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Tuesday, November 10, 2009

Budget 2010: Seeing green

BUDGET 2010, that was tabled on Oct 24, saw the Government taking concerted effort to encourage Malaysians to embrace green technology.

This is a move in tandem with growing concerns of not only Malaysians but the entire world in preserving our resources and the environment for the future. The drive to preserve the environment comes with monetary costs and certainly with government incentives to ease such cost from the individual will bring economic sense to environmental objectives.

To intensify green-awareness activity and to encourage the practice of environmentally-friendly lifestyle, the Government had allocated RM20mil. Among other efforts, is an international exhibition on green technology that will be organised in April 2010.

The Government will also give priority to environmental-friendly products and services that comply with green-technology standards in government procurement of goods and services.

A fund of RM1.5bil has been allocated for soft loans to companies that supply and use green technology. For suppliers, maximum financing is RM50mil per supplier and, for users, it’s RM10mil per company. The Government will bear 2% of the total interest rate in the said soft loan and will guarantee 60% of the amount financed.

Applications for this “green loan” are to be made to the National Green Technology Centre and the scheme will commence on Jan 1, 2010. It’s estimated that a total of 140 companies could benefit from the “green loan”.

Apart from such broad-based initiatives, the Government has come around to back the Green Building Index (GBI) by Persatuan Akitek Malaysia and the Association of Certified Engineers Malaysia in a two-tier strategy.

First, building owners or developers obtaining the GBI certification between Oct 24, 2009 and Dec 31, 2014 will be given income tax exemption equivalent to the additional capital expenditure in obtaining the certificate. It is known in the industry that greening the building can add up to 20% on top of the usual construction cost.

Such additional capital expenditure will then save the building owner in long-term operational expenditure as the cost of running the building will be cheaper. On the implementation of this tax exemption, developers and building owners will have a double benefit of not only saving long-term operational cost but also the upfront tax savings.

It will be difficult to quantify the actual additional expenditure as building owners/developers could overstate the additional expenditure in order to obtain higher-income tax exemption. To this cause, it would be appropriate for the architects or quantity surveyors of the project to cost out this additional amount and for the Green Building Index Accreditation Panel to determine and certify the actual additional capital expenditure.

Otherwise, it may also be prudent for the Government to fix the percentage of capital expenditure for the various GBI green ratings that is Platinum, Gold, Silver and Certified. For ease of operation, the latter may be a more feasible option.

The second tier in the strategy is for stamp duty exemption on the instrument of transfer of ownership for first purchasers of buildings with GBI certificate from developers between Oct 24, 2009 and Dec 31, 2014. The exemption amount is reported to be equivalent to the additional cost in obtaining the GBI certificate. How this operates is actually unclear.

The question asked: Is the additional cost in obtaining the certificate only or is the additional capital expenditure included?

Nevertheless, these two tiers, tax and stamp duty incentive to promote the development of green buildings will certainly push developers to seriously consider green building technology.

Developers and building owners will certainly decide to incorporate green features into their buildings to obtain the GBI certificate and take advantage of the tax incentives. Since the GBI certificate can be granted for both new construction and building upgrades, the move will also encourage owners of older buildings to upgrade their buildings to obtain GBI certification and thus claim tax exemption on such costs.

Green building certification is not only for office buildings but also available for condominiums, industrial buildings, hotels and even townships. The Government has announced that Putrajaya and Cyberjaya are to be developed as pioneer townships in green technology.

Therefore, even private developers could aim for GBI certification of their township and take advantage of the tax exemption on the additional cost to go green. The purchasers of their products will also stand to benefit from the stamp duty exemption. This will certainly give such development a competitive edge.

These incentives stop on Dec 31, 2014 but, to keep the green momentum going, longer-term policies would be necessary.

Sarkunan Subramaniam is executive director of Knight Frank Malaysia. He was in charge of the exercise to act for a major oil & gas company in its search for a green building to consolidate its principal office operations that was recently concluded in KL Sentral.

By The Star (by Sarkunan Subramaniam) Posted on 9 Nov 2009

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