Posted on 25 October 2013 - 11:51pm
Datuk Seri Michael K.C. Yam
Real Estate and Housing Developers' Association Malaysia (Rehda)
While Rehda welcomes the various incentives and measures announced today by Prime Minister Datuk Seri Najib Abdul Razak in Budget 2014, we are also concerned with some of the drastic steps announced related to the real estate sector.
Rehda supports the introduction of the goods and services tax (GST) to make the current taxation more comprehensive, efficient, transparent and business friendly and looks forward to working closely with the government to ensure smooth implementation of the GST and resolve foreseeable issues and challenges that may arise.
The announcement to implement GST only in April 2015 will give sufficient time for the industry to work with the Ministry of Finance in fine tuning the implementation details of the taxation.
We have earlier in our wish list submission urged for residential property transaction to be either standard or zero rated to mitigate increased costs and impractical challenges.
Rehda welcomes the government's move in promoting the provision of affordable housing and the various programmes including that of the private sector developers. The introduction of the Private Affordable Ownership
Housing Scheme (MyHome) which will provide a subsidy of RM30, 000 to private developers for each affordable housing unit built is indeed a step in the right direction especially in view of the current rising cost of development.
We also applaud the government's allocation of the RM1 billion Housing Facilitation Fund under UKAS and believe this will assist the industry tremendously in the provision of better housing infrastructure for the Rakyat.
The establishment of the National Housing Council to develop strategies and action plans in a holistic manner in ensuring that housing delivery is more efficient and expeditious is timely indeed. Rehda stands ready to work closely with the government on this matter and hopes that the council's function will be facilitative rather than prescriptive in nature to ensure a more sustainable housing industry for the nation.
Rehda, however, is concerned over some of the drastic measures announced.
Although some are anticipated, in light of the focus given on home ownership affordability gaps in recent months, the industry feels that the following measures will have negative impact on the market including:
i) The increase in real property gains tax (RPGT) from the current rate of between 10% and 15% to between 15% and 30%, depending on the year of disposal will to a great extent curb speculative activities in certain market segment although in reality, the presence of speculators in the market is insignificant.
Delays of disposal of property by sellers will only further reduce supply into the market causing prices to increase. The flat rate of 30% RPGT charged for disposal of properties by foreigners may send the wrong signal to foreign investors with regard to our property investment and promotion policies.
ii) Similarly, the increase in foreign ownership threshold from RM500,000 to RM1 million across the board may be detrimental to the promotion of property acquisition by foreigners.
We have to take into account that in many urban areas outside the Klang Valley, Penang and Johor Baru, there is limited supply of properties above RM500,000 while properties above RM1 million are almost non-existent. Such measure will also restrict developments of smaller units such as studio and one-bedroom apartments as prices for such units may not be beyond RM1 million.
This measure is also contrary to one of the 10th Malaysia Plan's aspirations of providing better incentives to attract foreign talents and the Malaysia My Second Home programmes.
iii) Rehda is of the opinion that innovative home financing package such as the Developer Interest Bearing Scheme (DIBS) offered by developers of high premium properties in certain hot spots in Kuala Lumpur, Penang and Johor should be encouraged to facilitate financing and promote homeownership as DIBS will greatly assist homebuyers in upgrading and facilitating their acquisition cost.
Banning DIBS altogether will put pressure of high acquisition cost on genuine buyers including those first time buyers and bumiputera buyers.
iv) The requirement for developers to disclose all details pertaining to sales pricing including benefits and incentives offered to buyers will be challenging to the industry, both administratively and practically.
The implementation of this has yet to be tested.
We, however, anticipate that such practice may affect buyers' ability to purchase as incidental cost in cash over and above the deposit needs to be raised.
Although Rehda believes that this budget may have taken and balance the interests of all stakeholders such as the Rakyat, house buyers, supply chain, related industries and various stakeholders into consideration, we are of the opinion that the increase in house prices is due to inevitable cost push factors and the imbalance of supply relative to demand in some segments of the market especially in the urban areas.
In conclusion, we appreciate the government's efforts and consideration in promoting a more stable, healthy and orderly growth of the real estate and property sector.
The measures announced will pose new challenges to the industry and Rehda hopes to work with the authorities to address some of the industry's concerns and hope to mitigate some of the negative impact moving forward.