NOTES TO THE FINANCIAL STATEMENTS
(CONT’D)
31 DECEMBER 2015
14.
INVESTMENT PROPERTIES (CONT’D)
Sensitivity analysis on management’s estimates (cont’d):
4.
Market capitalisation rates
A hypothetical 10% (2014: Nil) increase or decrease in the market capitalisation rate would have an
effect on return before tax of – lower by $37,581,000, higher by $20,531,000 (2014: Nil).
The decrease in fair value is due to the weakening of property prices in Indonesia.
By relying on the valuation reports, the management is satisfied that the independent valuers have appropriate
professional qualifications and recent experience in the location and category of the properties being valued.
Other details on the properties are disclosed in the Statement of Portfolio.
The types of property titles in Indonesia which are held by the Group are as follows:
(a)
Hak Guna Bangunan (“HGB”) Title
This title gives the right to construct and own buildings on a plot of land. The right is transferable and
may be encumbered. Technically, HGB is a leasehold title where the state retains “ownership”. However,
for practical purposes, there is little difference from a freehold title. HGB title is granted for an initial
period of up to 30 years and is extendable for a subsequent 20-year period and another 30-year period.
Upon the expiration of such extensions, new HGB title may be granted on the same land. The cost of
extension is determined based on certain formula as stipulated by the National Land Office (Badan
Pertanahan Nasional) in Indonesia. The commencement date of each title varies.
(b)
Build, Operate and Transfer Schemes (“BOT Schemes”)
This title gives the Indonesia subsidiaries (“BOT Grantee”) the right to build and operate the retail mall
for a particular period of time as stipulated in the BOT Agreement by the land owner (“BOT Grantor”).
A BOT scheme is not registered with any Indonesian authority. Rights under a BOT scheme do not
amount to a legal title and represent only contractual interests.
In exchange for the right to build and operate the retail mall on the land owned by the BOT Grantor,
the BOT Grantee is obliged to pay a certain compensation (as stipulated in the BOT agreement), which
may be made in the form of a lump sum or staggered.
A BOT scheme is granted for an initial period of 20 to 30 years and is extendable upon agreement of
both parties. Upon the expiration of the term of the BOT agreement, the BOT Grantee must return
the land, together with any buildings and fixtures on top of the land, without either party providing any
form of compensation to the other.
(c)
Strata Title
This title gives the party who holds the property the ownership of common areas, common property
and common land proportionately with other strata title unit owners.
ANNUAL REPORT 2015
105
