MORE affordable housing, improve public transport, reduce development costs, consistent policies, minimal increase in the real property gains tax (RPGT) as well as more incentives for first-time homebuyers — these were among the more common requests on the wish list of developers, both big and small, from various parts of the country for the Budget 2014, which will be announced on Oct 25.
We asked the developers for the top three items on their wish list for the upcoming budget and we gathered some interesting replies. For instance, Bukit Kiara Properties Sdn Bhd group managing director Datuk NK Tong, who is also the national treasurer of the Real Estate and Housing Developers’ Association (Rehda), only gave his Top 1 wish — that the government take a long-term view of housing the nation. “To make homes affordable, we need to increase the supply of homes. We have a population of 28 million but only 4.8 million homes,” he says.
Both Glomac Bhd group managing director Datuk FD Iskandar Mansor and Selangor Dredging Bhd managing director Teh Lip Kim say there is a need for more consistent policies. “Stability and reliable policies will encourage foreign investments in the local property market. For example, changing the RPGT rates in every budget announcement will create uncertainty,” Teh explains. Iskandar says, “It will not be good for the country if the policies are not consistent as it keeps foreign investors as well as locals wary of the country’s market condition.”
MKH Bhd group managing director Tan Sri Eddy Chen, who is also Rehda patron, proposes that affordable homes be built on government land on a public-private partnership basis. He says high land cost due to the scarcity of land has led to escalating costs and house prices. He adds that the government should do away with low-cost housing and the land allocated (20% to 30%) can then be freed up for the building of affordable homes. (Note: For more on affordable housing, please see Page 7.)
While these are certainly not new concerns, the question to be asked is: are the concerns getting louder now? Ask the average man in the street about property prices today and the answer you will most probably get is that it is way beyond his reach and affordability. Read on to find out what’s on the wish list of some developers for Budget 2014.
Datuk Vincent Tiew
Management Sdn Bhd
Some of Andaman Property Management’s previous projects include Cova Square, Cova Villas, Cova Suites, Kota D’sara Signature Park and Casa Residenza, all in Kota Damansara; The ARC @ Cyberjaya, The Academia @ South City Plaza, Diamond Square and Diamond Residence @ Serdang; and Taipan @ Ipoh Cybercentre, Taipan Festival Mall, Taipan 3 and Taipan City, all in Ipoh.
It is a property and project management organisation that specialises in providing sales and marketing as well as project property management services to property developers
1. End-financing guidelines and margin of financing to be maintained. Currently, purchasers of properties generally find it difficult to obtain loans from financial institutions. A further tightening of the guidelines would make it near impossible for end-financing to be obtained. The current margin of financing for a first or second residential unit of up to 90%, and 70% for the third unit onwards, is more than adequate to contain the problem of speculation.
2. Bigger and better packages and incentives for first-time buyers such as free stamp duty, 100% loan, special interest rate and renovation package. It would really help first-time buyers if we could emulate our southern counterparts by allowing a direct deduction of the first 10% of the purchase price from the house buyers’ EPF (directly from the EPF to the developer), as it would not only cut out fraudulent withdrawal cases but also effectively, the buyer does not need to come up with the downpayment.
3. Corporate tax rebate/incentive to build houses below RM400,000. Normal wage earners cannot afford to buy properties, especially those in highly developed areas such as the Klang Valley, Johor Baru, Penang and Kota Kinabalu where prices have skyrocketed by up to 200% in recent years. Assistance could be in the form of tax rebate/incentive from the relevant authorities; special high-density approval, which would enable developers to spread out their costs more effectively and efficiently; special high plot ratio approval; a special one-stop centre to cater for fast approvals, to enable developers to get their projects off the ground without the usual delays; special provision of government land at cheaper or no cost; in the case of Penang and Selangor, the waiver or drastic reduction of development cost, which really eats into a project’s viability and profitability.
Datuk Steve Chong Yoon On
Group managing director
Austin Heights Sdn Bhd
This Johor-based developer is also involved in construction and project management, with projects ranging from residential to educational corridors. Its previous projects include Austin Heights 1 and Austin Heights 2 in Johor Baru, with a total gross development value (GDV) of RM2.5 billion.
1. No increase in RPGT. A proper study should be conducted to ensure that the root cause and mechanisms of speculation are identified.
2. No increase in stamp duty. An increase based on property price scales — without taking into account the location — can stifle sound property investment for rental income and as a hedge against inflation.
3. Policies on foreign acquisitions should not be changed too frequently as it can cause long-term adverse effects. The contemplated hike in the threshold price for foreign acquisition and the increase in stamp duty create concerns for foreigners who are expected to adopt a wait-and-see approach, which can slow down the economic growth of the country.
Datuk Tan Seng Leong
Group managing director
The Johor-based company recently made inroads into the Klang Valley property market with the initial launch of Concerto North Kiara. It also launched a project in Kota Kemuning called Home Tree, a bungalow residential enclave. The total GDV to date of its projects in the Klang Valley is RM800 million.
1. Minimal increase in RPGT
2. Defer the goods and services tax (GST) as it will lead to more expensive construction materials
3. Stamp duty rates to remain status quo
Group managing director
The Melaka-based Singaporean developer is known for its development of Hatten Square and Hatten Hotel. It also owns Pahlawan Melaka Megamall. Projects under construction include more commercial and residential components such as hotels and condominiums. The total GDV of its Melaka projects to date (completed and under construction) amounts to RM4.6 billion.
1. Status quo on RPGT and stamp duty on transfer of titles. According to Malaysia Property Inc, only 3% of property investors in Malaysia are foreigners. It is of minor significance to the overall investment industry and is unlikely to warrant the further increase in RPGT. The preventive measures to be introduced by Bank Negara Malaysia in 4Q2013 such as the tightening of the loan-to-value ratio for property purchases and the removal of the developer interest-bearing scheme (DIBS), are likely to dampen speculation in Malaysia. Keep the current stamp duty rate to encourage property investment by both domestic and foreign investors, thus increasing Malaysia’s overall gross domestic income as well as forging relations and opening up channels for global partnerships.
2. Policy allowances for first-time middle-income homebuyers. An extension of the financing tenure for the My First Home Scheme to 40 years with lower interest rates will enable this segment to own their first residential property. The government may also consider giving incentives to young families by implementing supplementary measures such as special financial grants to help enable and sustain home affordability levels.
3. To consider tax incentives for the local hospitality and tourism industry. If the GST bill is endorsed for Budget 2014, the impact on the hospitality and tourism industry will be significant as a result of the higher cost of living and a drop in tourism receipts as tourists might spend less. Tax reduction incentives should be proposed to help ease the hospitality and tourism industry players’ burden in sustaining general business operations.
Chow Chee Wah
Gamuda Land Sdn Bhd
The property arm of Gamuda Bhd has existing developments such as Bandar Botanic in Klang, Kota Kemuning in Shah Alam, and Celadon City and Gamuda City in Vietnam. Gamuda Land has RM13 billion worth of projects in the Klang Valley. Its GDV in Vietnam is also RM13 billion.
1. Additional cooling measures to be considered carefully as they will affect the market negatively as well as affect real demand for homes.
2. Sustainability of low-cost housing to be reviewed. While the government’s low-cost housing plan should be supported, the cross-subsidy structure is not a sustainable long-term plan. Initiatives such as the rent-then-purchase scheme can be considered as an option.
3. The foreign purchase policy to encourage foreign investors to be kept status quo. It will boost the economy and enrich knowledge sharing among our talent. If Malaysia wants to be competitive, the property market must be able to accommodate expatriates and the foreign purchase policy should be maintained.
Managing director and CEO
Berinda Properties Sdn Bhd
A subsidiary of Kuok Brothers Sdn Bhd, some of Berinda’s flagship projects include Taman Molek and Taman Ponderosa in Johor Baru, and also part of Flagship A. One of its bigger future launches is Ponderosa Waterfront — a 381-acre mixed-use development on the banks of Sungai Tebrau that will comprise 4,000 bungalows and high-rise apartments, commercial properties and a big-box retail building.
1. More tax incentives for green building developers. Currently, no tax incentive is given to those who develop green buildings but do not own them (for example, development of condominiums for sale).
2. Tax incentives for property developers who build affordable and low-cost housing. For example, double deduction of financing costs incurred during the construction period, double deduction of losses incurred in the construction of the above and stamp duty waiver upon transfer of title from developers to purchasers.
Datuk Lee Tian Hock
Founder, CEO and managing director
Matrix Concepts Holdings Bhd
The Negeri Sembilan-based property developer was founded in 1997 and has experience in developing affordable residential and commercial properties. The group has completed projects worth over RM2.2 billion in GDV and has RM6.8 billion worth of projects in the pipeline. It has about 1,700 acres in Negeri Sembilan and Johor. Its townships include its flagship Bandar Sri Sendayan in Seremban, Negeri Sembilan, and Taman Seri Impian in Kluang, Johor.
1. The implementation of measures to curb speculative property activity should not be drastic. This is to enable smoother transition and prevent knee-jerk reactions from all parties, and allow the property sector to expand in a sustainable manner.
2. New incentives for first-time homebuyers. A complete waiver of the stamp duty for first-time homebuyers would greatly ease the burden of the targeted middle-income group. Currently, the stamp duty has been reduced to 50% for the first residential purchase worth up to RM400,000.
3. Incentives for both developers and buyers such as tax rebates and fast-track processing for developers of affordable properties would go a long way in expediting the supply of affordable homes in the market as well as encourage ownership among the intended targets.
Datuk Beh Huck Lee
Group managing director
EUPE Corp Bhd
The Kedah-based developer has completed projects in the north with a GDV of RM1.2 billion and has projects in the pipeline and ongoing in Kedah, Penang and the Klang Valley worth more than RM1.7 billion. Its core businesses cover property development, construction, hospitality, plantation and property management and investment. EUPE has built more than 20,000 residential, commercial and industrial properties, and offices.
1. More generous capital allowances to be given to new investments, including the manufacturing and hotel industries, perhaps in the form of double tax deductions. This will stimulate private investments and improve the job market.
2. Reduce corporate tax rates. In line with the government’s aspiration to develop a high-income nation, this will improve our national attractiveness against countries such as Singapore and Hong Kong, particularly in the finance and banking sector as this sector is particularly sensitive to changes in the tax rates. In effect, the reduction in the corporate tax rates will be offset by the introduction of the GST.
3. Tax incentives and allowances to be given to young house buyers. Incentives should be given to assist youth (those below 30) to buy their first homes. Government assistance will prevent the broadening of future income gaps.
Datuk Soam Heng Choon
Managing director and CEO
IJM Land Bhd
IJM Land recently launched its first project abroad called Royal Mint Gardens in London. Some of its notable developments in Malaysia include The Light in Penang, Seremban 2 and Shah Alam 2. It has other projects in the Klang Valley, Negeri Sembilan and Penang as well as ventures in Vietnam and China. IJM Land is the property arm of the IJM Group.
1. Urban safety and security. People are feeling less safe. The government should get the local authorities and police to work together to prevent crimes in urban areas.
2. Grant for first-time homebuyers by the government. This is to help them own a starter home and make home ownership easier.
3. Affordable and low-cost housing to be provided by the government, and not developers. This way, the element of cross-subsidy will be reduced and it allows a more equitable pricing structure for other free-market products, thereby reducing prices of other properties. If the government insists that developers continue to build and promote affordable and low-cost housing, the concessions given to various agencies should be used to promote developers as well. Some of the concessions given to PR1MA housing — such as no requirement for low-cost homes, no bumiputera quota discount, facilitation fund facilities, lower or no land premium and so forth — will enable developers to lower property prices. In other words, compliance cost needs to be reduced.
Datuk NK Tong
Group managing director
Bukit Kiara Properties Sdn Bhd
Bukit Kiara Properties is renowned for its innovative Mont’Kiara Verve Suites where public spaces are placed atop the four condominium towers, thereby sacrificing the penthouse space. Since then, the Verve Suites brand — where small spaces come fully furnished and all you need to do is bring your suitcase — has taken off. The total GDV of its projects is RM1.6 billion, including the estimated GDV of the Verve Suites KLCC and The Ambangan.
Tong says: “I have a Top 1 on my wish list — that the government take a long-term view of housing the nation. To make homes really affordable, we need to increase the supply of homes. We have a population of 28 million but only 4.8 million homes. To be truly developed, like Australia, we need to be closer to its 9.1 million homes for its 22 million population.
“To do that, we need to allow the government to tackle the affordable housing category, much like how Singapore has done for the Housing Development Board (HDB) housing. Today, 82% of Singaporeans live in public housing, and HDB continues to subsidise public housing in the billions each year. It took almost 50 years to achieve that. We don’t need that high percentage, but we do need the government to take a long-term view, and to be responsible for affordable housing. Hopefully, PR1MA will finally be the answer.
“The housing delivery system needs to encourage more houses to be built. Talks of cooling-off measures such as loan restrictions and RPGT increases only cool property prices for the short term. Less supply only results in long-term prices rising again with a vengeance.
“The housing delivery system needs to be streamlined so that private developers can bring houses to the market quicker, making them more affordable. Any long-term affordable housing strategic initiatives should receive funding from the government and the rakyat should be happy to support these initiatives through the taxes we pay.”
Teh Lip Kim
Selangor Dredging Bhd
Selangor Dredging recently launched The Hub in SS2, Petaling Jaya. Its ongoing projects have a GDV of RM1.3 billion. SDB’s completed projects include Five Stones in SS2, Petaling Jaya, 20trees West in Taman Melawati, Park Seven in Persiaran KLCC and Aman Sari in Puchong. Its upcoming and ongoing developments include Windows On The Park in Cheras, Laman Bayu in Puchong and By The Sea in Batu Ferringhi, Penang. It started out as a tin mining company and has grown and diversified into other areas of business, including property management and leasing, hotel and property development.
1. Consistent policies, tax rates and duties. Policies that are consistent and can be applied over a long duration allows for them to mature and take optimal effect. This also removes uncertainty and allows for long-term strategic planning for both developers and purchasers.
2. Stability and reliability from consistent policies. This will encourage foreigners to invest in the Malaysian property market. For example, changing the RPGT rates at every budget announcement will create uncertainty.
Datuk Lim Hock San
LBS Bina Group Sdn Bhd
The developer has townships and housing estates in Puchong, Cameron Highlands and Batu Pahat. Its flagship development includes D’Island Residence in Puchong, and Golden Hills and Taman Royal Lily townships in Cameron Highlands. The former construction outfit has since diversified into real estate development and investment, building materials, insurance, turfing and landscaping.
1. Government to manage/control costs related to the development of affordable homes. More developers are finding it a challenge to develop affordable homes due to the rising cost of labour, land and raw materials, which reduce profit margins considerably. It would be good if the government can actively manage these costs to encourage more developers to help fulfil the demand for affordable homes.
2. Improve public transport. With the rising cost of land, affordable homes are being built at the fringes of major towns. An efficient transport network is crucial to enable homebuyers to commute to and from work with ease. The convenience and increased accessibility are added values homebuyers are looking for nowadays.
Tan Sri Eddy Chen Lok Loi
Group managing director
Known for developments across Kajang, Semenyih, Bangsar, Puncak Alam, Serdang, Melawati and Damansara, the group’s latest land acquisitions have doubled its undeveloped landbank to 1,060 acres with a potential GDV in excess of RM6.6 billion.
1. Affordable homes built on government land on a public-private partnership basis. High land cost due to the scarcity of land has led to escalating costs and prices of housing. Land cost includes conversion premium, development charges, quit rent and stamp duty.
2. Adopt the industrialised building system (IBS). Labour shortage affects the construction progress of a project, leading to delays and cash flow issues for contractors and developers, which will eventually be passed down to house buyers. The IBS system should be centralised with a joint government-private sector entity developing and owning the system where the cost is to be borne by the joint entity. The system is made available to all contractors or developers for their projects. The government should consider a one-for-one grant for the initial five years to entrench the system.
3. The government should do away with low-cost housing and in this way, all the land (20% to 30%) can be free up for the building of affordable houses. To bring down this cost of building affordable houses, compliant cost, including contribution to utility companies, premium, local government deposit, development charges and all non-building-related cost should be borne by their respective providers. The structure and local plans should re-zone some areas for higher plot ratio development so that land cost can be brought down and thus contribute to more affordable housing. The government should look at specific infrastructure grants for affordable housing so that the limited funding is more targeted and efficiently used.
This article first appeared in The Edge Malaysia Weekly, on September 30, 2013.
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