Penang exploring ways to bring down rising property development contribution costs

 

PETALING JAYA: The state government is exploring a number of measures to bring down contribution costs imposed upon property developers, said Penang State Exco for Housing and Town & Country Planning Jagdeep Singh Deo.

He noted that the state government understands the challenges faced by developers and a series of meetings has been held to discuss how they can assist the developers in this difficult period.

“We will definitely not increase the contribution cost at this point in time. We are looking at the possibility of allowing developers to pay certain contributions for their developments by way of corporate guarantee instead of a bank guarantee and in instalments,” he said at the Penang International Property (PIP) mid-term review conference on Friday, Aug 5.

Jagdeep had participated in a panel discussion titled “Prospects of Penang Property Sector in 2017” moderated by vice-president of FIABCI (International Real Estate Federation) Malaysia, Michael Geh.

The summit was officiated by Penang Chief Minister Lim Guan Eng.

“In addition to that, we are also in the process of considering the suggestion that financial contribution in lieu of physical provision of community facilities such as hawker complexes, markets and community halls ought not to be based on existing market valuation but instead capped at a fixed rate,” he added.

Apart from reviewing the stringent security conditions, on the proposal to allow corporate guarantee instead of bank guarantee, Jagdeep noted there has also been a request to the state government to extend the period before the bank guarantee or corporate guarantee is honoured, namely to more than two years in light of the volatile economic conditions.

“This proposal is also under consideration and an announcement will be made in the near future,” he said.

The high contribution cost for project developments in Penang is one of the main issues faced by developers in Penang currently, said Real Estate and Housing Developers’ Association (Rehda) Penang chairman Datuk Toh Chin Leong during the discussion.

“As we know, Penang land prices are high because we have a scarcity of land. It can go as high as RM1,300 psf. On top of that, developers need to pay a compliance cost of approximately RM200 psf or more. If the land needs to be converted, we will have to pay an additional premium which will add on further to our compliance cost to almost RM500,” he said.

“In addition to that, the deprecating ringgit has caused important materials for construction to increase, which is taking a toll on us,” Toh added.

Meanwhile, another issue that was raised during the panel discussion was the mismatch in land valuation by the National Property Information Centre (Napic) and private land valuers.

“The land value which we get from private valuation companies sometimes differ by a large amount compared with results given by the land valuers in Napic. There is no supporting document provided by them [valuers in Napic] as to how they derived that value. We hope to ask for support to have a session between the private and government valuers to sit down together [to see how they can work on this matter],” said Toh.

FIABCI Penang committee member Jason Teoh Poh Huat noted that this will definitely allow a clearer guideline between the valuers.

“It will definitely narrow the gap between the valuations,” said Teoh, who is also director of Henry Butcher Malaysia (Penang) Sdn Bhd.

Other issues, such as the delay in the approval of the Advertising Permit and Developers Licence (APDL) by the federal government, were also raised.

“In this regard, our record shows as of June 2015, out of 81 applications submitted since August, 2014, only 34 had been approved with some 47 applications still outstanding. I will continue to engage with the federal government on this matter and hopefully there will be some positive developments,” said Jagdeep. — PIP 2016

Try out one of our super tools, the rental yield calculator, here.

This story first appeared in TheEdgeProperty.com pullout on Aug 12, 2016, which comes with The Edge Financial Daily every Friday. Download TheEdgeProperty.com pullout here for free.