In fact, Dr Mahathir had welcomed foreign investment during a meeting with the firm in Beijing just weeks ago, said Country Garden Pacificview.
The developer added in a media statement on Monday (Aug 27) that the Malaysian PM's comments "may have been taken out of context", and pointed to Malaysia's National Land Code, which stipulated that "a foreign citizen, or a foreign company may acquire land in Malaysia subject to the prior approval of the State Authority".
Country Garden Pacificview said it does not issue any permanent residency to foreigners who purchase units in the US$100 billion (S$134 billion) project.
The Chinese property developer added that it is in touch with Dr Mahathir's office "for clarifications".
"We believe (Dr Mahathir's) comments may have been taken out of context in certain media reports," the company said, noting that the comments "do not correspond" with what took place in an Aug 16 meeting between Dr Mahathir and Country Gardens Holdings chairman Yeung Kwok Kwong.
Dr Mahathir had said during a news conference in Kuala Lumpur on Monday: "One thing is certain, that city (Forest City) that is going to be built cannot be sold to foreigners."
"We are not going to give visas for people to come and live here. Our objection is because it was built for foreigners, not built for Malaysians. Most Malaysians are unable to buy those flats."
Opposition to the Forest City project had helped drive Dr Mahathir's election campaign, during which he called it — and other Chinese-backed projects — evidence of his predecessor selling the country to China.
He also claimed that over 700,000 Chinese nationals would be brought into Malaysia through the Forest City project, and that the new Chinese immigrants would be given Malaysian identity cards that would allow them to vote in the next elections.
Built on four man-made islands in Iskandar Malaysia, the 1,386ha, S$134 billion project includes facilities for business, tourism, hotel, residences, and other services.
About two-thirds of buyers of the Forest City apartments are from China, with 20 per cent from Malaysia, and the remaining from 22 other countries.
The developer said previously that it had opened Forest City showrooms in Singapore, Kuala Lumpur and Jakarta, and planned to open more in Vietnam, Myanmar, Taiwan, Thailand, Japan, Dubai, the Philippines and Laos.
With Forest City units also on sale in Singapore, some property agents here said there is concern among buyers, particularly after Dr Mahathir's comments on Monday.
An agent who did not want to be named said he had received a number of calls since the news broke, but declined to provide exact figures.
He added that the agents were "waiting for the developer to give us further directions".
Property analysts TODAY spoke to said that any potential impact on Singaporean buyers was limited as they were not the targeted market for Forest City. Still, they pointed out that Dr Mahathir's comments could hurt investors' confidence, even though there is always a risk in buying overseas properties.
Mr Alan Cheong, head of research at Savills Singapore, noted that Singaporeans investing in property across the Causeway were usually more "comfortable purchasing properties from Singaporean or Malaysian developers".
He said: "The fallout (among Singaporean buyers) will be limited. Forest City is a Chinese-centric (development)…(and) seems to be primarily targeting the Chinese market."
Mr Colin Tan, director of research and consultancy at Suntec Real Estate Consultants, added that should Dr Mahathir ban foreigners from buying Forest City units, this could lead to doubt among Singaporeans "if anyone wants to buy Malaysian property".
He added that more clarity from the Malaysian authorities was needed, as these were potentially "drastic measures...that are almost (effectively) killing the development".