SR FAZIAH ABD RASID

National Institute of Valuation (INSPEN)

Valuation and Property Services Department

Ministry of Finance Malaysia

Persiaran INSPEN, 43000 Kajang,

Selangor Darul Ehsan, MALAYSIA

(Email : faziah@inspen.gov.my )

ASSESSING THE VALUATION APPROACHES AND

METHODOLOGIES FOR STRATUM TITLE

IN MALAYSIA 2nd Place Postgraduate Poster Competition @

Asia Pacific Network Housing Research Conference (APNHR 2013)

Presentation Arrangement

1 • INTRODUCTION

2 • LITERATURE REVIEW

3 • RESEARCH METHODOLODY

4 • DATA ANALYSIS AND FINDINGS

5• CONCLUSION &

RECOMMENDATION

Questions Objectives

Q1. What is Stratum Title? a) To examine underground land use rights and legislation in Malaysia and underground development in other countries

Q2. What are the legislation and policies about underground land?

Q3. How is Stratum Title determined?

Q4. 

How is the valuation of Stratum Title implemented? b) To analyze and assess valuation approaches and methodologies of Stratum Title in Malaysian context

Q5 What are the factors that will affect the valuation of Stratum Title?

Q6. What are the possible valuation approaches and methodologies to value Stratum Title?

Research Aim To examine the current policy and legislation related to Stratum Title which will lead to assessing the valuation approaches and methodologies for Stratum Title in Malaysia.

1 INTRODUCTION

NLC 1965, ‘Underground land” means land which lies below the surface of the earth.

Land owners can use his land to a reasonable and fair depth as per the provision under section 44(1).

What is Underground land?

Reasonable depth

Surface Land

Underground

Other countries

Subsurface land Subterranean

Malaysia

Stratum

‘Stratum’ mean a cubic layer of underground land, which lies below the surface of the earth.

Stratum is a solid aspect of underground land with the depth that is determined below the earth surface

Stratum Title can be issued separately from the land title issued for the surface land

What is Stratum Title ?

6 meters (minimum depth)

x – can apply stratum title

Land Surface

Minimum Depth Of Disposal Of Underground Land

Type of Stratum Application

Land Category/Classification

Agriculture Building Industry

Section 92B NLC 6 meters 10 meters 15 meters

Section 92E NLC 6 meters 10 meters 15 meters

10 meters (minimum depth)

x – Apply for Stratum Title

Land Surface

15 meters (minimum land)

x – Apply for Stratum Title

Land Surface

State LandDirectly the right of Local Authority as State Land

X- alienation of underground land with determined depth.

X – Stratum application for any government land

Alienated land that have specified depth

X-alienation underground land (application by any person/body)

Continue to be authorized to the State Authority as State land

Government land has been alienated, the application for stratum by any individual /private sector

Alienated land that not have specified depth

X-alienation of underground land (application by the owner of alienated land surface)

Authority to be authorized to the State Authority as Government land

Diagram 2.10: Application for Stratum of alienated land (private land)

Application of Stratum Title

The Development Of Underground Space UseAuthors Literature Review

Sterling (1993) Notes that the development of underground space is categorized to a few examples of usage such as residential, religious, recreation, commercial and institutional, industrial facilities, military and civil defense facilities, storage, transportation etc.

Woodard (1998)

Reviewed the history of commercial underground development in the Kansas City area. This region is ideal for underground development because of widespread limestone mines, and Kansas City has, in fact, pioneered commercial use of underground space.

Raufer (1998) Points out, many utilities compete for underground space, from water or gas pipes to optic fiber cables.

Pasqual and Reira (2004).

In other cities, it is the very high value of land that presses development underground. In Japan, for instance, prime land has more and more been developed underground for a wide variety of uses: retailing, offices, cultural, etc.

2 LITERATURE REVIEW

Authors Literature Review

R. Sterling & J.P. Godard (2004)

Utilizing underground space remains one of the great challenges for the future. The potential is to bury unsightly car parks, highways and shopping malls, and direct the surface that this unlocks to other uses that improve the urban environment.

The benefits of utilizing underground space can be summarized as follows:• Efficient land use and improvement of the environment: realizing the

potential of underground space in congested urban areas and realizing surface for other uses such as parks and recreational areas. Construction of road tunnels relieves surface routes for cyclists, pedestrians, emergency vehicles and public transport.

• Aesthetic: removing unattractive structures such as car parks, roads and shopping malls from the horizon.

• Sustainable development: removing the need for external cladding and finishes leading to efficient use of materials and cost savings.

• Conservation of energy: using the ground’s natural insulating properties to absorb noise and energy, allowing more efficient heating or cooling systems or harnessing the ground for energy storage.

• Protection of people to extreme weather conditions.• Security: e.g. bank vaults and bomb shelters.

Underground Development Implementation

Authors Literature Review

Ghazali et al (2000)

• For successful implementation of the underground land development co-operation among all parties involved is necessary.

• The State Authority, the land administrators, property-related professionals, local authorities, proprietors and the private sectors must be able to come up with positive ideas to develop land underground.

• Underground land has a lot of potential for various forms of developments that can complement development on the surface of the land.

C. Yao (2011), • In order to use the underground space of the subway station more effective, the problems of the right and the cost estimating of the underground space in the market transactions must be discussed.

• It is mean have to analysis the theory and the legal right about underground space which involved the land use right.

• The comprehensive legal system of the underground space will ensured the rights and obligations during the development processes.

Country Underground Planning, Usage Strategy and Practice

Finland • The underground master plan of Helsinki reserves designated space for public utilities and important private utilities in various underground areas of bedrock over the long term. The master plan also provides the framework for managing and controlling the city’s underground construction work, and allows suitable locations to be allocated for underground facilities.

• According to the Finland law, the owner of a property has control over the underground part of the property, though the vertical extent of ownership is not specifically defined in legislation

Singapore • Land owners in Singapore also own the underground space of the land that they own subject to the specific area being defined on a government plan or gazetted.

 • In October 2007, the government, under the Ministry of National Development, set

up an inter-agency Underground Master Planning Task Force (UMPTF) that aims to map out the long-term development of the underground space, bringing the underground space development to a strategic level.

Review Of Underground Planning, Usage Strategy and Practice in other Countries

Country Underground Planning, Usage Strategy and Practice

Hong Kong • The Hong Kong Planning Standards and Guidelines (HKPSG) have a specific section on ‘Rock Cavern Development’ which outlines the role of relevant Government departments/ agencies in the planning and development of rock caverns.

• The land uses with the potential for development in rock caverns in Hong Kong are shown below:

Land Use Category

Potential Land Use in the Current HKPSG (2008)

Additional Potential Land Uses

Commercial Retail Food / Wine StorageWarehousing

Industrial IndustryStorage / WarehousingOil bulk storageLPG bulk storage 

Dangerous goodsData centreResearch laboratoriesScience park

Government / Institution /Community 

SlaughterhouseCivic centreIncineratorIndoor games / Sports hallWholesale marketRefuse transfer facilitySewage / Water treatment plantService reservoirTransport connections & networksColumbarium / Mausoleum / Mortuary

ArchivesBicycle park-and-rideCar / Vehicle parkingCrematoriumRefuse collection pointMaintenance depot for rail and othersUnderground quarrying 

Public Utilities Power station Substation 

Historical

Strong Incentive

Cash flow

High cost of reversibility

Lack of info

Stratum Valuation

Comparison Method

Residual Method

Cost Method

Shadow Approach

Legal Aspect Factors Affecting Value Valuation

Approaches / Methodology

Legal/ Policy Land Use Planning Property right Economic

Theoretical Framework:Valuation Approaches and Methodologies for Stratum Title in Malaysia

3

• The methodology of study is Qualitative Analysis.

• There are two type of analysis adopted in this study, which are Content Analysis and Nvivo software.

• Refer to Diagram Research Methodology Framework.

Research Methodology

Literature Review

Expert Interview (Semi- Structured)

Secondary Data

Face To face Interview

Triangulation Model (Modified from Creswell, 2005)Source : Creswell, J.W. (2005)

1

Yield

GVD GDC

Lawyer

Planner

Valuer

Engineer Experts

Architects

Ecologist

Strong incentives

Type of Development

Life-cycle

Energy saving

Maintenance cost

Replacement cost

Depth & High

DATA ANALYSIS AND FINDINGS4

CONCLUSION & RECOMMENDATION

• For legal aspect have to consider are adequacy of Stratum Title; rights transfer from surface landowner to the underground land ownership; land use planning/ issues in land use; property right/ ownership rights and economic factors.

Sub-objective (i):

To examine underground land use rights and legislation in Malaysia and underground development in other countries

• High cost of reversibility• Cash flow• Strong incentive• Historical• Property rights• Lack of information• Land use planning• Tenure• Location

Factors affecting land value

5

• There are several suggestions which are:• Shadow Method• Residual Method• Cost Method and• Comparison Method

Sub-objective (ii):

To analyze and assess valuation approaches and methodologies of Stratum Title in Malaysian context

•The conclusion of this study- the most suitable methods are Residual Method by extension of DCF method and Comparison Method with a mixture of other principles

Recommendation

•In relation to that, future research should adopt a case study or actual case to investigate the valuation of Stratum Title.

• This is highly beneficial to enhance this study and analyzing in depth to establish a valuation methodology of Stratum Title in Malaysia.

Future Study

• There are no other countries that have a title for underground land. Only Malaysia has an underground title, that we call ‘Stratum Title’.

• Related to this, it’s very difficult to find a literature review on Stratum Title. .

Limitation of Literature Review

•Due to a lack of information and knowledge about stratum valuation. A few of them did not answer the entire questionnaire especially valuers because they do not have any experience in stratum valuation.

•Valuation of Stratum Title in Malaysia has not been established yet.

Limitation of Data Collection

Limitation of Study

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