Can Malaysia revive its $100 billion city that has become a ‘ghost town?’

Malaysia is scrambling to save its $100 billion city of the future.

Forest City, the brainchild of China’s troubled property giant Country Garden, located in southern Malaysia’s Johor has Sultan Ibrahim Iskandar as one of its major stakeholders.

Billed as a paradise with turtles and white-sand beaches, Forest City aimed at housing 700,000 people across 7,000 acres on four reclaimed islands upon completion in 2035.

But many years into construction, the joint venture between Country Garden and a private Malaysian company backed by the Sultan of Johor and the state government, remains home to less than 10,000 people.

So, what happened? And how is Malaysia trying to resurrect its pet project?

Let’s take a closer look:

What happened?

As per Al Jazeera, the project is being built along the coast of Johor state.

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Spread over 7,000-acres and overlooking Singapore, it was originally aimed at luring Chinese middle-class buyers.

Launched it 2016 amid much fanfare, the project was given duty-free status and tax breaks by local authorities.

But things quickly went downhill.

A combination of scant sales, Chinese controls on capital leaving the country, a pandemic shutdown that all but closed the border and public anger at China’s growing influence in Malaysia left the project in dire straits.

In 2018, then Malaysian prime minister Mahathir Mohamad made things worse when he said no visas would be given to foreigners to stay in the project.

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The recent financial woes of Country Garden only added fuel to the fire.

The project developer rose from a farmer’s idea to Beijing’s largest private real estate firm, but is now saddled with $196 billion of debt and struggling to stave off default.

As it struggles with weak cash flow and a wall of repayment obligations, Country Garden’s prospects of deploying additional capital to the project now look increasingly challenging, analysts say.

The Chinese developer is also unlikely to see any revenue boost from the project any time soon.

But Forest City previously said the project is proceeding as planned despite issues tied to the “political landscape and interference, economic stability, government policy”.

The company is also always prepared to review and to re-evaluate Forest City’s development plans after 2025 if there is a current need to do so," it said, without elaborating on its plans or the significance of the 2025 review date.

Forest City claims around 55,000 people visit its sales gallery each month and two hotels with 600 rooms combined, including a five-star golf resort, “are always fully booked.”

“Seeing is believing,” Forest City said.

But reality saw on a recent trip appeared quite different.

Empty palm tree-lined roads led to a mall where a karaoke lounge, a birds-nest museum and a herbal medicine shop were among the outlets shuttered.

The four-storey mall had only around a dozen shops open, with cleaners outnumbering shoppers. One of the hotels was largely empty and the rooftop bar that sat atop it remained closed even though its owners told Reuters in February it would open in March.

The sales gallery featured a massive replica of the development, with many residential blocks marked “sold out” or “fast selling”. But over the space of an hour only a few families checked out the large showroom.

Several property agents said there was scant demand for units as potential buyers were worried about its low occupancy rate, environmental concerns and a lack of economic development.

“People don’t want to buy into a block where there are just a few residents,” said one agent, who declined to be identified due to the sensitivity of the issue.

Another agent said his client was looking to sell a unit after three years as he was unhappy with the pace of development.

Forest City said 28,000 housing units have been completed so far, with more than 80% sold to buyers from at least 30 countries.

The BBC in December reported that just 15 per cent of the project was finished.

Occupancy levels hover around 1 per cent.

Nazmi Hanafiah, an IT engineer and former Forest City resident, told the outlet that the project was a “ghost town.”

“I didn’t care about my deposit, I didn’t care about the money. I just had to get out,” Hanafiah said. “It’s lonely around here— it’s just you and your thoughts. There is nothing to do here.”

Al Jazeera quoted Samuel Tan, a property consultant at KGV International, as blaming foreign ownership for the current woes.

“Any project where the majority is more than 40 percent of foreigners is doomed for failure,” Tan said. “[This is] because they don’t come here, they don’t occupy [the properties] here, they don’t spend money here.”

Koh Sin Yee, an adjunct senior research fellow with Monash University Malaysia, told Business Insider that locals aren’t interested in buying high rises.

Even those that have the money prefer to buy landed properties.

How are they trying to save the city?

Bloomberg reported that the country is considering opening a casino in Forest City to give the project a boost.

A meeting between Prime Minister Anwar Ibrahim, Berjaya Corporation founder Vincent Tan and Genting Group’s Lim Kok Thay to discuss such a prospect occurred last week.

A representative of King Ibrahim Iskandar was also present at the meeting.

Ibrahim, the billionaire businessman who was sworn in as Malaysia’s King in January, holds more than 20 per cent of the joint venture, as per Business Times.

However, it is no sure thing that Anwar will give his blessing to this idea given that Malaysia is a Muslim-majority nation and that Muslims are not allowed to gamble.

That’s not the only idea to revive the project.

Singapore and Malaysia in January agreed to develop a special economic zone in Johor to give a fillip to trade, as per Bloomberg.

Ibrahim also announced other perks including a special income tax rate and multiple entry visas.

‘Ghost town’

Things are difficult on the ground.

A Malaysian man named Ozzy, speaking to Foreign Policy, said he was on the hunt for a place in Malaysia.

But Forest City is not on his list.

“Look at how empty this place is,” he said. “I’d only be able to rent it out for one or two months a year. … When I visited in 2018 this place was packed. Now there’s no one here. It’s like it’s haunted.”

Construction workers chip away at the island city by day while an eerie silence falls over its deserted four-lane highway at night.

Only a small number of lights shine from windows by evening across the project’s more than two dozen high-rise towers.

Below those sit rows of shuttered shopfronts, some with court documents stuck to doors demanding outstanding payments. Inside, rubbish is strewn across the floors.

Many buyers do not live in the artificial city, a security officer told AFP, and instead stash their money as absent owners.

A three-hour drive from capital Kuala Lumpur, the city attracts visitors who want to catch a glimpse of the space-age towers or buy duty-free alcohol.

“Everyone comes here for the liquor,” said Singapore-based technician Denish Raj Ravindaran, 32.

“I will not stay here, it is a ghost town. The road is dark and dangerous and there are no street lights.”

Much of the activity is foreign workers – many from Nepal or Bangladesh – maintaining the city’s bushes, sweeping its roads or guarding its towers.

An artificial sand beach littered with beer cans where families picnic under coconut trees also bears a sign warning would-be swimmers about crocodiles.

At one 45-story tower, an official says only two floors are occupied while the rest are for sale.

As Country Garden fights for its survival, drastic efforts will likely be needed – from both Beijing and Kuala Lumpur – to get Forest City on its feet.

“I came here for a holiday after seeing TikTok videos,” said retail clerk Nursziwah Zamri, 30, from Malacca state.

“If you ask me if I would live here, the answer is no.”

Business owners say they are desperate to hear some good news.

“I hope Country Garden can overcome their financial difficulties,” said 29-year-old Zhao Bojian from Chinese province Henan, who bought one of 26,000 Forest City apartments for around $430,000 five years ago.

“If nobody comes to Forest City, we cannot do business here.”

Observers say Forest City faces an uphill battle given Country Garden’s finances.

“The liquidity pressure could have an impact on their capability to complete overseas housing projects,” said Bernard Aw, chief Asia-Pacific economist at credit insurance firm Coface.

‘Love to live here permanently’

But others remain optimistic.

“If not for my business back home, I’d love to live here permanently. It’s so relaxing and prices are affordable,” Chinese citizen Yang Ming Han, in her 30s, said.

“Although home values haven’t increased and it is not a good investment compared to properties in Singapore, living here is really nice.”

Yvonne Xavier, 29, who has a fully-furnished two-bedroom apartment in Forest City, told Al Jazeera it is far cheaper to live here than in Singapore.

There are other benefits too.

“I like living here because it is cosy and very quiet. It’s too noisy in town,” Xavier said about state capital Johor Bahru.

Loh Wee Loon, who has investments in five businesses in Forest City, is confident China’s real estate debt crisis won’t pose any issues.

“I don’t think the troubles in China are a problem. It is a different management and I’m also confident because Forest City has the backing of the Johor Sultan.”

With inputs from agencies