2018 Budget wishlist: Developers call for relaxed rules
Posted on News Straits Times on 12 October 2017
Developers are urging the government to relax regulations so that property development in the country takes place in a healthy and efficient manner. They have come up with various proposals and hope that the 2018 Budget would have some motivators.
Various cooling measures introduced by the government and Bank Negara Malaysia (BNM) in the last three years to help curb escalating property prices has left an irreparable dent in the market.
The measures included the removal of the Developer Interest Bearing Scheme (DIBS), changes in real property gains tax (RPGT) and curbs on loan to value (LTV) ratio which has resulted in end-financing issues and loan rejections. Projects in the luxury housing or properties segment priced above RM800,000 have not been selling well.
According to the National Property Information Centre (Napic), as of the first quarter of this year, some RM10.08 billion worth of residential units (not including serviced apartments) were left unsold in Malaysia.
LBS Bina Group Bhd group managing director Tan Sri Lim Hock San hopes that cooling measures would be reviewed to help stabilise the property sector.
This includes relaxing the terms in RPGT to encourage more Malaysians to invest or upgrade their homes, directly creating and further boosting property market activities.
Lim suggested the lowering of the minimum threshold from RM1 million to RM500,000 for foreigners looking to purchase homes in Malaysia, and the expansion of the stamp duty waiver to include properties priced between RM300,000 and RM500,000.
“Many first-time home buyers still find it tough to meet loan requirements. We believe more flexible end-financing guidelines and additional incentives will greatly empower first-time home buyers financially,” said Lim.
Lim is also proposing the lowering of personal income tax rates and corporate tax.
“The additional margin in income can be used to ease the burden of the rakyat when purchasing their homes. Reducing the corporate tax will help to ease the burden of businesses, particularly developers.
“We are confident this will greatly benefit property developers who can then reinvest in the business, a move that can lead to improved productivity, increased job opportunities and increased quality and quantity of developments,” said Lim.
Lim said the move is aimed at helping to provide more options for home buyers and spurring the growth of the property industry and the overall economy.
Mah Sing Group Bhd group managing director Tan Sri Leong Hoy Kum said stimulating the property industry would have a larger impact on the wider economy.
“The property industry has a larger multiplier effect than other industries, affecting more than 140 subsectors. Motivators in the 2018 Budget will help property developers and construction players, as well as encourage buyers, especially first-time home owners, to invest,” he said.
Mah Sing’s wishlist includes:
More flexible schemes for private developer’s projects
“At the moment, the flexible financing scheme is only exclusive for PR1MA’s projects. Such flexible schemes, if extended to private developers’ with projects where the houses are priced below RM500,000 and first-time home buyers will enable more buyers to own a home,” said Leong.
Continuing stamp duty exemption for first-time home buyers
The continuation of waiving off 100 per cent stamp duty for homes below RM300,000 is a good move to lessen the burden for first-time home buyers. It would further ease home ownership if the stamp duty exemption is applicable for homes below RM500,000, he said, adding that more subsidies will also be able to encourage a higher take up rate for first-time home buyers, said Leong.
Reducing compliance costs
“We hope the government will be able to loosen mandatory obligations to ease developers’ burden on compliance costs such as contributions for utilities like Tenaga Nasional Bhd, Syarikat Bekalan Air Selangor Sdn Bhd and Indah Water Konsortium Sdn Bhd, developer charges, land conversion premiums, infrastructure contribution, surrender of land and construction of facilities as these charges represent heavy compliance costs.
“All these would result in cost savings that can be passed directly to the home purchasers with a more affordable properties prices.”
Lower price threshold for foreigners
“This will promote more foreign investment in Malaysia. The majority of the states in Malaysia have a threshold of RM1 million while the Penang island and parts of Selangor have a threshold up to RM2 million for foreign buyers.
“Compared with Hong Kong and Singapore,
Malaysia’s property market is very domestically driven. In fact, foreign buyers in Malaysia are only between two per cent and three per cent. Therefore, we should promote more foreign investments in Malaysian properties as it would also has a multiplier effect in boosting the property industry as well as the nation’s economy,” said Leong.
Claims on Goods and Services Tax (GST) input credit for affordable residential projects
In the property industry, a GST of six per cent is not imposed for residential projects. However, developers are still required to bear the GST for development cost.
Leong hopes the government will be able to allow developers to claim the GST input tax credit for development costs incurred for affordable residential products to lessen developers’ burden.
Providing tax relief for private developers
A 10 per cent to 20 per cent tax relief on profit will be able to encourage developers to build more affordable homes, especially in areas that are experiencing shortage of homes, said Leong.
Lower personal income tax rate
With the successful implementation of GST, Leong hopes the government will consider lowering the personal income tax rate for individuals. This would allow individuals to have more disposable income which could be used for investments.
Higher EPF account 2 percentage allocation
The government can consider revising the percentage of funds in the Employees Provident Fund (EPF) Account 1 and 2. By increasing the funds in Account 2 from the current 30 per cent to 40 per cent of EPF balances, EPF contributors can have more funds in Account 2 to pay the downpayment of their property purchase, reduce housing loan and pay monthly housing loan instalments, said Leong.