ST Forum : Do your checks before investing in land abroad

May 17, 2010

Do your checks before investing in land abroad

I REFER to last Friday's report, '200 lose $6m in British land deals', which revealed that 200 persons have, at various times since 2006, purchased plots of land in rural places like Swindon and Gatwick in Britain through Land International (Far East), a Singapore company which is the subsidiary of parent Land International, shut down by the British government in 2008.

These 200 persons had been promised high returns with regular payouts for three years.

Singapore investors may wish to know that Britain's Land Registry published a guide in 2008 on 'land banking schemes' to alert the public on schemes often touted as offering huge returns on investment. Apparently, land sold in such schemes is usually in areas protected from development by planning law - that is, land in the 'green belt' or agricultural land where no development is ever likely to be permitted.

According to the guide, known in short as Public21, such land is first acquired at a low price and divided into smaller plots. The plots are then offered for sale (even online) to the public on the premise that when planning permission is secured in the future for the site for housing, the plots will be more valuable. Potential investors may be misled about the prospects of obtaining planning permission or redevelopment and this in turn may lead them into thinking that they will have the opportunity to sell the plots at even greater profit to developers in the future.

The guide mentions that those operating land banking schemes often claim that they have well-known banks, other lending institutions and established developers as their partners in the schemes when this may not be the case. In some extreme cases, forged Land Registry letters have been produced to suggest that there is official Land Registry planning approval.

Singapore investors keen on land in Britain should at least peruse such a guide, and make inquiries with the Land Registry or a credible international property firm based in Singapore with overseas networks in those countries of interest to them. Singapore Accredited Estate Agencies agrees with the Consumers Association of Singapore that due diligence and background checks of both the locally registered land banking company and its parent or counterpart in the country of origin must be stringent before investors part with their monies.

Dr Tan Tee Khoon
Chief Executive Officer
Singapore Accredited Estate Agencies