Rehda ready to pitch in

Developers are very much supportive of the government plans to build more affordable housing and are eager to participate in the programme.

Real Estate and Housing Developers' Association (Rehda) deputy president Datuk FD Iskandar said there is a consumer demand for quality and affordable housing.

"Developers are very much in support of building more affordable housing as we can see the demand is there.

"PR1MA (the 1Malaysia Housing Programme established by the government) cannot do it alone and we are willing to cooperate with them," he told Business Times in a recent interview.

Rehda, he said, fully supports the good intention of the federal government to build more affordable homes.

Iskandar said affordable houses are not a new concept. When the Selangor State Economic Development Corporation was established in the 1970s, its goal was to build affordable houses.

"Sadly today, PKNS is selling houses that are priced more than RM1 million.

"Where is their social responsibility? They get cheap land while private developers pay market rate. On top of that, PKNS gets other benefits. Yet they are building expensive houses," he added.

Iskandar, who is also Glomac Bhd group managing director, said developers are willing to work with PR1MA in building these affordable homes.

"PR1MA can be a facilitator of projects to build affordable homes by private developers as it has the list of first-time home buyers," he added.

The federal and state governments could also identify pockets of land in their respective areas to be tasked to private developers to build affordable homes.

"The authorities can even stipulate that this developments must have as high as 50 per cent of affordable units," he said.

In this respect, Selangor has a crucial role to play as it still has plenty of land to be developed.

The state must do its part in solving the housing woes of the rakyat, especially the middle-income.

"The high-income earner has no problems buying houses. So too the lower-income earners who are entitled for low-cost houses.
"It is the middle-income group which is feeling the pinch," he said.

However, Iskandar said buyers must also change their mindset in choosing the location for their houses.

"You cannot expect to buy an affordable unit in Bangsar (Kuala Lumpur) at RM300,000. An affordable unit there might be RM1 million, while those in Shah Alam RM400,000 and Rawang RM300,000," he said.

Private developers are already building affordable houses but it may be a bit far from Kuala Lumpur where the land cost is cheaper.

That is where a better public transportation system will help make these places more accessible to buyers.

"In this respect, I salute the federal government for biting the bullet to build the multi-billion ringgit Light Rail Transit (LRT) and the Mass Rail Transit (MRT).

"These projects will make more outlying areas accessible to home buyers whose travel time from home to office will be very much reduced.

"After saying this, feeder services should be enhanced so that the public can easily access the LRT or MRT stations," he added.
On rising prices of houses, Iskandar said it does not mean that developers are making bigger margins now.

In fact, he said, when he first entered the business 23 years ago the margin was 25 per cent. Now he is happy if he gets 15 per cent.

Among the main reasons for the reduced margins are the cost of land, building materials and labour.

Recently, the Selangor state government had imposed a 30 per cent development charge on all improvements that it has allowed on any development land in the state.

The Caj Pemajuan 2010 indicates that all approved planning permission and approved extra floor area or space would attract a development charge and local authorities in the state are allowed to charge a 30 per cent fee and a 20 per cent of the difference in value due the permission being granted.

These additional cost would certainly contribute to the rising house prices, he said.

Iskandar said the Selangor state government must also help to alleviate the housing problems, especially of the middle- income earners.

By 2020, it is projected that the population of the Greater Kuala Lumpur area will rise from 4.5 million people to 10 million.

Assuming that the average household has four persons, it would mean that there is a need to build 150,000 new houses a year as compared to 200,000 new and old homes sold nationwide last year.

By Business Times

Property developers optimistic of improved second half

REHDA'S OUTLOOK: There may be a bit of cautiouness in early 2013

DEVELOPERS are upbeat the local property industry will do better in the second half of this year due to positive market sentiments, but cautioned of setbacks in the early part of 2013.

"There is a bit of cautiousness out there because of negative news like a possible property bubble and concern over the general election. All these will affect the market in the first half of 2013, but minimally.

"If there is any bubble, it will only happen in one or two hotspots in Kuala Lumpur," said Real Estate and Housing Developers' Association of Malaysia (Rehda) president Datuk Seri Michael K.C. Yam.

Yam said another myth faced by the property industry is complaints of houses being overpriced because of higher foreign ownership and speculation.

But Yam said only less than two per cent of residential properties here are owned by foreigners, majority of which are located in the Kuala Lumpur city centre.

Yam said properties have become more expensive because of the hike in price of building materials and increasing labour and land cost.

He said Rehda is, in fact, encouraging foreign ownership of high-end properties in Malaysia to add to the vibrancy here.

"We should not worry as foreign buyers are not tampering the bread and butter properties here. There are ceiling prices where they can only buy properties of a certain range," Yam added.

Meanwhile, according to a recent property industry survey by Rehda, about 56 per cent of the 180 companies which has responded said they will launch new projects in the second half of this year compared with 46 per cent in the first six months of 2012.

More than half of the respondents said they expect their sales performance to be above 40 per cent for the next six months, from bigger scale projects.

The survey shows that majority of the developers will price their properties between RM250,000 and RM500,000, comprising a mix of single- and double-storey terrace houses and service apartments.

The market will be driven by domestic buyers, mainly for their own use.

"The loan tightening rule by Bank Negara Malaysia has left out an increasing number of potential buyers facing difficulties in obtaining loans. We hope the government will relax some rules," Yam said.

By Business Times

Efforts to curb property speculation

The government will initiate measures to address various issues gripping the property sector, including curbing rampant speculative activities in the market.

Housing and Local Government Minister Datuk Seri Chor Chee Heung said he would present to the cabinet findings of an industry meeting which could be used to come up with innovative ways to build affordable homes.

"The government has done fairly well in addressing the housing issues of the lower income. However, 40 per cent of the medium-income society still need accommodation.

"My ministry will use some of the findings to improve the sector," Chor told reporters here after opening a roundtable discussion on "Housing Affordability - Issues and Challenges".

The government will put forward recommendations, which will be based on proposals made by Real Estate and Housing Developers Association Malaysia (Rehda) such as on how to curb speculative property prices, financing, abandoned projects and sluggish developments.

Metro Kajang Holdings Bhd group managing director Datuk Eddy Chen Lok Loi said for example, a house built in Perlis cost RM250,000 but the same house using the very same materials but built in KLCC would cost RM1 million.

"This is caused by land cost due to two different locations. Nevertheless, there are some of the issues which Rehda will look into to address this such as materials prices. Working groups and a task force have been set up," said Chen.

Meanwhile, National House Buyers Association secretary general Chang Kim Loong said all parties, including the government and developers, need to launch proactive measures to stop steep price increases in the property market due to false demand and excessive speculation fuelled by easy mortgages and low real property gain tax.

"There is a huge mismatch between what the average household income can afford to buy compared to what is available in the market. A homeless generation will emerge and create various social problems," said Chang.

Chang said the average rakyat in a major urban area was struggling to buy his dream home where the average household with income of RM5,962 in 2009 would not be able to qualify for a 90 per cent loan over a 30-year period.

Assuming the average household income rises 15 per cent this year, the household may still not qualify for a 90 per cent loan in far areas such as Kajang, let alone in hot areas such as Kuala Lumpur.

He added that the government must also fine-tune the Bumiputera quota which has not made any headways.

"Don't get me wrong, we have no qualms over the discount for the first buy. But when you buy properties for the fourth and the fifth time and get up to 15 per cent discount ... that is wrong," said Chang.

By Business Times

Developers: Consumers don’t want low-cost homes

PETALING JAYA: While house buyers are seeking more affordable homes, developers do not want to be bound into building low- and medium-cost homes.

In its memorandum to the Finance Ministry, Real Estate and Housing Developers Association (Rehda) said it wanted to develop affordable homes in line with the increased household income instead of being compelled to build low- and low-medium cost units, which it said consumers did not want.

“Unoccupied and excess low-cost units are a waste of resources. They are cross-subsidised by both developers, through lower profit, and lower tax collected by the Government and buyers of non-low cost units, in additional tax,” said Rehda president Datuk Seri Michael Yam.

“They are either vacant or abused by being rented to foreigners. The hardcore poor group, which is falling in numbers, can be housed in the government-built social housing (PPR).”

He said Rehda had also proposed a lower stamp duty, with buyers of cheaper units paying less.

“The ceiling for higher priced units should be lifted as inflation and higher costs have increased the prices of even affordable homes,” he said, adding that more incentives were needed to encourage faster adoption of the Green agenda.

Yam said Rehda had also suggested an auto release mechanism for Bumiputra units, which were not sold after a certain period.

“Penalties should not be imposed for such releases as it is caused by low demand,” he said.

National Housebuyers Associa-tion (HBA) secretary-general Chang Kim Loong said the organisation had not submitted a memorandum for the upcoming Budget as its previous request for the enforcement of the “build-and-sell” system had yet to become a reality.

“Although Sharia-compliant housing using the BTS system was announced in Budget 2012, it is yet to be implemented,” he said.

It was reported that the ministry had approached HBA early this month for recommendations on how to reduce the price of homes.

Among its 10 recommendations, HBA urged the Government to unlock its land banks in various locations and give priority to affordable housing projects instead of high-end properties.

By The Star

Affordable housing in city possible: Rehda

KUALA LUMPUR: Affordable housing in the city for the poor and middle class is possible when the government provide the land for the development, said Real Estate and Housing Developers Association Malaysia (REHDA).

"In terms of rising cost of materials, it's something that we can't control. One thing that is under the government control is land -- whether it is available for low and medium cost housing.

"I'm not sure what the plans are for the Rubber Research Institute land but if they target a certain portion for affordable housing it would be good because land is one of the biggest cost components in property development," said REHDA council member N.K. Tong.

Tong was speaking to reporters here yesterday (5/6) on the upcoming fourth International Conference on World Class Sustainable Cities 2012 (WCSC 2012).

To be held on September 25, the WCSC 2012 will carry the theme "Cities for People". Among issues to be discussed include housing for urban poor, daycare services, preservation of greenery, safety practices and community building activities in the interest of crime prevention, re-landscape of open spaces and a more integrated public transportation.

The WCSC series is being co-organised by REHDA, Kuala Lumpur City Hall, the Malaysian Institute of Planners and the Malaysian Institute of Architects.

In the past three editions, the WCSC series focused on the transformation of Cheongyecheon River in Seoul, South Korea; city transportation solutions Curitiba, Brazil; and the metamorphosis of Kaohsiung, Taiwan; from an industrial polluter to an ecological tourist hub.

By Business Times

Rehda eyes RM10b 'green allocation'

The Real Estate and Housing Developers' Association Malaysia (Rehda) is lobbying for a RM10 billion annual allocation from the government to help upgrade existing buildings to be energy efficient.

The association wants this to be in the 2013 Budget.

Rehda president Datuk Seri Michael Yam said the fund would cover up to 30 per cent of the costs to make the buildings green.

With this in mind, the association is also asking the government to recognise other international green certifications like Singapore's Green Mark, Australia's Green Star, UK's BREEAM and the United States' LEED.

This was to enable those buildings already certified with those certifications to qualify for incentives provided by the government, Yam said.

Among other incentives that Rehda is seeking are stamp duty waiver for transfer of green certified properties from developers to buyers for the next five years, and double tax deduction on training expenses incurred by property development firms.

Yam said this yesterday at the launch of "Green Tour KL 2", a showcase of prestigious green rated developments in the Klang Valley.

Green Tour KL 2 is organised by Rehda Youth. It was officiated by Datuk Loo Took Gee, the secretary-general for the Energy, Green Technology and Water Ministry.

Yam said the building sector, at present, contributed about 40 per cent of the global greenhouse gas emissions but added that it could be reduced as green buildings had lower carbon emissions.

Currently, less than 0.5 per cent of all commercial and residential buildings in Kuala Lumpur were green certified, Yam said.

During Green Tour KL 2, projects showcased were the new Rehda headquarters in Kelana Jaya; KEN Rimba, Legian Residences, a project by KEN Holdings Bhd in Shah Alam; 11 Mont Kiara by Sunrise Bhd, a unit of UEM Land Holdings Bhd; Sime Darby Idea House in Shah Alam; and S11 House here.

By Business Times

Aye to new housing loans

KUALA LUMPUR: The proposed new housing loan scheme for those in the low and middle income group here can keep the city “thriving, vibrant and youthful,” said the Real Estate and Housing Developers Association (Rehda).

Its president Datuk Seri Michael Yam said Prime Minister Datuk Seri Najib Tun Razak and the Federal Territories and Urban Well-being Ministry should be complimented for proposing the scheme.

However, he stressed that the scheme’s terms and conditions would have to be well drafted if the proposal was to be a success.

Factors such as geographic boundaries and income limits would also have to be properly defined, Yam said.

“Another thing that should be considered is risk management.

“This scheme will be very attractive to people who are otherwise unable to obtain bank loans due to the lack of steady income or personal reasons. We have to be able to properly deal with these high credit risks.”

Najib had announced on Saturday a special funding scheme to help low and middle income families own homes in the city.

The scheme, which comes into effect on March 1, will cover units built under the National Economic Action Council’s People Housing Programme as well as City Hall’s public housing programme.

“In Kuala Lumpur, many young people are now moving to other places because of high costs of living, and transportation issues. This scheme can attract people from elsewhere to live and work in the capital, and retain those already living here,” said Yam.

Many young Malaysians have expressed positive views about the proposed scheme.

“It can improve living standards for those in the city,” said university student Asyraf Syahir, 20.

“I hope the scheme’s terms will be favourable because houses in Kuala Lumpur are expensive. I would like to own a house here some- day,” said IT specialist Christine Leong, 24.

Marketing executive Lee Kim Kong, 25, said although the initiative was good, more holistic solutions were needed to address rising house prices.

By The Star

Rehda: Property prices will continue uptrend in H1

KUALA LUMPUR: A majority of developers expect property prices to continue climbing in the first half of the year in tandem with rising costs.

In a recent survey of members by the Real Estate and Housing Developers' Association Malaysia (Rehda), about 74% of respondents surveyed generally felt that prices would be on an upward trend, largely influenced by an increase in the cost of development.

Rehda president Datuk Seri Michael Yam said about 36% of the respondents said property prices might increase 10% to 20%, 31% expected prices to increase less than 10%, and 7% expected prices to increase more than 20%.

“The main reason cited was the escalation in land, building materials and labour costs. For example, steel bar price had climbed to RM2,589 per tonne in 2011 from RM2,285 in 2010, while cement had gone up to RM16.33 per bag in 2011 from RM15.64 in 2010,” he told a briefing yesterday on the Rehda Property Industry Survey for the second half of last year.

Two other main factors were the larger deposits required in obtaining housing development licences and the higher market demand.

The deposit for a housing development licence is now 3% of the estimated project cost instead of RM200,000 previously. The survey covered 148 companies or 15% of Rehda's 979 members, and they were selected from all the states in Peninsular Malaysia.

Yam said 63% of the respondents indicated that they planned to launch projects in the first half of this year. In comparison, 45% had launches in the second half of 2011.

“The top property types to be launched in the first half of this year are two-storey terrace houses, apartments and condominiums as well as service apartments,” he added.

The survey also reported that better sales were expected in the first half of this year compared with the preceding six months. About 67% of the respondents with planned launches in the period under review anticipated to sell 41% of their properties and above. Yam pointed out that this was despite the drop in confidence largely influenced by external factors. “Some of the external factors are the eurozone sovereign debt crisis, fragile US economy and volatility in commodity prices.

“Nevertheless, the Malaysian market is still buoyed by its relatively strong economy, low non-performing loans for the property sector and the Government Transformation Programme and the Economic Transformation Programme (GTP/ETP),” he said.

On challenges for the industry, Yam said the unsold designated bumiputera lots had been the main reason for unsold units recorded in the last four surveys, which were conducted every six months.

“The way forward in solving this is to have a policy for automatic release of designated bumiputera lots. This will enable such ideal units to be put in the open market instead of them remaining unproductive.”

“Additionally, more than half of the respondents believed that the real property gains tax would have an impact on the overall property market.

“Other than that, 48% of respondents reported that they faced financing issues but mainly in the end-financing for buyers due to buyers' creditworthiness as well as due to banks being more stringent in their lending policies,” he said.

Rehda Federal Territory branch chairman NK Tong said the 45% of respondents that reported launches in second half of 2011 represented a slight drop from the 58% in the first half of 2011.

“The average size per project launch has also declined to 145 units from 160 units for the period under review,” he said.

“Sales were encouraging for the period as more than half of respondents who had launches sold more than 40% of their launched units,” he said, adding that the majority of the units launched were landed properties, but Kuala Lumpur and Penang were more focused on strata-title properties.

Rehda announced that the first Malaysia Property Exposition for 2012 would be held from March 2 to 4 and would feature some foreign developers.

By The Star

Rehda’s wishlist for Budget 2012

KUALA LUMPUR: The Real Estate and Housing Developers’ Association Malaysia (Rehda) hopes the Government will not implement any major systemic change for the property sector in Budget 2012.

While applauding the current system, its president Datuk Seri Micheal KC Yam said frequent changes in the taxation and property-buying segment would disrupt the immense investment in property by both locals and foreigners.

He said a change, would deepen the negative perception of Malaysian legislation by foreigners, and even locals, that things are always changing.“If the system keeps changing for every budget, then the confidence level for a person to invest in local properties will also be very low.“Sustainability and standardisation of property taxes, as well as a market friendly environment, is very important for Malaysia to compete on the international arena,” Yam said after the opening of the “Green Solutions for Property Development 2011” forum here today.

It was officiated by Housing and Local Government Minister, Datuk Wira Chor Chee Hueng.

He added that the result of an inconsistent system has resulted in only four per cent of households in Malaysia being owned by foreigners.

He said the current system was good in ensuring the competency of the local property market among neighbouring countries.“However, the property segment players must be given time to adjust to a certain legislation system.“Usually, when the players are ready to adopt a new system, it is then being enhanced or upgraded, thus, making it difficult for the property developers to put it into practice,” he added.

Meanwhile, Yam said REHDA hopes the government will review the low cost housing scheme requirements and reconsider the release of unsold Bumiputera-property units, due to less demand from the respective quarter.“This will enable the Malaysian property segment to be a more market and demand-driven,” he said.

By Bernama

Real property gains tax expected to rise

PETALING JAYA: Real property gains tax (RPGT) would probably increase after Budget 2012 but experts are divided over the quantum or the new form the tax on property sales would take.

Few are hoping for the rate to be maintained but others felt the RPGT would increase by another 5%. The current RPGT, imposed after Budget 2010, is 5% for all properties sold within the first five years of purchase.

Previously, from April 2007 until it was reintroduced in January 2010, all gains from property transactions have been exempted from the tax.

If the Government decides to reintroduce the RPGT in its entirety, property speculators will feel the heat as gains from property sales within the first five years of purchase will be subject to a tax ranging from 5% to 30%.

HwangDBS Investment Management Bhd head of equities Gan Eng Peng was quite pessimistic, and said he was expecting the Government to announce an increase in RPGT from the current 5% to 30% during Budget 2012.

“From a macro-economic perspective, the rise in RPGT is primarily to normalise the level of property prices and to avoid any bubbles from popping. Land and property prices in hotspots such as the Klang Valley, Penang and Johor have been on the rise over the last two years, ranging from 30% to more than 50% depending on location and type of property. Also, we can see a correction in property stocks in the last two months. These have signalled the peak of the local property cycle. As such, increasing the RPGT to bring the sector to a soft descent is a good move,” said Gan via email.

Gan said Malaysia would not be the only country in this region to end the property boom.

“China and Singapore are aggressively doing so as well, in order to engineer a softer landing for the properly sector after it soared to dizzying heights since the low interest rate environment kicked in after the 2008 global financial crisis.”

However, property analysts and tax specialists were less pessimistic, with some expecting an increase in RPGT to 10% at the most, and others predicting the RPGT to be maintained at 5%.

A local tax consultant said while an increase in RPGT was likely, it would not reach pre-April 2007 levels.

“Any increase should be minimal, perhaps by another 5%. This would help to curb property speculation and, at the same time, not hit the sector too hard,” he said.

A bank-backed property analyst concurred, and reiterated that the objective of an increase in RPGT was to “make speculators think twice before offloading their properties.”

“It is time for the property market to enter a downcycle and at this juncture, the upside to price appreciation is very much capped. Speculators may think that it is better to offload their properties and invest their capital elsewhere. Thus, the Government may be worried about a situation of forced selling next year where owners may sell their properties at near panicky prices after they are completed in 2012. I think an increase in RPGT is likely in order to ease the pressure of such an undesirable situation.”

However, KPMG Tax Services Sdn Bhd executive director Tai Lai Kok opined that the current 5% RPGT would be maintained.

“Increasing the RPGT would mean changing the rules too often and investors would not be impressed. Also, increasing the RPGT by another 5% would not do much in curbing property speculation. The additional rise in tax collection would not be that substantial.”

CB Richard Ellis (M) Sdn Bhd executive director Paul Khong agreed and said any increase in the RPGT would affect the confidence of investors, especially foreign property buyers.

“Investors would get the impression that there is no stability in policies concerning gains on the disposal of properties. Even if the RPGT is increased from 5% to 10%, the question of what next would arise. Would the RPGT increase again in 2013 or 2014?”

Khong said those who had bought properties when no RPGT was imposed might quickly exit the market.

“Investors, especially foreign property buyers, have other options in obtaining the best returns for their investments. They can always go to Hong Kong, Singapore, Australia and London,” he said.

Khong also pointed out that real estate in Malaysia was among the cheapest in the region.

He felt the Government should not change RPGT regulations too often, and should allow the property market to find its own equilibrium.

“Even a so-called minimal increase in the RPGT from 5% to 10% would curb speculation to some degree and result in minimal price appreciation for new properties, especially in the current slowdown scenario for the sector. However, this would not affect genuine buyer-occupiers.”


Foo feels that the current 5% RPGT should be maintained.

Property consultancy CH Williams Talhar & Wong Sdn Bhd managing director Foo Gee Jen felt that the current 5% RPGT should be maintained as the property market was entering a self-correction phase.

“The sentiment in the property market is weakened compared with the scenario two years ago. Any increase in the RPGT would be counter-productive as speculation has been dampened by the maximum loan-to-value (LTV) ratio of 70% for the third and subsequent house financing facilities,” said Foo.

Foo felt that rather than increasing the RPGT, a better measure to further curb property speculation might be to impose a maximum LTV ratio of 80% for the second housing loan.

Meanwhile, property consultancy DTZ Nawawi Tie Leung Sdn Bhd executive director Brian Koh said the government would need to balance between trying to curb a potential property bubble and ensuring a healthy growth in the property market.

“With the dimmer current economic outlook, the property market may be due for a soft landing. Revising the RPGT may be too little and too late and could also provide a tripping point if investors turn too negative.”

Bernama reported Tuesday that the Real Estate & Housing Developers' Association Malaysia (REHDA) hopes the government will not implement any major systematical change for the property sector in the 2012 Budget.

While applauding the current system, its president, Datuk Seri Micheal K.C.Yam said frequent changes in the taxation and property buying segment would disrupt the immense investment in property by both locals and foreigners.

He said a change, would deepen the negative perception of Malaysian legislation by foreigners, and even locals, that things are always changing.

"If the system keeps changing for every budget, then the confidence level for a person to invest in local properties will also be very low.

"Sustainability and standardisation of property taxes, as well as a market friendly environment, is very important for Malaysia to compete on the international arena," Yam said after the opening of the "Green Solutions for Property Development 2011" forum here today.

It was officiated by Housing and Local Government Minister, Datuk Wira Chor Chee Hueng.

He added that the result of an inconsistent system has resulted in only four per cent of households in Malaysia being owned by foreigners.

He said the current system was good in ensuring the competency of the local property market among neighbouring countries.

"However, the property segment players must be given time to adjust to a certain legislation system.

"Usually, when the players are ready to adopt a new system, it is then being enhanced or upgraded, thus, making it difficult for the property developers to put it into practice," he added.

Meanwhile, Yam said REHDA hopes the government will review the low cost housing scheme requirements and reconsider the release of unsold Bumiputera-property units, due to less demand from the respective quarter.

"This will enable the Malaysian property segment to be a more market and demand-driven," he said.

By The Star

Rehda optimistic of property market outlook

KUALA LUMPUR: The Real Estate and Housing Developers’ Association Malaysia (Rehda) is optimistic of the future prospects of the property market in Malaysia.


Datuk Michael Yam: Majority of developers expect prices to rise.

“For the first half of this year, the Rehda Property Industry survey for the first half 2010 showed that 62% of the developers were more optimistic of the market conditions compared with 43% for the second half of last year,” said Rehda president Datuk Michael KC Yam at a media briefing jointly held by Rehda and RAM Ratings Services Bhd yesterday.

The survey showed that 58% of the respondents had launched new projects in the first half of this year, a significant increase compared with 31% in the previous half, Yam said.

He said with the current favourable market conditions, the survey showed that 69% of the respondents would launch new products in the second half of this year.

“The majority of the developers also anticipated prices to rise in the next six months.

“About 41% said their properties will increase in value by less than 10%, while another 40% of the developers expect their property prices to increase from 10% to 20%,” he said.

On the opportunities in the housing industry, Yam said the financial sector has been accommodative.

“The banking sector is liquid, credit for construction players has improved and housing non-performing loans have declined,” he said.

Yam said the regeneration of brownfield sites and the improvement in government policies had also been lauded for contributing to the favourable market conditions.

He said although the business has gained momentum, the industry still faced challenges like the increase in the base lending rate, removal of subsidies and the high production cost.

Yam said the current state of the housing industry was simmering and not boiling.

“It is still business as usual, but it needs continuous government support and accommodative policies to ensure its stability,” he said.

RAM Ratings chief economist, Dr Yeah Kim Leng, said the current monetary and financial conditions were conducive for sustainable growth.

“Following a 10.1% gross domestic product growth in the first quarter of this year, and with second quarter growth estimated at 8.8%, Malaysia’s first-half GDP growth will likely hit 9.4% year-on-year,” Yeah said.

The Rehda survey is conducted twice a year to assess the current housing industry conditions faced by its members.

By Bernama

High-income economy: The impact on Malaysian properties

StarProperty.my spoke to Real Estate and Housing Developers’ Association (REHDA) chairman and Metro Kajang group managing director Datuk Eddy Chen about the New Economic Model (NEM) and addressing the housing affordability gap.


“I would suggest that the government raise the income of the government servants. They can lead the whole high-income movement,” says REHDA chairman Datuk Eddy Chen.

What are your thoughts on the recently unveiled New Economic Model (NEM)? Chen: I think that the NEM, if it is carried through is very good for the country. And it may be make market much more equitable. For example, let’s say if the Prime Minister said to take care of the bottom 40% of the people, irrespective of race, that would be good. Because then, you take care of Chinese, Indian and Malay as well. Then it is fair, because it is (on) needs-based.

The only grouse that we have is the pricing of low cost houses, which developers are subsidising RM15,000 to maybe RM20,000 per unit. We believe that there are not that many people who fall into that category now.

Out of the bottom 40%, how many percent of people will qualify for the low cost housing scheme?
Chen: It may well be 5% or maybe 10% of the 40% that falls into that category, which we believe the government is fully capable of taking care of these people via general taxation, without involving subsidies.

Because for subsidies, the costs are passed on to medium-cost house purchasers. They are footing the bill for this.

If the government takes care of low cost housing, would that mean that prices of houses would be lower?
Chen: Across the board, for developers, it is like this. We work on a margin. Say Metro Kajang, we look at land and we work backwards. I want a margin of say, 15%. Then (we) work backwards and price the house accordingly. So if take away low cost housing, certainly my margin will remain, but it may be at a lower absolute figure. Therefore, if you look at lower figure that means the price of houses is actually lower in absolute terms.

And of course, developers also do take into consideration the market demand of the house. If the market price is say RM500,000 per unit, the developer will price at RM500,000 per unit. (We) won’t overprice to RM600,000.

Or below, because if I invest in a property at RM500,000 and later if the subsidy of low cost housing is removed, my property’s value might remain or even drop.
Chen: Then you (will) find that following of buyers will reduce. So we try to price ourselves to the market but of course we work at a margin. So it is a dual thing – market and margin.

Because you see, in terms of affordability, the government can help in many aspects. You take away bumiputera quota. The 7% (bumiputera discount) subsidises the rich bumiputera as well as poor bumiputera. It is not (on a) needs basis. But if you do away with let’s say, anything above RM250,000, they will get a discount.

Some suggested instead of RM250,000, look at RM500,000. Any house above RM500,000, we do away with the bumiputera discount. That way, it will help affordability a lot more.

Bumiputera quota and low cost housing - if we take these away, developers will still work on a margin of some sort, and price to market. The absolute figure might actually come down.

That will help affordability and of course there are compliance costs like TNB (Tenaga Nasional Berhad), IWK (Indah Water Konsortium) and water capital contribution. All these are privatised entities. Developers come up with capital and they collect the long-term income. So perhaps look that they (utilities companies) fork out their own costs and price in their tariffs and take it back over the long term.

So at the end of the day, these are some of the things that can bring (property) prices down, make houses much more affordable and when we say affordable, we are talking about (property being) affordable to (the) middle class. Because they are the bulk of the population.

Yes, because they (the middle income group) don’t qualify for low cost housing and at the same time, can’t afford many of the properties built these days.
Chen: So, if we can take care of the middle class, which is probably the majority of Malaysians, I think the middle class may constitute 60% to 70% of Malaysians.

But even if the government does decide to do away with the bumiputera quota for properties above RM500,000, the middle income group is still stuck in the trap.
Chen: Everybody will get a lower price. The price will move to a new equilibrium if we can take away some of these structured costs. But over time, inflation will take over and will slowly push the cost up. So this is one way. Of course the other way is that NEM is talking about bringing Malaysia to a high-income economy. I think that is more critical, in the sense that, high-income must be linked with productivity and add value-add. Income must value-add and it must be more than the physical income.

Malaysia aims to make that quantum leap from the current USD7,000 per capita annual income to USD15,000 in 10 years. But in 10 years, property prices would’ve inflated quite a bit too!
Chen: (The) thing is that when we move up, the input into housing, the raw material, the service, the value-add will be more. Because of this value-add, price goes up. You may be looking at new technology of building houses. Better quality houses, more guarantees in terms of houses, guarantees in delivery system.

So if (we) transform the housing (industry), although it won’t be a revolutionised thing, but the incremental increase in quality, the specifications would certainly commensurate with (the) higher price. But then, of course you are earning higher income and salary. And (the) built environment will be much higher.

In 10 years’ time, we may not be building the same house. Quality is improving every day. (We) build greener homes, houses that save more water, save electricity, safer house. What is the point of having high-income if we stay in the same type of houses. So it must actually be meaningful. Everything must be better.

If you look at say Ringgit Malaysia, (it) will eventually go up. But be mindful that other countries such as Australia, Singapore might have gone up as well. So in relative term, we must move faster than Singapore or Australia. But the thing to us is that we have more room to grow than a matured economy.

You mentioned green homes. Fact is, it is not cheap to go green at the moment, be it for existing building or new buildings. Will this move be even more of a burden and enlarge the affordability gap?
Chen: Actually, (being) green will increase the price but we are looking at the incremental increase. Because the house cannot be totally green at the moment, so we could be looking at maybe increasing certain features over time.

Certainly we are hoping to incorporate green features that will help savings. For example, certain green features save electricity, use less light, use less water. And although the price will increase but over time you save. So we are working on is figuring out the feasible ROI (return-on-investment), and we are waiting for the feed-in tariff (FIT) to come from the government.

Do you have any idea of the percentage increase of income versus property prices?
Chen: Property prices tend to move faster than income, and many a time this is caused by little bit of speculation. For example, price of some houses I have sold in Kajang, prices have increased by maybe 200% over the last 20 years, but pay has not increased by 200%. In many instances, some (properties) have increased by 300% or 400%. But generally, pay has not increased much, especially for government servants.

Unfortunately for the poor people, there is a myth that the government is helping the low income people to own properties as an investment. But many low cost houses, when you look around, Kajang, Rawang, Kuala Langat, the low income people bought at RM42,000, and today they are selling only at RM20,000 to RM25,000. These poor people have become poorer! They are caught in the trap. We believe the government is wrong in that sense, to build low cost houses irrespective of location.

And low cost houses, the other problem is that there is lack of maintenance. People are not paying subscription, not painting the houses, no sinking fund. Some of these low cost houses, it is like a slum.

Somehow government must come to understanding that these poor people, maybe it is better for them to rent than to buy a house that is in a poor location with poor maintenance. So that is a myth that developers building low cost houses are helping them as an investment. As a home, yes of course, a roof over their head. But as investment, it is a losing proposition.

So, when household income increases, we will have a better quality of life. Apart from that, what are the other expected spin-offs when people have higher income?
Chen: Not just for housing (industry). I would suggest that the government raise the income of the government servants. They can lead the whole high-income movement. With more to spend, the Ringgit goes around to boost the economy. Imagine, they buy more things from hypermarkets. These hypermarkets now feature locally-produced items, which are purchased from SME (small and medium enterprises) in this country.

(When) the consumption increases, this has big multiplying effect. We need for studies to be done for this. That is the theory of it all. If you can move government servants’ salary (up), there is justification for everyone to move salary (up), to new income salary equilibrium. But it must all be done via productivity. For example, instead of taking six months to approve a plan, it takes three months instead. That is huge savings and that savings can be passed back to everyone else.

When (we) get everything (done) faster, on the global picture, Malaysia becomes that much more competitive. These are the things that income can help generate this kind of effect and government servants play (a) crucial role.

REHDA Property Forum 2010
The REHDA Property Leader Forum 2010 will take place on 22 – 23 April (Thursday and Friday). For inquiries or registration, call 03-7803 2978, email syahiidah@rehdainstitute.com / ong_huitse@rehdainstitute.com, or visit www.rehdainstitute.com

By The Star (StarProperty.my) by Sherry Koh
Posted on 21 April 2010

Compliance costs and property prices

In property development, there are various costs involved, but one of the largest costs is compliance costs. According to Real Estate and Housing Developers’ Association (REHDA) vice president and chairman of REHDA’s Kedah/Perlis branch Datuk Ricque Liew, a survey is being carried out and compliance costs might account for approximately 30% of the purchase price of properties.


REHDA vice president Datuk Ricque Liew

What are compliance costs?
Compliance costs refer to the cost of doing business while complying with regulations. The property industry is saddled with compliance costs such as capital contribution to utilities companies, regulatory controls, subsidising low cost units and the bumiputera quota.

Liew said, “In the last three to four years, (I have) been attending lots of things on behalf of REHDA. And thankfully the people in EPU (Economic Planning Unit) is listening and reviewing whether (it is) fair to impose all these (costs) on this particular industry. The problem with public perception is that (the) developer makes tonnes of money.”

Inequitable cost loading
Currently, infrastructure costs, such as piping for water and cabling for electricity, are borne by developers. Upon completion, developers then handover the responsibilities to the respective utilities companies. Liew said, “It is the cost of compliance that is loading to the house’s price.”

Liew opined that all service providers should contribute towards their respective capital infrastructure costs or capital expenditure (capex), as opposed to property developers installing the infrastructure. He also mentioned that the utilities companies can then recover costs through tariffs.

Low cost housing
In order to ensure that the private sector construct low cost housing, the Malaysian government, through the local authority, imposes 30% quota provision of low cost housing in every residential development.

Liew suggested a review as to whether the need for the quota on low cost housing is still necessary as Malaysia’s economy has grown and the low cost policy was set in the late ‘60s or early ‘70s. He also said that the government must recognise that things are different today, and that he has been engaging various industries on the notion of the Malaysian government resuming the responsibility of providing subsidised housing for its rakyat.

“Now, the government, under EPU, is looking at one-room, two-room, and three-room apartments. (I am) happy to note that they are going in the right direction. Like Singapore’s HDB, they monitor. (For example) young and married couples only need 1-room apartment. Once (they) need to upgrade and move into a 2-room unit, (they can) return to (the) housing development board to redistribute the (1-room) unit for people with similar needs,” Liew elaborated on Singapore’s approach.

Liew sums it up
“Compliance costs (are) much higher (in Malaysia) compared to other countries. Singapore does not have these types of compliance costs. The Singapore Government through HDB takes care of social housing,” he explained.

Liew summed it up, “Most immediate, (we should) remove (the) need for developers to provide low cost housing. Two, cap the (bumiputera) discount to certain products below, for example, RM350,000. Utilities companies can recover costs based on consumption, meaning to increase tariff.”

REHDA Property Forum 2010
Datuk Ricque Liew, an interesting and animated speaker who supports the GST (Goods and Services Tax) and is an advocate for non-subsidised petrol, water and electricity, will be sharing more of his views on “Coping with Increased Compliance Costs” at the 2-day REHDA Property Leader Forum 2010. The forum will take place on 22 – 23 April (Thursday and Friday).

For inquiries or registration, call 03-7803 2978, email syahiidah@rehdainstitute.com / ong_huitse@rehdainstitute.com, or visit www.rehdainstitute.com

By The Star (by Sherry Koh)

How competitive are Malaysian properties in the global market?

StarProperty.my asks CB Richard Ellis Malaysia Sdn Bhd managing director Allan Soo on how Malaysia can enhance its competitiveness in the property industry.


CB Richard Ellis Malaysia Sdn Bhd managing director Allan Soo will be speaking at the REHDA Property Leader Forum, which will take place on 22 – 23 April.

Malaysia’s place on the Global Competitiveness Index (from the Global Competitiveness Report, a yearly report published by the World Economic Forum) had dropped to 24th in 2010 from 21st previously, indicating that the country is becoming less attractive as an investment destination. How much has this affected the property sector?
Soo: Actually for a while after the Lehman Bros crisis, most of the investment funds who were here left Asia, not just Malaysia. Now some have come back but there is still some difficulty in raising capital, particularly in Europe, so the numbers are substantially less compared with 2007.

Malaysia was also not immediately back in the map as many funds moved into new areas like Vietnam and India. However, now they are back here as we have a larger and better quality asset base to invest in, compared with Vietnam which is still so young as a market.

What has contributed to the decrease or increase in Malaysia’s attractiveness,
in terms of property investment?
Soo: There is no change in our attractions in terms of assets but the fact that there is now no requirement for FIC (Foreign Investor Committee) approval and that foreign funds can acquire 100% equity in a property has made Malaysia certainly very attractive.

Where are most of the foreign investors from?
Soo: Many are regional funds, mainly from Singapore.

Why are they the largest percent of investors in properties in Malaysia?
Soo: The original restrictions on local funds by our authorities limited their ability to compete with international funds, particularly our REITs (Real Estate Investment Trusts). Pricing was a problem as foreign funds could offer lower yields than our REITs.

As a result foreign funds have been leading the market as far as yields and prices are concerned. Now our local funds are still looking at 7% and above, and this may be an obstacle if foreign funds start pushing the yields down.

What types of properties do most foreigners invest in?
Soo: Mainly retail centres and commercial buildings with running income streams. Most would prefer prime assets although some individual funds have appetites for even assets in smaller towns.

What are the key reasons foreigners invest in Malaysian properties?
Soo: They are investing here as yields are attractive and as the rents are steady. Plus many of our buildings are of international quality.

What are the important drivers or determinants of making Malaysia a more property-competitive country?
Soo: We need a comprehensive public transport now, to make properties more attractive. Properties in Singapore which are near MRT (Mass Rapid Transit) stations actually showed the highest price growth rates in the last 5 years and some even went up during the global crisis.

We also need to reduce the crime rate for the cities here to be more liveable. On top of this, we need to cut the red tapes and improve our IT connectivity. This will attract more FDI’s (Foreign Direct Investment) and increase our expatriate market, which in turn will increase office and condo rents and then prices. It’s really not about the properties themselves – we are already pretty good in design and construction. It’s more about the supporting amenities and infra(structure).

There have been some changes in our regulatory framework (such as RPGT, FIC guidelines). Did it impact the property industry?
Soo: The new RPGT caused some confusion initially but that has now cleared and has had almost no effect on foreign acquisition. FIC has now been disbanded and that has made us very attractive.

How do the regulations in foreign ownership compare to our neighbours?
Soo: We are much more attractive compared to the rest of the region.

Some argue that high-end properties will rise because that is the segment foreigners will invest in. Should there be substantial restrictions in the residential and/or commercial sector for foreigners?
Soo: No. We need a bigger share of the FDI’s and foreign investments to make our market more robust. Remember it is because we are part of a regional map that we are attractive.

It is reported that there is a decrease of expats in Malaysia. Has this impacted the property industry in any way?
Soo: Rents have started to come down for high-end condominiums.

In Singapore, the high price of quality residential projects is the result of foreign purchasing, which has pushed properties beyond a lot of Singaporeans' affordable level. Will this happen to Malaysia?
Soo: This could happen here and in fact KLCC(Kuala Lumpur City Centre) prices are beyond the reach of ordinary Malaysians. But we have 1.63 million housing units and only 5,600 of these are in KLCC. That is a small percentage going to foreigners and a small percentage beyond ordinary Malaysians. I don’t see areas like Puchong attracting foreigners and becoming impossible for Malaysians.

REHDA Property Forum 2010
Allan Soo has a laudable record in retail, research and development consultancy. He is a regular contributor to trade journals and will be speaking on “Competitiveness of Malaysian Properties in the Global Market” at the REHDA Property Leader Forum 2010. The forum will take place on 22 – 23 April (Thursday and Friday).

For inquiries or registration, call 03-7803 2978, email syahiidah@rehdainstitute.com / ong_huitse@rehdainstitute.com, or visit www.rehdainstitute.com

By The Star (StarProperty.my) (by Sherry Koh)

Green strategies to be communicated at Malaysia’s first carbon-neutral property conference

Coming together for a green cause. Minister of Housing and Local Government Y.B. Dato’ Seri Kong Cho Ha (seated, third from left) holding a sample of an environmentally compliant certificate.

REHDA (Real Estate and Housing Developers Association Malaysia) Institute, EAROPH (Eastern Regional Organisation for Planning and Human Settlement) Malaysia, and Sime Darby Property is organising Malaysia’s first carbon-neutral real estate conference - Green Solutions Property Conference 2010.

At a media briefing on the conference on March 11, Minister of Housing and Local Government Y.B. Dato’ Seri Kong Cho Ha stressed on the importance of mitigating climate change and global warming.

“Energy saving technology, rainwater harvesting and so on; these topics will be discussed in detail at the Green Solutions Property Conference. Speakers will talk on various topics and incentives by the government to promote green technology in both building centres and property centres,” Kong added.

He also commended on Sime Darby’s involvement, as it shows industry players’ commitment in supporting our Prime Minister’s call for a 40% GHG (Green House Gases) reduction by 2020.

Mr Lincoln Lee, Chairman of EAROPH GTi as well as the conference’s organising chairman, feels that the conference and its content are both timely and vital to Malaysia’s current building industry.

“40% or more of our carbon footprint is from the building industry. If you go green, it doesn’t mean that it’ll cost you more – in fact it can even make you further revenue. It forms a real shift of paradigm in all industries,” Lee says.

Director of REHDA Institute, Mr Y. K. Wong, believes the element of carbon neutrality will play a major role in the effectiveness of the conference and hopes that it will provide a tangible example of what is demanded of contemporary industry professionals. He says it symbolises the “plausible future trend in housing, namely going green and reducing carbon emissions in the process.”

The conference will be held on April 6 at Sime Darby Convention Centre and will be Malaysia’s first carbon-neutral real estate conference. It will also be included into the Malaysia Book of Records.

There will be seven speakers at the conference and they are:
• Ar Dr Tan Loke Mun, Director of ArchiCentre Sdn Bhd and Chairman of PAM Green Building and Sustainability Committee

• Mr Matthias Gelber, Initiator, Maleki GmbH, Germany

• Mr Jason Pomeroy, Director of Broadway Malyan, Singapore

• Mr Lincoln Lee, Chairman, Council of EAROPH-GTi (Green Technology Innovation) and Executive Director of Lucas Works Sdn Bhd

• Ms Ng Say Guat, Executive Director of Pricewaterhouse Coopers Taxation Service Sdn Bhd

• Mr B. K. Sinha, Founder and Director of C2C Project Managers Sdn Bhd

• Mr Ed Cotter, Head of BREEAM Communities

For more information on Green Solutions Property Conference 2010, call 03-7803 2987 or send an e-mail to syahiidah@rehdainstitute.com / ong_huitse@rehdainstitute.com

By The Star

Associations urge govt to forestall property gains tax

REAL-ESTATE and Housing Developers Association (Rehda) along with two other associations, have petitioned the government to forestall the implementation of Real Property Gains Tax (RPGT) come January 1 2010.

The RPGT will return next year at a fixed 5 per cent after it was scrapped in 2007, following the 2010 Budget announcement on October 23.

Rehda patron Datuk Eddy Chen told reporters yesterday that three associations, Rehda, the House Buyers Association and Associated Chinese Chamber of Commerce and Industry, sent a memorandum to the government last week, as a last ditch effort to stop the implementation of RPGT next year.

He was speaking at the "Conversation with Industry Leaders - Expectations and Perceptions of 2010 Outlook" forum yesterday, held during the two day 14th Malaysian Capital Market Summit 2009, organised by the Asian Strategy & Leadership Institute.
Chen said inconsistencies in policy making, such as in the case of the RPGT, would drive foreign investors away.

"For example, RPGT was abolished some two years ago, and developments became attractive to foreigners, now that the building is completed, we are slapped with the 5 per cent RPGT," he said.

Rehda is expecting flat overall growth for the real estate sector going forward, as certain segments of the markets flourish, while other suffer.

Chen said, while buyers who are owner-occupiers are doing well, investment type properties are facing problems.

By Business Times (by Presenna Nambiar)

Rehda Penang seeks aid for first-time house buyers

A RM10,000 grant for first-time buyers of affordable homes is being proposed by Penang property players to the government for consideration in Budget 2010.

Real Estate and Housing Developers' Association, Penang Chapter (Rehda Penang) chairman Datuk Jerry Chan said the grant can be considered for properties which fall below a certain price range.

"The hard-core poor can also be helped in owning houses via the setting up of a revolving fund," he told Business Times.

He said the fund can be tapped by those who qualify to pay nominal rental on properties which can later be converted as payment for the said houses.
Chan said these proposals would be incorporated into a master-list of requests which the national-level Rehda will submit to the federal government.

The Penang chapter of the association is made up of some 70 over property players, some of whom are the country's top developers.

Chan said also on Rehda Penang's wish list for Budget 2010 is a request for the waiver of stamp duty.

"We are also asking the federal government to consider taking over the provision of low-cost housing," he added, saying that just like healthcare and education, the provision of housing for the poor should also be assumed by the government.

"The private sector," Chan noted, "should not be asked to build low-cost housing and this social responsibility should be taken over by the government."

Meanwhile, commenting on a recent annoucement by the Penang government of its decision to revise the plot ratio for high-rise developments on certain parts of the island, Chan said:

"This move will now allow for a different pricing structure which will fill the gap between very expensive landed property, very expensive super condominiums and low-medium cost accomodation."

The Penang government two weeks ago announced the plot ratio revision during a Rehda Penang event.

Chan said that previously, a ratio of less than 1.0 time was applied (to medium-cost housing of between 700 and 1,400 sq feet) will now be revised to 2.8 times for certain areas.

This will place Penang on par with Singapore where a 2.8-time plot ratio policy applies. In the Klang Valley the plot ratio for certain high-rises stands at between 4 and 6 times, while the Kuala Lumpur City Centre boasts a plot ratio in excess of 6 times.

Chan said the request to review the outdated policy was made by Rehda Penang earlier this year, and the association is now awaiting official notification from the state government.

On whether the revision of plot ratios would also apply to landed property, Chan said the state is willing to consider the removal of backlanes for terrace-houses (which sometimes make up 15 per cent of the total build-up area) on a case-by-case basis.

By Business Times (by Marina Emmanuel)

Klang Valley property expo kicks off today

The Real Estate and Housing Developers' Association Malaysia (Rehda) will team up with its Federal Territory and Selangor chapters to organise the second Klang Valley Malaysian Property Exhibition (Mapex) 2009 in Kuala Lumpur from today to Sunday.

Themed “Go Green”, the event is expected to provide a platform for property developers to market their green projects as well as encourage them to design and construct green, sustainable buildings.

By Business Times

Rehda, MBAM appeal against stamp duty

KUALA LUMPUR: The Real Estate and Housing Developers’ Association Malaysia (Rehda) and Master Builders Association Malaysia (MBAM) are appealing against the Government’s recent decision to apply ad valorem stamp duty of 0.5% for second-tier private as well as Government contracts from RM10 previously.

In a statement, Rehda urged the Government to abolish this imposition as it was burdening members of the building fraternity, including contractors, consultants and developers.

President Datuk Ng Seing Liong said with the stamp duty of 0.5%, a construction contract of RM10mil would now attract ad valorem duty of RM50,000 while previously only a nominal duty of RM10 per document was imposed regardless of the contract amount.

“This would definitely push up building costs,” he said.

Rehda is asking the Government to consider exempting the imposition of the new stamp duty rate on all service agreements without security including consultancy, operation and maintenance contacts.

In a separate statement, MBAM president Ng Kee Leen said the duty was exorbitant as Construction Industry Development Board also imposed a levy of 0.125% on a construction contract.

“The ruling would cost the construction industry an additional RM300mil per annum, which is burdensome,” he said.

MBAM appealed to the Government to consider reverting to the old stamp duty of RM10.

By The Star

Easier stamp duty rules but building cost higher

The government has slightly loosened rules that will lower the stamp duty for the construction sector, but industry players want things to return to the way it was last year.
Consulting engineers, architects, property developers and contractors say the government's latest stand raises the cost of doing business and hurts efforts to stimulate the economy.

Under Budget 2009, the government said it wanted to simplify stamp duty assessment. However, it turns out that industry players have to pay more.

From January 1 this year, they will have to pay 0.5 per cent duty on all construction services agreements that do not require collateral.

This covers consulting contracts, operation and maintenance contracts, maintenance contracts and facilities services contracts.

It means that a RM10 million construction contract will attract total stamp duty of RM50,000. Previously, the stamp duty on an ordinary service agreement was just RM10.

On Wednesday, the Finance Ministry said on its website that main contractors with government contracts do not have to pay the 0.5 per cent stamp duty.

But subsequent contracts between the main contractor and subcontractors are not exempt and further subcontracts are charged a RM50 flat fee.

"The Finance Ministry, by insisting the private sector pay such astronomical sums in stamp duty, will cause many professionals in the construction industry to face cash flow problems," Association of Consulting Engineers (Acem) president Dr Abdul Majid Abu Kassim said.

Master Builders Association Malaysia (MBAM) president Ng Kee Leen said that contractors are already paying a levy of 0.125 per cent on construction agreements to the Construction Industry Development Board.

This money is used to train and develop construction executives.

"Why are we paying four times more to the Inland Revenue Board? What will the money be used for?" Ng questioned.

Real Estate and Housing Developers' Association Malaysia (Rehda) president Ng Sieng Liong said the higher stamp duty will push up renovation costs.

"Properties will also become more expensive after factoring in these extra costs," he said.

Malaysian Institute of Architects (MIA) president Lee Chor Wah concurred with Abdul Majid.

"The amendment was supposed to simplify stamp duty assessment, but it has turned out to frustrate business investments instead. The July 15 announcement is worsening the recession we're facing," Lee said.

Already, more than half of its member architects have had to take job and pay cuts amid the tough economic climate.

Acem, MIA, Rehda and MBAM are renewing their appeals to the government to revert to last year's flat fee of RM10.

By Business Times (by Ooi Tee Ching)