How is LBS Bina helping Malaysia build more inclusive residential communities?

The cost of housing is a top concern in Malaysia. While continued economic development has pushed up prices, especially in the capital of Kuala Lumpur, the supply of affordable homes has not kept pace with demand.

The country’s central bank warned in its most recent financial stability review that housing affordability issues are likely to persist as developers pass on higher construction costs and supply remains constrained.¹

For property developer LBS Bina, affordable housing is a strategic focus, with a target of 85% of sales originating from this segment in the 2023 financial year.²

The company has delivered more than 40,000 homes in Malaysia since it was founded in 1961, with a particular focus on affordable units.³

To help fund the development of new projects, the company in late 2023 established a MYR750 million (USD159 million) sukuk wakalah programme. HSBC Amanah, acting as sole sustainability structuring coordinator, assisted LBS Bina in developing a sustainability financing framework, which gives the company the flexibility to issue sustainability sukuk – including green, social and Sustainable & Responsible Investment (SRI) sukuk – off the programme.

HSBC Amanah is also the sole Shariah adviser, joint principal adviser, lead arranger and lead manager of the programme.

LBS Bina issued the first tranche of ASEAN Social SRI Sukuk Wakalah in January 2024, raising MYR200 million (USD42 million) for use on affordable housing projects.

This is the first time that a real estate developer in Malaysia has issued a social sukuk. It is also the first sukuk under the ASEAN sustainable finance taxonomy to be used for affordable housing, building alignment with the regional bloc.

MARC Ratings assigned a AA- (IS) rating to the sukuk wakalah programme and issued a “gold” second party opinion on its sustainability financing framework, the highest on MARC’s scale.⁴

The final order book for the first tranche was 6.4 times oversubscribed, coming in at MYR1.276 billion (USD271 million). Pricing came 39 basis points inside initial guidance after a strong response from investors. The secured Islamic notes have a profit rate of 5% with a five-year tenor, maturing on January 23, 2029.

“The successful issuance of this tranche of ASEAN Social SRI Sukuk Wakalah certainly marks a positive milestone for LBS,” said LBS Group Executive Chairman Tan Sri Dato’ Sri Ir. (Dr.) Lim Hock San.

“LBS’ aspiration to expand the supply of affordable housing will facilitate and encourage home ownership, which will help bolster Malaysia’s real estate market. The construction of affordable residential housing will also increase the social value of LBS’ development projects, encourage social inclusion while acting as a catalyst for regeneration and community cohesion,” said Lim.

The transaction gives LBS Bina additional resources to use as it works with local authorities and other government agencies to find a solution to Malaysia’s affordability housing crisis.

“The response from investors was a resounding vote of confidence in LBS Bina and its contribution to Malaysian society,” said Karel Doshi, Head of Commercial Banking at HSBC Malaysia. “The structure and sustainability features helped the company access the deepest possible investor base, which was crucial to an optimal pricing outcome.”

Several initiatives have already been introduced across the country to support affordable housing. For example, the state government of Selangor is seeking to provide 60,000 affordable housing units by 2025.⁵ Malaysia’s 2024 budget included several provisions to support the sector, including setting aside MYR2.47 billion (USD520 million) for public housing projects and MYR358 million (USD76 million) for a raft of affordable housing projects.⁶

Armed with its new social sukuk issuance programme and vast amounts of experience, LBS Bina is well-placed to support these initiatives.