KUALA LUMPUR (Dec 20): Property developer LBS Bina Group Bhd, whose landbank consists mostly of leasehold land in Selangor, has welcomed the state government's move to allow owners of leasehold properties to renew their leases for a nominal sum of RM1,000.
However, it said freehold properties will still be in stronger demand despite the new Private Residential Ownership Scheme introduced by the Selangor government.
"The scheme is set to benefit leasehold homeowners as they can now renew their lease for up to 99 years by paying a fee of RM1,000 only.
"However, they will still have to pay the full premium in the event they sell or transfer these properties. This is why freehold property will always be in demand," LBS Bina Group Bhd managing director Datuk Lim Hock San told The Edge Financial Daily on Monday.
Lim said LBS, which has leasehold projects such as Bandar Saujana Putra and D'Island in Puchong, and other developers will benefit from this scheme as it will encourage homebuyers to purchase their dream property.
On Monday, The Edge Financial Daily reported that the Selangor government on June 1 this year introduced a scheme to renew land leases for a nominal premium of RM1,000, although the landowners will have to pay the full premium if they subsequently sell their property.
For those who can afford to pay the full premium, a 30% discount will be given and must be settled within six months from the date of the issuance of Form 5A which allows for the renewal.
The premium is calculated based on one-quarter of the land's current market value, divided by 100 and multiplied by the number of years renewed. The scheme also allows leasehold landowners to extend their lease from 60 years to 99 years.
The scheme was introduced with little fanfare and it is still not widely known by leasehold property owners and housing developers. Indeed, several parties contacted by The Edge Financial Daily on Monday were still unsure of the scheme.
Selangor Mentri Besar Tan Sri Abdul Khalid Ibrahim told The Edge Financial Daily that the philosophy behind the move is to ensure that the people of Selangor can realise the wealth of their asset.
An analyst said the scheme will benefit the residents of Selangor, even if they have to ultimately pay premiums when their properties are later sold.
"Most people who own leasehold properties would at a later stage be worried about renewal and the premium... especially if they are retired. With this, they don't have to worry about depleting their retirement funds or leaving a big liability for their children who inherit the property," he said.
He added that the premiums to be paid when the properties are sold should also not be a burden, as it will be effectively about a quarter of the land value for a 99-year lease, excluding the value of the house.
"The owner of the property still stands to make a big profit from the home. The premium is effectively taxed 25% on the land value alone for a 99-year lease, excluding the building structure," he explained, adding that all transactions for leasehold properties require state consent anyway. As such, he thinks the transfer of the land and premiums on land renewals could be conducted simultaneously by the state government.
The analyst also agrees that freehold properties will still remain more popular, as they are free from encumbrances, but he expects the leasehold stigma to decline and the price differential to narrow. The issue of land lease renewal has plagued Selangor residents for the past few years, especially those who have property in prime and older parts of Petaling Jaya such as Sections 1 to 5, whose leases are running out.
On whether this scheme would change the way the company markets its leasehold properties, Lim said: "LBS's marketing strategies for our leasehold properties have always provided homeowners with a wider range of landed properties that have been thoughtfully designed to cater for greater space to accommodate the changing lifestyle of modern families."
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