year, around June or July of each calendar year. The subjects for the Part I examination are: 1. Principles of Accounting 2. Building Technology I 3. Principles of Economics 4. Principles and Practice of Marketing 5. Introduction to Law 6. Property Taxation The subjects for the Part II examination are:

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1. Building Technology II 2. Estate Agency Law 3. Laws Relating to Property 4. Real Estate Agency Practice 5. Principles of Valuation 6. Land Economics A Candidate may take all or at least 2 of the 6 subjects in the respective part at one sitting and shall be given credits for the subjects passed which shall lapse at the end of the third year. A pass in all the above 6 subjects in Part I makes the Candidate eligible for Part II. Candidates must take the Part II examination not later than 5 years after passing all the subjects in Part I examination. After passing Part I and Part II of the Estate Agent Examination, a Candidate shall register as a Probationary Estate Agent and must at all times be employed on full time basis in an Estate Agency Firm or Establishment approved by the board; undergoing 2 years post-qualifying practical training and experience in Malaysia, under the mentorship of a Registered Estate Agent; and thereafter may apply to sit for the Test of Professional Competence (TPC) including an oral interview. The successful Candidates have to maintain a Work Diary purchased from the Board and shall record it from the date of admission as a candidate for the TPC. Experience gained before registration for the TPC would be excluded. Entries in the Dairy must described clearly and concisely the actual work done in accordance with the areas of approved professional experience such as: Sale & Purchase of Residential, Commercial, Industrial and Agriculture Property; Tenancies/Leases of Residential, Commercial, Industrial and Agriculture Property and Marketing of Property for Sale/Letting. The Dairy must be signed weekly by the Candidate and the Registered Estate Agent, being the Mentor for the Candidate. After completing the 1st year of recording, a Candidate is

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required to submit to the Board for evaluation and similar procedure to be adopted after recording 2nd year Work Dairy. On completion of the required training period, a Candidate must prepare a record of experience outlining the experience that have been obtained during the period of professional experience covering the type of work undertaken, the geographical areas in which the experience was gained, the types of property dealt with, the Candidates level of responsibility and any other information that demonstrate the experience gained. A Candidates is also required to prepare and submit Two Practical Tasks. These Tasks are intended to test the Candidates ability at report writing, logical expression, professional judgement and ability to be objectivity critical of a project undertaken personally by the individual Candidate.

Task I Prepare a report showing step by step the agency process for sale of a property that the Candidate sold from the date of listing of property until its final transaction. Task II Prepare a Marketing Proposal to market the sale of a high-rise building or a mixed housing development. Writ the report as though the Candidate is bidding to get the marketing rights.

Upon satisfying the areas of approved professional experience recorded and in compliance with the requirements set by the TPC Committee, the Candidate will be interviewed on the Practical Tasks including the following:
y y y y

Knowledge & application of the relevant laws and taxation relating to Real Estate Laws & regulations on Real Estate Agency practice. Real Estate Agency practice and techniques Topical matters relating to current issues, new amendments and changes that governing the local government and land law.

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Upon passing the Part III Test of Professional Competence (TPC) including an oral examination, the Candidate has now completed the Estate Agent Examination, to be eligible for registration as an Estate Agent with the Board of Valuers, Appraisers and Estate Agents, Malaysia (LPPEH). As defined under Section 22C of the Valuers, Appraisers and Estate Agents Act 1981, only Registered Estate Agents can practice, carry on business or take up employment as an Estate Agent ( Source: http://www.lppeh.gov.my)

Conclusion
The Estate Agent plays an active role in the process of buying & selling property in Malaysia. To become a licensed Registered Real Estate Agent in Malaysia, it normally takes a minium of 5-6 years to become such a professional. The person have to be qualified to sit for a two-parts real estate examinations offered by the Board of Valuers, Appraisers and Estate Agents, serve a two-years apprenticeship with a registered Real Estate Agent and pass the Test of Professional Competence(TPC), including an Oral Examination before they can be designated as an Estate Agent in Malaysia. As defined under Section 22C of the Valuers, Appraisers and Estate Agents Act 1981: Only registered Estate Agents can practise, carry on business or take up employment as an Estate Agent.

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INVESMENT TRUST (REITs)

What is REITs?
A real estate investment trust is a type of investment that holds a large amount of real estate in a portfolio for investors. Investors can purchase shares of the real estate investment trust and become partial owners of a portfolio of real estate. This type of investment allows investors to get involved in real estate with a very small initial investment. It is also easily traded and allows individuals who know little about real estate to get involved in the market. A real estate investment trust is managed by a professional team of real estate experts. The real estate experts take the funds that are provided by investors and use them to purchase many different real estate properties. A real estate investment trust could utilize many different types of real estate strategies, such as investing in commercial properties or multifamily housing units. Shares of this type of investment are traded on exchanges just like stocks. One of the advantages of this type of investment is that investors can get involved in the real estate market for a fraction of the price of buying a single property. Many investors realize the potential of the real estate market but lack the funds to get involved on an individual basis. By purchasing shares of an REIT, these investors can get involved in the market even if they only have a small amount of money to invest. This type of investment is very easy to get involved with. In order to buy or sell shares, investors will simply need a brokerage account. At that point, investors can buy or sell shares as if they were trading stocks.

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Typical REITs structure

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Islamic REITs
Islamic REITs are collective investment vehicles that pool money from investors to buy, manage and sell real estate. An Islamic REIT is an investment vehicle that invests primarily in: (a) income-producing Syariah compliant real estate, and/or (b) single purpose companies which are Syariah compliant whose principal assets comprise Syariah compliant real estate.

The incomes from the real estate or companies are used to provide returns to its unit holders. A portion of the REIT funds can also be invested in other Syariah compliant asset classes e.g. cash or Syariah acceptable deposits. Islamic REITs provide a new investment opportunity for investors who wish to invest in real estate through Syariah compliant capital market instruments. An Islamic REIT is an effective means of gaining investment exposure to large Syariah-compliant commercial properties. Investments in Islamic REITs provide opportunities to hold stakes in high-grade Syariah-compliant real estate which may otherwise have beendifficult or impossible for a retail investor to hold.

Islamic REITs structure

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Characteristics of I-REITs
Different countries set different levels in determining the requirement for a REIT, especially with regards to the ratio of investing in real estate. For example, the US ratio is at 75% while Korea and Singapore have set it at 70%. Conventional and Islamic REITs have the same criteria interms of structural requirements such as valuation, trustees, management companies and property manager. The difference is the Shariah compliant assessment that is undertaken by a Shariah committee or advisors entrusted with overseeing the operation of I-REITs to ensure compliance with Shariah principles. This includes investments, deposits and financing decisions, acquisition and disposal of real estate and rental earnings and tenants activities. The following are some of the issues involved in the compliance assessment process:

1. Non-Permissible Rental Activities Since rental constitutes the main income stream for investors, it is pertinent to ensure that this rental derived from halal or permissible sources. Accordingly, the Shariah Advisory Council of Securities Commission delineates the following rental activities that are classified as non permissible. The list includes financial services based on interest (riba); gambling/gaming; manufacture of sale of non-halal products or related products; conventional insurance; entertainment activities that are non-permissible according to the Shariah; manufacture or sale of tobacco-based products or related products; stockbroking or share trading in Shariah non compliant securities; and hotels and resorts. Apart from these activities, the Shariah committee or advisors are allowed to use their own discretion based on ijtihad to determine other activities that are deemed non-permissible to be included as a criterion in assessing the rental income for the Islamic REIT.

2. Rental from Tenant who Operates Mixed Activities When there is a case of tenant who operates mixed activities i.e. one where its core activities are permitted by Shariah, although there are some other activities that may contain a small extent of prohibited elements, the Shariah advisors must perform compliance assessment with additional consideration. One of the most important considerations is that the rental from non-permissible activities must not exceed 20% of total turnover of the Islamic REIT (based on the latest
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financial year). To that effect, Shariah advisors need to advise the Islamic REIT fund manager not to invest in the real estate involving non-permissible activities that clearly exceed the benchmark.

3. Method of Calculating the Ratio of Rental of Non-Permissible Activities There are several approved methods that can be used for calculating the ratio of rental of nonpermissible activities from a tenant operating mixed activities. The methods include the usage of space, hours of service and other methods deemed appropriate by the Shariah advisors using their own ijtihad. In the case of a supermarket for instance, the rental of non-permissible activities such as selling of alcohol can be based on the ratio of area occupied for non permissible activities to the total area occupied. For example, if the total area rented out is 10,000 square feet and the area allocated for the sale of alcoholic beverages is 1000 square feet, then the ratio of area used for non-halal activities is 10%. Thus, the rental from non-permissible activities is 10% of the total rental paid by the supermarket. In this case the 10% rental income is deemed to be permissible as it is still within the acceptable benchmark of 20% of total turnover of the Islamic REITs.

4. Acquisition of Real Estate Shariah-compliant assessments must be carried out by the appointed Shariah advisor. It is not permitted to acquire real estates in which all tenants operate non-permissible activities, even if the percentage of rental from the said real estate is within the accepted benchmark i.e. below 20% of the total turnover of the Islamic REITs.

5. Renting out to new tenant The 20% benchmark in determining the status of mixed rental income need not be applied in case of renting out to a new tenant. This is because the exact rental receipt from non-permissible activities is still unknown. However in an obvious case whereby the new tenant involves in activities which are deemed impermissible then it is not allowed for Islamic REIT fund manager to accept such tenant. For example, a well-known casino operator who plans to rent the real estate of the Islamic REIT must not be accepted as a new tenant.

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6. Instruments used in investment, deposit and financing for Islamic REITs An Islamic REIT must also ensure that all forms of investment, deposit and financing instruments comply with the Shariah principles. For example, in financing the acquisition of real estate, Islamic REIT fund manager must not engage in riba-based instrument which would have an effect on the Islamicity of the Islamic REIT operation and transaction.

7. Takaful Coverage The Guideline issued by the Securities Commission also stipulates that an Islamic REIT must use Takaful schemes to insure its real estate. However in case that Takaful schemes are unable to provide the insurance coverage, then the Islamic REIT is permitted to use conventional schemes (Securities Commission, 2005a).

8. Risk Management Issues Islamic REIT is permitted to participate in forward sales or purchases of currency, and is encouraged to deal with Islamic financial institutions. If the Islamic REIT deals with Islamic financial institutions, then it will be bound by the concept of wa'd (a unilateral promise where only one party is obligated to fulfil his promise or responsibility). The party that is bound is the party that initiates the promise. However, if the Islamic REIT deals with conventional financial institutions, it is permitted to participate in the conventional forward sales or purchase of currency. The similarities between Islamic REIT and conventional REIT The are broad similarities between conventional and Islamic REITs: (a) Tax treatment Both types of REITs receive a similar tax treatment on corporate tax, stamp duty and real property gains tax. (b) Structure of REIT The main structures for both types of REITs are the same in terms of the requirements to have a trustee, management company, property manager, valuation etc. (c) Regulatory framework

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The regulatory frameworks is similar for both types of REITs. But for Islamic REITs there are Syariah requirements that need to be complied with.

The differences between Islamic REITs and conventional REITs The two major differences are: (a) Syariah Committee/Syariah Adviser

Islamic REITs must appoint Syariah Committee/Syariah Adviser. The Syariah Committee/Syariah Adviser is a party to the REIT who is obliged under the Guidelines for Islamic REIT to act as an adviser on all Syariah related matters. The Syariah Committee/adviser is responsible for ensuring that the Islamic REIT complies with the investment guidelines, providing references and consultations to the manager on permitted investments as provided in the Guidelines. It also monitors and ensures that the fund has been managed and administered in accordance with Syariah principles, rulings or decisions issued by SC pertaining to Syariah matters. The Syariah Committee/Syariah Adviser will provide certification and will also prepare an interim and annual report in respect of the Islamic REIT.

(b) Syariah compliance criteria The following activities are contrary to Syariah principles: 1. financial services based in riba (interest) 2. gambling 3. manufacture or sale of non-halal products or related products 4. conventional insurance 5. entertainment activities that are non-permissible according to Syariah 6. manufacture or sale of tobacco-based products or related products 7. stockbroking or share trading in Syariah non-approved securities 8. hotels and resorts 9. other activities deemed non-permissible according to Syariah.

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Table 1: Comparison between conventional and Islamic REITs

PROSPECT OF ISLAMIC REITS IN MALAYSIA

The future prospect of Islamic REITs in Malaysia looks very encouraging. It is envisaged that the growth of Islamic REITs in Malaysia to be further boosted following the recent tax transparency and incentives from the Malaysian government. Perhaps, as part of the Malaysian government's effort to promote Malaysia as an Islamic financial centre and capitalise on the influx of liquidity, particularly from the Middle East, various incentives were introduced via 2007 Budget proposals announced by the Prime Minister and Minister of Finance on 1 September 2006 (Treasury Malaysia, 2006). This has partly resolved the uncompetitive business environment due to high taxation regime which had discouraged foreign investors from entering the Malaysian capital market before. Based on the 2007 Budget Proposals, the tax incentives can be generally categorised into two main areas, namely the enhancement of tax transparency system and reduction of investor's tax. Under the enhanced tax transparency system, REIT is fully exempted from paying its income tax on its taxable income if it distributes at least 90% of income to investors. In other words, the undistributed income from REITs is exempted from tax provided that the REITs distribute at least 90% of their income. On the other hand, where the 90% distribution is not complied with, the indistributed chargeable income of the REITs will be subject to income tax at the prevailing tax rates (Treasury Malaysia, 2006).This particular incentive encourages REITs
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manager to distribute at least 90% of income to investors thus not only providing investors more certainty of income but also ensuring higher yields from their investments in REITs. The National Budget 2007 also provides tax incentives to entice specific investors to the Malaysia REIT market through the reduction of tax on the investors. According to the new tax proposal, dividends received by local and foreign individual investors and local unit trusts from listed REITs subject to a withholding tax of 15%, while foreign institutional investors (include a pension fund, collective investment scheme or such a person approved by the Minister of Finance) be reduced to 20% from the previous 28% for five years (Badawi, 2006; Treasury Malaysia, 2006). Undoubtedly, the tax incentives proposed in the National Budget 2007 would enhance the competitiveness of Malaysian REIT market. In addition to various tax incentives, Islamic REITs are also expected to operate in a more transparent and well regulated environment. The issuance of two important documents by Securities Commission, namely Guidelines on REITs and Guidelines on Islamic REITs essentially provide a more transparent regulatory approach in Islamic capital market. The Guidelines delineates the roles and responsibilities of all stakeholders in the REIT structure. It clearly states the structure of the fund, restrictions, investment powers, fees and expenses, valuation requirements and procedures as well as reporting and disclosure requirements. Furthermore, the introduction of the Guidelines on Islamic REITs as guidance on Shariahcompliance criteria and requirement for managing Islamic REITs facilitates the development of a wider range of Islamic collective investment schemes for global Islamic funds. In a sense, the new guideline on Islamic REIT can be considered a supplement to the existing guidelines which are general rules on all aspects of investments in REIT in Malaysia. It also sets a global benchmark for the development of Islamic REITs. Undoubtedly, these two guidelines attest sound and tight regulatory framework, which promotes transparency and predictability in regard of business strategies and financial standing.

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Conclusion
The introduction of Islamic REITs is viewed as one of the most significant initiatives to broaden and deepen the product base of Islamic capital market in Malaysia. It can also help to enhance competitiveness of Malaysian Islamic capital market by attracting global Islamic investors who wish to diversify their investment portfolio which are Shariah compliant.

Undoubtedly, Islamic REITs, with their relatively stable returns, provide investors with a new Shariah-compliant investment options. As evident from the above discussion, Islamic REITs is an investment instrument not only potential in providing investors with a 'piece of mind' in terms of complying with God's law but equally important the benefits of participating in the steady rental yields of real estates and other properties. Islamic REITs typically have relatively stable cash flow since almost all of its revenue is generated by rental payments. Islamic REITs also offer the benefit of diversification arising from their holding of a portfolio of high quality real estates with different tenancy lengths and geographical locations, rather than a single real estate or building. More importantly it promotes financial inclusion by providing investors an entry into the real estate market via participation and investment in units of the Islamic REITs, which requires a smaller capital outlay relative to purchasing similar real estate on their own.

Indeed, the emergence of Islamic REITs should help to propel the expansion of Islamic capital market in Malaysia. For Malaysian Islamic REITs to be truly successful, they also have to appeal to the vast international investing community. In this regard, the various tax incentives and regulatory framework introduced by the Malaysian authorities are perceived as a move in a right direction towards realizing the noble vision of becoming the worlds Islamic financial and capital hub.

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Property Manager
Who is Property Manager?
A property manager is one who is responsible for the selling, leasing, transferring and operating of real estate property. They will act as liaisons between a number of different groups of people involved with the real estate property and ensure that the real estate operations and transfers go smoothly.

How they work?

Generally, property managers handle the financial operations of the property, ensuring that rent is collected and that mortgages, taxes, insurance premiums, payroll, and maintenance bills are paid on time. In community associations, although homeowners pay no rent and pay their own real estate taxes and mortgages, community association managers must collect association dues. Some property managers, called asset property managers, supervise the preparation of financial statements and periodically report to the owners on the status of the property, occupancy rates, dates of lease expirations, and other matters. Often, property managers negotiate contracts for janitorial, security, grounds keeping, trash removal, and other services. When contracts are awarded competitively, managers solicit bids from several contractors and recommend to the owners which bid to accept. They monitor the performance of contractors and investigate and resolve complaints from residents and tenants when services are not properly provided. Managers also purchase supplies and equipment for the property and make arrangements with specialists for repairs that cannot be handled by regular property maintenance staff. In addition to these duties, property managers must understand and comply with provisions of legislation. They must ensure that their renting and advertising practices are not discriminatory and that the property itself complies with all of the local, State, and Federal regulations and building codes.

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Onsite property managers are responsible for day-to-day operations for one piece of property, such as an office building, shopping center, community association, or apartment complex. To ensure that the property is safe and properly maintained, onsite managers routinely inspect the grounds, facilities, and equipment to determine if repairs or maintenance are needed. They meet not only with current residents when handling requests for repairs or trying to resolve complaints, but also with prospective residents or tenants to show vacant apartments or office space. Onsite managers also are responsible for enforcing the terms of rental or lease agreements, such as rent collection, parking and pet restrictions, and termination-of-lease procedures. Other important duties of onsite managers include keeping accurate, up-to-date records of income and expenditures from property operations and submitting regular expense reports to the asset property manager or owners. Property managers who do not work onsite act as a liaison between the onsite manager and the owner. They also market vacant space to prospective tenants through the use of a leasing agent or by advertising or other means, and establish rental rates in accordance with prevailing local economic conditions. Some property and real estate managers, often called real estate asset managers, act as the property owners agent and adviser for the property. They plan and direct the purchase, development, and disposition of real estate on behalf of the business and investors. These managers focus on long-term strategic financial planning rather than on day-to-day operations of the property. When deciding to acquire property, real estate asset managers take several factors into consideration, such as property values, taxes, zoning, population growth, transportation, and traffic volume and patterns. Once a site is selected, they negotiate contracts for the purchase or lease of the property, securing the most beneficial terms. Real estate asset managers periodically review their companys real estate holdings and identify properties that are no longer financially profitable. They then negotiate the sale of or terminate the lease on such properties. Property and real estate managers who work for homebuilders, real estate developers, and land development companies acquire land and plan construction of shopping centers, houses, apartments, office buildings, or industrial parks. They negotiate with representatives of local governments, other businesses, community and public interest groups, and public utilities to eliminate obstacles to the development of land and to gain support for a planned project. It
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sometimes takes years to win approval for a project and, in the process, managers may have to modify plans for the project many times. Once cleared to proceed with a project, managers may help to negotiate short-term loans to finance the construction of the project, and later negotiate long-term permanent mortgage loans. They then help to choose, assist, and advise the architectural firms that draw up detailed plans and the construction companies that build the project. In many respects, the work of community association managers parallels that of property managers. They collect monthly assessments, prepare financial statements and budgets, negotiate with contractors, and help to resolve complaints. In other respects, however, the work of these managers differs from that of other residential property and real estate managers. Community association managers interact on a daily basis with homeowners and other residents, rather than with renters. Hired by the volunteer board of directors of the association, they administer the daily affairs, and oversee the maintenance of property and facilities that the homeowners own and use jointly through the association. They also assist the board and owners in complying with association and government rules and regulations. Some associations encompass thousands of homes and employ their own onsite staff and managers. In addition to administering the associations financial records and budget, managers may be responsible for the operation of community pools, golf courses, and community centers, and for the maintenance of landscaping and parking areas. Community association managers also may meet with the elected boards of directors to discuss and resolve legal issues or disputes that may affect the owners, as well as to review any proposed changes or improvements by homeowners to their properties, to make sure that they comply with community guidelines.

Working Conditions
Offices of most property, real estate, and community association managers are clean, modern, and well lighted. However, many managers spend a major portion of their time away from their desks. Onsite managers, in particular, may spend a large portion of their workday away from their office, visiting the building engineer, showing apartments, checking on the janitorial and maintenance staff, or investigating problems reported by tenants. Property and real
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estate managers frequently visit the properties they oversee, sometimes on a daily basis when contractors are doing major repair or renovation work. Real estate asset managers may spend time away from home while traveling to company real estate holdings or searching for properties to acquire. Property, real estate, and community association managers often must attend evening meetings with residents, property owners, community association boards of directors, or civic groups. Not surprisingly, many managers put in long workweeks, especially before financial and tax reports are due. Some apartment managers are required to live in the apartment complexes where they work so that they are available to handle any emergency that occurs, even when they are off duty. They usually receive compensatory time off for working nights or weekends. Many apartment managers receive time off during the week so that they are available on weekends to show apartments to prospective residents.

Property Manager Job Opportunities

Through the year 2012, employment of property, real estate, and community association managers is forecasted to grow about as fast as the average for all occupations. As managers transfer to other occupations or leave the labor force, additional jobs should become available. Managers with a college degree in concentrations like business administration or real estate and with a professional designation should have the best prospects. Job growth for onsite property managers in commercial real estate should follow the forecasted expansion of the real estate and rental and leasing industry. The countrys increasing number of residences and offices also should increase the need for property managers. Professional management is also needed for the growing number of community or homeowner associations that often accompany new home developments. In a move to increase profitability or resale value, more commercial and residential property owners will probably entrust their investments to professional managers.

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The nations changing demographics should also generate jobs for property, real estate, and community association managers. The increasing number of older people during the years 2000-2012 will intensify the need for suitable housing options like assisted-living facilities and retirement communities. Consequently, more property and real estate managers will be needed to administer these facilities; the need will be especially strong for managers with experience in the operation and administrative aspects of running a health facility. Source: Institute of Real Estate Management, Chicago - http://www.irem.org
Bureau of Labor Statistics, U.S. Department of Labor - http://www.bls.gov

Conclusion
To be property manager is not easy as we think, they have to managers handle the financial operations of the property, ensuring that rent is collected and that mortgages, taxes, insurance premiums, payroll, and maintenance bills are paid on time. In community associations, although homeowners pay no rent and pay their own real estate taxes and mortgages, community association managers must collect association dues. Some property managers, called asset property managers, supervise the preparation of financial statements and periodically report to the owners on the status of the property, occupancy rates, dates of lease expirations, and other matters. This work is not easy because they must spend a major portion of their time away from their desks. Onsite managers, in particular, may spend a large portion of their workday away from their office, visiting the building engineer, showing apartments, checking on the janitorial and maintenance staff, or investigating problems reported by tenants. Property and real estate managers frequently visit the properties they oversee, sometimes on a daily basis when contractors are doing major repair or renovation work. Although the work is hard but this prospect has allot of opportunity because in future more people have property and they have no time to manage their property. So property manager should grab this opportunity .

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