PKNS, or the Selangor State Development Corp, is a name that used to be synonymous with social housing. Its operations way back in the 1960s tend to be rather localised. Today, the state housing corporation has made its foray into Australia. Yes, many things have changed ... Its general manager talks to StarBizWeek's Choong En Han.
HAVING been in existence since 1964, the Selangor State Development Corp (PKNS) started building single-storey affordable housing that cost less than RM20,000 in Petaling Jaya decades ago. But over the decades, things have changed. Whether these changes are for the better of the company, or for the strata of people it once used to serve, is debatable.
In today's housing environment, where prices have skyrocketed and where affordable, social housing is now an issue, the role that PKNS used to play and the role that it has assumed today has come into focus.
It has now evolved into a mega builder and is involved in more than 60 ongoing developments in Selangor at any given time. As if that is not enough, it has 50 more projects that it is working in collaboration with private sectors and a further 30 under several of its subsidiaries. Some of these projects with subsidiaries are in Sydney, New South Wales and Perth, Western Australia.
Besides residential, PKNS has also ventured into high end commercial developments. At a glance, PKNS seems to have lost touch with its roots of being a social builder, and its role to contribute to the five million people of Selangor.
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| "Profit is just a means to an end, which is to maximise our profit in order to contribute more to our stakeholders, namely the state and its people," says General Manager of PKNS Othman Omar |
While it carries the name of the state, its objective seems to have changed.
PKNS general manager Othman Omar explains that because PKNS does not receive grants from the Government to subsidise these projects, the state body has to create profits which can only come from its medium to high end residential and commercial developments that command a respectable profit margin.
“Profit is just a means to an end, which is to maximise our profit in order to contribute more to our stakeholders, namely the state and its people. The cost of our social responsibility in terms of providing land and required infrastructure for our townships run into billions of ringgit,” he says.
Billions more in subsidies are required for PKNS when it develops its low cost housing schemes, upkeep and maintenance cost, squatters relocation programmes and other heavily-subsidised state government projects.
Branding PKNS
Faced with a legacy image of developing many low cost housing schemes, branding is an issue for PKNS as many believe that it would not be competent enough to build quality high-end properties. “Not long after I joined PKNS in 2009, we did a branding audit to find out how the public sees PKNS and how we stack up with other private developers and other government linked companies,” he says.
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| Artist Impression of Kelana Jaya Sports City |
Inadvertently, some of the branding audit findings took PKNS by surprise with 70% of what the public think about PKNS is false.
According to him, many think that PKNS will most probably be slow and not efficient as it is a government-owned or government-linked company.
“Over the years, as complaints appeared in the media especially regarding issues and problems with our low cost developments, the public perception on PKNS took a dive and we were labelled as a low quality builder and low cost developer,” he says.
Since then, PKNS has introduced a new quality system to ensure a much higher and consistent standard of finishing its houses, with the setting up of PKNS Response team to deliver maintenance services and also a customer service department.
All its rebranding efforts have also led PKNS to garner several prestigious awards including the Brand Laureate Top 10 Master Developer 2010 and the BCI Asia Top 10 Developers Award in 2011.
Othman says the rebranding exercise has helped to improve PKNS's image as a reputable developer that can also deliver high-end quality lifestyle products.
“Our initiatives to improve corporate governance and transparency in the organisation including the integrity pact and collaboration with Transparency International not only improve our image but deliver the bottom-line. In 2010, we saved RM115mil from our open tenders, e-sebutharga and value engineering, and we are targeting to save RM150mil from the same in 2011,” he says.
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| PKNS Affordable Home |
Business model
In line with the changing of times, PKNS has also re-looked its business model, driving the changes it needs to sustain its operations.
“What worked before does not necessarily work for us now. We used to get free land or at a cost of almost nothing. For the 9,000 acres we had for Shah Alam, we only paid the land premium as we developed them. Then we parceled out some of our land to private developers in the form of joint ventures and privatisation project to get good returns from them,” he says.
However, according to Othman, the last 15 years had been quite different, with PKNS buying 6,000 acres of Bernama Jaya land at market price, and to date have spent over RM480mil in land purchases and infrastructure development. It is also planning for further spending for infrastructure cost.
“At the end of the day, how much margin can you make selling houses in Bernam Jaya?” he asks rhetorically.
The state development corporation has also bought 1,500 acres in Selangor Science Park 2 (SSP2) in Cyberjaya at market price, and the infrastructure cost is said to be six times the land price due to bad soil condition.
“When we sold land to German Q-Cells for the purpose of setting its solar factory, we had to sell below cost. This, of course, benefited the nation and the state in attracting more foreign direct investments and creating more jobs. However, we still need to find a more sustainable business model so that we can continue to subsidise our infrastructure development, our low cost and affordable housing schemes,” he says.
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