The government's investment arm 1Malaysia Development Bhd (1MDB) could lose more than RM1 billion after landing itself in a "no-win" situation due its "hasty" purchase of more than 234 acres of land in Penang last year, The Edge reported today.

According to the report, 1MDB had paid RM 1.38 billion for the various parcels in Air Itam town, a DAP stronghold, in a deal brokered by some businessmen close to BN who had promised to build low-cost housing for Penangites during the general election campaign last year.

But with Pakatan Rakyat having increased its majority in the Penang state assembly, 1MDB is now left with parcels of lands for which it had reportedly not only overpaid, but also has plenty of encumbrances.

The Edge also states that conservatively, there are around 1,200 ground tenants occupying the land that 1MDB had purchased, which it needs to compensate and appease before any development could be attempted.

But either way, the report said, 1MDB might lose money. The cost of constructing the 9,999 low-cost housing units that was promised, including compensation for current tenants, would cost RM 2.7 billion.

But the revenue from selling the house could only reach RM 1.45 billion. If 1MDB continues not to do anything with the land, it would be losing RM55 million annually to interest repayments to the bank.

According to the report, for some parcels of land, 1MDB had paid 95 percent higher than what the value was in 2011.

"The land is fragmented and its owners have fought many costly legal battles with each other and been unable to develop it," said the report.

The companies from which 1MDB had purchased these parcels - Farlim Properties Sdn Bhd, Gerak Indera Sdn Bhd, and Farlim Group - are linked to Penang tycoons Lim Gait Tong, and Goh Choon Lye, with the latter having actively campaigned for BN in the last general election.

The report stated that the deal has likely to have benefited those who brokered the deal.

"Those who sold the land and the brokers must be walking around with a big smile because they managed to unload more than 234 acres of land that was full of encumbrances and difficult to develop," said the business weekly.