SP Setia in China JV project

KUALA LUMPUR: SP SETIA BHD's subsidiary is teaming up with China's Hangzhou Ju Shen Construction Engineering Ltd to undertake a mixed real property development project in XiaoShan, Hangzhou.

It said on Wednesday, Oct 28 its subsidiary, Setia (Hangzhou) Development Co. Ltd and Hangzhou Ju Shen would set up a limited liability joint-venture company to undertake the project on 25 acres of land there, of which five acres would initially be developed under the first phase.

"The management of SP Setia is of the view that the JV Contract will further drive the Group on its way towards achieving its overseas expansion ambitions supported by the success and awareness generated through its maiden international, integrated commercial and luxury high-rise development projects," it said.

SP Setia said the JV contract also provided an important opportunity for the group to start off with a small presence in the fast-growing Hangzhou property market and progress from there to the larger China market.

In view of the above, the JV contract augurs well for the company and is expected to contribute positively to the future earnings and cash flow of SP Setia.

By The EDGE Malaysia (Joseph Chin)

Mixed reaction to property tax

PETALING JAYA: The Government’s proposal to reimpose the real property gains tax (RPGT) may ensure a more balanced property market in the long run but industry players see it as counter-productive to the ongoing efforts to stimulate investments in the property sector.

Under Budget 2010, the RPGT of 5% would be imposed from Jan 1 on gains from the disposal of real property irrespective of the holding period and category of owner.

Prior to the exemption of the RPGT in April 2007, tax on gains from property sales was on a progressive basis from 30% to 0% depending on the holding period of the property.

Industry players and analysts see the reinstatement of the RPGT as premature when the property market is just recovering from the global financial crisis.

However, they hope the move to allow Employees Provident Fund (EPF) contributors to utilise their current and future savings in Account 2 for home purchase would compensate for the imposition of the RPGT.

Datuk Ng Seing Liong ... RPGT will adversely impact fragile market’s confidence level

Real Estate and Housing Developers Association (Rehda) president Datuk Ng Seing Liong said re-instating the RPGT after a brief exemption period of less than three years would adversely impact the already fragile market’s confidence level among investors, both local and foreign.

“Worse, the move is also a reinforcement of Malaysia’s infamous ‘flip-flopping’ property investment policies,” Ng added in a statement yesterday.

He urged the Government to review the RPGT proposal and carefully study the cost-benefit analysis of such a move before its implementation.

Rehda also viewed the re-imposition of RPGT at 5% irrespective of number of years of acquisition as “punitive to owners of existing housing units who may have bought their properties decades ago.”

Ng said the owners might want to sell their houses to upgrade to better properties or to relocate.

HwangDBS Vickers Research said in a note yesterday the property tax was a “negative surprise” and would “dampen the velocity of transactions”.

Concurring with the view, CIMB Research said the 5% RPGT “was a shock to us as the Government had suspended RPGT 2½ years ago to give the property sector a boost and attract foreign purchasers.”

Although the real property sector had enjoyed some measure of recovery in the past three to six months, the research house said transactions remained subdued and many developers had yet to undertake new project launches.

“The RPGT of 5%, although low, could make developers pause and gauge market conditions before taking the plunge, which would push back their earnings recovery. Also, the re-imposition of RPGT may stir fears of more RPGT increases in future years, which could have a compounding dampening effect on the sector,” CIMB Research added.

ECM-Libra described the reinstatement of the RPGT as a “shocker.”

“This may dampen property buyers’ sentiment and may deter speculative activities to a certain extent,” it said in a note yesterday.

According to Mah Sing Group Bhd group managing director Tan Sri Leong Hoy Kum, the waiver of RPGT since April 2007 had been effective in boosting sentiment and increasing domestic and foreign demand in the local property market as it had lowered the cost of property sales.

As Mah Sing catered mainly to first-time home buyers, owner-occupiers and the upgraders’ market, Leong said it would not bear the brunt of the impact of the RPGT.

SP Setia Bhd president and CEO Tan Sri Liew Kee Sin said:”We cannot assume that purchasers who have bought these properties are going to sell upon completion. Many are first time buyers looking to set up a home and we also have many purchasers who are upgraders.”

Liew said at 5%, the RPGT would not significantly impact decisions to buy or sell properties, regardless of the holding period.

“RPGT is a tax on gains derived and not proceeds received from the disposal of real property. The reimposition of the tax by the Government at this time indicates their confidence in the health of the sector and also that there are decent gains to be made from property transactions,” Liew added.

Sunway City Bhd managing director of property development Ngian Siew Siong concurred that a tax rate of 5% “is very minimal and should not be a deterrent to buyers and investors.” “Malaysia’s property prices are still comparatively lower than those in other regional countries,” he said.

However, Ngian wants gains from properties acquired more than five years ago to be exempted from tax, pointing out that those who kept their properties for over five years comprised mainly owner-occupiers and long-term investors who did not speculate in the property market.

“After all, the RPGT was introduced to curb speculative buying and as such, owner-occupiers and non-speculators should not be burdened by it,” he said.

By The Star (by Angie Ng)

Real property gains tax and green tech incentives

This is the final of a three-part question-and-answer series provided by PricewaterhouseCoopers on various aspects of Budget 2010

Q. I have owned my house for 10 years. I am thinking of selling it next year, or maybe consider giving it as a gift to my son. I am a Malaysian citizen. Will I need to pay real property gains tax (RPGT)? At what rate? Will there be any special exemptions available to me?

A. If you sell the property, the rate of RPGT applicable would be 5% of the chargeable gain as per the intention of the reintroduction of RPGT.

As an individual, under the Budget proposals, you will be entitled to an exemption of RM10,000 (previously RM5,000) or 10% of the chargeable gain, whichever is the higher.

You are entitled to a once in a lifetime exemption from RPGT for disposal of a private residential property. If you give the house to your son as a gift, you will be exempted from tax, as it is proposed that all gifts of real property between parent and child, husband and wife, grandparent and grandchild would be exempt from tax.

I took a loan to finance the purchase of a piece of property a few years ago. If I sell my property, can I incorporate the interest that I have been paying on the loan as part of the purchase price of the property when calculating the RPGT liability?

Based on the proposals in the Finance Bill 2009, you will no longer be able to include any interest incurred on capital employed to acquire the asset as part of the acquisition price of your property in calculating the RPGT liability.

I sold a piece of property in January 2007, which at the time, resulted in a loss to me for RPGT purposes. However, the government then announced the RPGT exemption from April 1, 2007 onwards. As a result, I have not been able to utilise the tax relief from that RPGT loss ever since. Can I still use that tax relief when RPGT is imposed again from next year?

Based on the transitional provisions proposed in the Finance Bill 2010, if you were entitled to a tax relief for RPGT purposes and have not utilised that tax relief at March 31, 2007, you will be entitled to claim that relief as a deduction against any RPGT assessed in the first year of assessment subsequent to the year of assessment 2009, and so on for subsequent years of assessment, until the whole amount of the relief is fully allowed as a deduction.

The principal activity of my company is the manufacture of food products. The board of directors decided to register trademarks of some of our products with the Domestic Trade and Consumer Affairs Ministry. I understand that the recent budget announcement proposes that the expenses incurred on the registration of trademarks in Malaysia will be allowed as tax deduction for purposes of income tax computation. Can you please confirm?

The proposed tax deduction on the expenses incurred on the registration of trademarks will only apply to companies which have a paid-up capital in respect of ordinary shares of RM2.5mil and less at the beginning of the taxable period.

Note that the company should not be related to a company which has a paid-up capital in respect of ordinary shares of more that RM2.5mil at the beginning of the taxable period.

In addition, the company should not have full-time employees exceeding 150 persons nor annual sales turnover exceeding RM25mil respectively.

The registration expenses include fees or payments made to trademark agents registered under the Trade Marks Act 1976.

This deduction is essentially targeted for small and medium enterprises. This proposal is effective from Year of Assessment 2010 to 2014.

To expand the use of green technology, the government launched the Green Building Index (GBI) on May 21, 2009. Can you elaborate on what GBI pertains to and some of the tax incentives available.

GBI was developed by Pertubuhan Akitek Malaysia and the Association of Consulting Engineers Malaysia.

Under the GBI assessment framework, points will be awarded for achieving and incorporating environment-friendly features which are above current industry practice.

Two different sets of GBIs have been developed for both commercial and residential properties.

The assessment criteria include:

·Energy and water efficiency

·Indoor environmental quality

·Sustainable management and planning of building sites in respect of pollution control and facilities for workers

·Usage recyclable and environment friendly materials and resources

·Adoption of new technologies

As a measure to encourage the construction of buildings using green technology, it is proposed that the owners of buildings awarded the GBI certificate be given exemption equivalent to 100% of the additional capital expenditure incurred to obtain the GBI certificate.

This incentive is applicable on new buildings and upgrading of existing buildings.

The proposal is effective for buildings awarded with GBI certificate from Oct 24, 2009 until Dec 31, 2014.

Further details on GBI can be viewed at http://www.greenbuildingindex.org.

By The Star

Rush to beat property gains tax deadline

Thinkproperty.my has reported an unusually high number of new listings after the 2010 Budget announcement as well as a high number of price cuts for properties on sale

The reintroduction of a real property gains tax (RPGT) from January 1 next year appears to have triggered a rush to sell properties but agents said it will be very tough to beat the deadline.

Thinkproperty.my, a website that lets people advertise their properties for free, said it has seen an unusually high number of new listings after the 2010 Budget announcement.

There have also been a high number of price cuts for existing properties that are on sale. However, it did not provide detailed numbers.

Last Friday, Prime Minister Datuk Seri Najib Razak said the RPGT will return next year at 5 per cent after it was scrapped in 2007.
But agents think it is just a knee-jerk reaction. Property consultant Sharizal Supian said a property deal takes between three and six months to complete, which means it will be very hard to beat the January 1 deadline.

The RPGT has not been well-received as many think it would halt the growth of the property market.

Thinkproperty.my chief executive officer Asim Qureshi believes the re-introduction of the tax has been a year or two too soon.

"We need some of the feel good factor to gain momentum and this tax can only slow down that momentum.

"Furthermore, I believe that having a tax exemption for property owned for a certain number of years would be better as the tax would target property speculators," he said in a statement.

Asim said Malaysia is increasingly seen as an international property hot spot and the RPGT will somewhat undermine that view.

However, he thinks that at 5 per cent, the reintroduction has been gentle and it may not significantly disrupt the market.

"In terms of opportunity, it will be a good time to buy in the secondary market from now until year-end which is where the tax will have its most direct impact," he said.

Emkay Group chief oper ating officer Peter Teh has a different take. He thinks that any sudden surge in sales in the next few months would be mainly due to a recovering property market.

He said the tax will not deter serious home buyers. "They are also not really buying now but over a few years and they will not fell the pinch as it will pass through in the next coming years."

Property stocks took a beating yesterday as the property tax was "a negative surprise" to investors, analysts said.

IJM Land Bhd, the country's fifth biggest property developer, fell 2 per cent to RM2.44, while Sunrise Bhd slid 4.6 per cent to RM2.28. Eastern & Oriental Bhd shed 6.5 per cent to RM1.15.

By Business Times (by Zaidi Isham Ismail)

Flurry of property transactions on the cards

KUALA LUMPUR: The proposed flat tax rate of 5% on gains from any property transacted, irrespective of the number of years it is held before being sold, is expected to create a spike in transactions of property held for five years and more, said a tax consultant.

The consultant said that in a bid to minimise the effects from the tax that was proposed in the Budget 2010, the number of property transactions is expected to significantly increase over the next few weeks leading up to the end of the year.

The proposed tax is to take effect from Jan 1, 2010.

In tandem with developments that are expected to negatively impact the property sector, stock prices of property counters on Bursa Malaysia have declined.

The property index fell 15.12 points to 805.26 with IGB Bhd and IJM Land Bhd being the top losers. IGB, which is the ultimate parent company of MegaMall and Properties surrounding it in Mid-Valley, shed 14 sen to close to RM2. IJM Land, which is fast gaining ground as the next “S P Setia”, lost 12 sen to close at RM2.37.

The tax consultant said that medium- and long-term property investors and companies holding property for more than five years would dispose the property within the next few weeks.

The consultant said that since 1976 when the real property gains tax (RPGT) was introduced, property transacted after five years of ownership were not taxed.

“But the new proposal calls for tax on all property transacted irrespective of the number of years it is held. This will disadvantage those holding properties for more than five years and that have seen an appreciation in its value,” said the consultant.

He cites an example of a person or company that has held a property for more than five years and looking at a gain of RM1 million.

“After Jan 1 next year, the tax would be equivalent to RM50,000 for a gain of RM1 million. If the property is transferred before January 2010 for say RM1 million and sold a year or two later for about RM1.1 million, the tax will only be on the gain of RM100,000 which is RM5,000,” said the consultant.

However not all are of the view that the ruling would spark a slew of transactions by people owning property for more than five years.

KGV-Lambert Smith Hampton executive director Samuel Tan said that it was too early to tell whether there would be a spike in property listings or transaction.

“But I foresee people becoming more careful when it comes to purchasing and selling a property, thus slowing down the momentum we are just starting to gain which is detrimental to our marke,” he said.

However, nearly all players in the property sector agree that the proposed tax was not fair to long-term holders of property.

According to YY Lau, a director of YY Property Solutions General, the people who are being penalised are those who own properties for many years.

“Long-term owners will feel discriminated. When they bought their properties 20 to 30 years ago, they were not told they will have to pay a 5% RPGT. That is why, there should be an exemption for properties owned for more than five years.”

He also said that it was not clear as to why the RPGT would be imposed.

“If it meant to curb speculation, then I’m afraid it’s counter-productive. In fact, it will encourage speculation, as there is no difference whether you sell within a year or five years like previously where a progressive rate based on the years of ownership was in place. If there is no differentiation, what’s to stop a speculator from selling and buying?”

Raine & Horne International Zaki and Partners Sdn Bhd executive director Lim Lian Hong expected the proposed tax to be an immediate shocker but in the long run, it won’t be a big deal.

“However, this will affect those who own properties for longer number of years. If you bought a house over 30 years ago, the prices would have appreciated and it would cut into the profit they will make from the sale. The government needs to take another look at the ruling as tax should not be imposed on properties owned for more than five years.”

By The EDGE Malaysia (by Jacqui Chan)

Exemption order on real property gains tax likely this week

The Finance Ministry is expected to come up with an exemption order on the Real Property Gains Tax (RPGT) this week to clear the confusion surrounding the RPGT proposal.

Under the 2010 Budget, the government proposed a fixed tax rate of 5 per cent on gains from the disposal of real properties effective January 1 next year.

However, based on the Finance Bill, disposals within two years of acquisition will be taxed 30 per cent, 20 per cent in the third year and 15 per cent in the fourth year, while disposals within five years and beyond will still be subjected to 5 per cent.

"As far as the Act is concerned, the rate is still there, which is 5 to 30 per cent. Exemption order has yet to be gazetted but it is coming out very soon, maybe around this week," the Finance Ministry's Under Secretary, Tax Analysis Division, Siti Halimah Ismail, said in Kuala Lumpur yesterday.
She was speaking to reporters after the 2010 Post Budget Dialogue, organised by the Malaysian Economic Association and University of Malaya's Faculty of Economics and Administration, and supported by Standard Chartered Bank Malaysia Bhd.

By Bernama

SP Setia: Pact execution extended to Feb 20

PROPERTY developer SP Setia Bhd said its wholly-owned unit KL Eco City Sdn Bhd and Datuk Bandar Kuala Lumpur (DBKL) have agreed to extend the period for the execution of a privatisation agreement up to February 20 2010.

Both the parties were supposed to execute the agreement within two years from the date of a memorandum of understanding (MOU) entered on August 21 2007.

Under the MOU, SP Setia has agreed to pay, through DBKL, compensation to a maximum of 600 squatter families amounting to RM3.6 million for the land near Mid Valley in KL, to be developed into a mixed residential and commercial development as a privatisation joint-venture project.

By Business Times

SP Setia in Viet deal

SP SETIA Bhd, through its subsidiary, Setia Lai Thieu Ltd, has signed an agreement with Investment and Industrial Development Corp for the assignment of 27 acres of land worth US$16.26 million (RM54.96 million) in Lai Thieu Town, Vietnam.

The land will be developed into a US$250 million (RM845 million) mixed-use project, which is expected to take six years to complete.

The development will include shop houses, commercial centres, a club house and apartments.

Lai Thieu Town is located 16km north of Ho Chi Minh City and an hour’s drive from Tan Son Nhat International Airport.

This will be SP Setia’s third project in Vietnam.

By Business Times

SP Setia plans Vietnam project

PETALING JAYA: SP Setia Bhd plans a mixed property project with gross development value of US$250mil in Vietnam.

SP Setia said its subsidiary, Setia Lai Thieu Ltd, had entered into an in-principle agreement with Investment and Industrial Development Corp (Becamex) for an independent mixed-use real estate project in Binh Duong Province.

“It shall entail a mixed development of about 1,700 units comprising shophouses, terrace houses, semi-detached houses, commercial centres, a clubhouse and apartments,” it said in a filing with Bursa Malaysia.

The project would be on 26.79 acres and would be transferred from Becamex to a newly-formed company for US$16.26mil, it said.

“The US$16.26mil was arrived at by aggregating all the costs and expenses for compensation and payment of all land-related fees,” it added.

By The Star

Builders fall on property tax

KUALA LUMPUR: IJM Land Bhd led real estate stocks lower and builders fell after Prime Minister Datuk Seri Najib Tun Razak imposed a capital gains tax on property and the Government cut development spending.

IJM Land, Malaysia’s fifth-biggest developer, slid 5% to RM2.37 while IGB Corp lost 6.5% to RM2.

The property tax was a “negative surprise” and would “dampen the velocity of transactions,” HwangDBS Vickers Research Sdn Bhd said in a report.

The Government aims to bolster revenue and cut spending to help trim a budget deficit to 5.6% of gross domestic product next year from a 22-year high of 7.4% in 2009.

Malaysia planned a 5% capital gains tax on property from January to help broaden the base of revenue collection, Najib said last Friday. Development expenditure will be reduced by 4.4% to RM51.2bil next year.

Gamuda Bhd, Malaysia’s second-biggest construction company, lost 1.4% to RM3.30, set for the biggest decline since Oct 9. IJM Corp Bhd dropped 1.2% to RM4.86.

“Although we believe the property market has bottomed, we view this measure came too soon,” Citigroup Inc said in a report yesterday, referring to the property tax. It’s a “negative for the sector as it would curb buying interest.”

Sunway City Bhd and Sunrise Bhd had their stock ratings cut to “hold” from “buy” by HwangDBS, which also lowered the target prices of SP Setia Bhd, DNP Holdings Bhd and Eastern & Oriental Bhd.

Shares in Sunway were unchanged while Sunrise fell 4.6% to RM2.28. SP Setia lost 1.3% to RM3.81, headed for the lowest level since July 13. DNP sank 6.6% to RM1.41 and Eastern & Oriental declined 6.5% to RM1.15.

“The Government needs to ensure that the Malaysian tax system is equitable and able to generate revenue for development purposes,” Najib said in his budget speech. Property tax exemptions for families would remain, he said.

Malaysia scrapped a three-decade old capital gains tax on property in April 2007 in a bid to help clear a backlog of unsold homes and attract overseas funds.

Previously, the capital gains tax on property was 30% within the first two years, falling to 5% by the fifth year. For foreigners, the old tax started at 30% for the first five years, dropping to 5% in the sixth and subsequent years.

Neighbouring Singapore said in August it wouldn’t proceed with an earlier plan to impose a tax on some property transactions after receiving negative public feedback.

The city-state had planned to tax individuals who sold more than one property within a four-year period to deter speculation.

By Bloomberg

MBAM to host construction summit

The Master Builders Association Malaysia (MBAM) will hold the second Malaysian Construction Summit on November 10 at the Sunway Pyramid Convention Centre.

Industry players and government officials will gather at the one-day event to talk about issues and produce some practical solutions for the industry.

For further details please contact Zharraine Chang, senior executive officer at 03-7984-8636 or email mbam02@mbam.org.my.

By Business Times

Malaysia builders, steel firms lower

STEEL makers and select property stocks suffering further selling pressure after the government slashed development spending goal for 2010.

AMONG builders, Gamuda was down 0.3 per cent, WCT dipped 0.37 per cent and IJM, the country’s largest construction group by assets, fell 0.62 per cent.

Steel maker Ann Joo slid 2.65 per cent and Perwaja, the country’s largest steel firm by output, was unchanged after a weak opening.

Prime Minister Datuk Seri Najib Razak last week said development spending will be cut by 4.5 per cent next year as the government moves to contain ballooning budget deficit following this year’s big stimulus plans.

By Reuters

5% cap for real property gains tax

PETALING JAYA: The Government will issue an order to cap the real property gains tax (RPGT) at 5%.

Second Finance Minister Datuk Seri Ahmad Husni Hanazdlah reiterated the RPGT of 5% was imposed on gains from the disposal of real property irrespective of the holding period and category of owner.

“In the Budget 2010 presentation, the Government proposed that real property gains tax at a fixed rate of 5% be imposed on the gains from the disposal of real property effective Jan 1, 2010,” Husni said in a statement yesterday.

“The rate imposed is irrespective of the holding period and the category of the owner,” he added.

The 5% rate will be implemented through the Real Property Gains Tax (Exemption) Order 2009.

“This order will be gazetted as soon as possible and is effective Jan 1, 2010.

“Therefore, the current rate of RPGT, which is higher than 5% as in Schedule 5 of the Real Property Gains Tax 1976, will no longer be applicable,” he said.

However, exemptions to individuals are given as follows:

● The level of exemption is increased from RM5,000 to RM10,000 or 10% of the chargeable gains, whichever is the higher;

● Gifts between parent and child, husband and wife, grandparent and grandchild; and

● Disposal of a residential property once in a lifetime.

There was some confusion when after the budget announcement last Friday, Deloitte Malaysia country tax leader Ronnie Lim said in a statement that the highest rate for RPGT was 30%.

Based on the Finance Bill, Lim said, disposal within two years of acquisition will be taxed 30%; in the third year, it will be 20%; in the fourth year 15%, while disposal within five years and beyond, will still be subject to 5% tax.

“Through our press release of Oct 23 in connection with Budget 2010, we reported on the proposed changes to the Real Property Gains Tax (RPGT) Act 1976 as a result of the Finance Bill.

“The Finance Bill retained all the holding period sensitive rates of RPGT in force prior to the suspension of that tax (in April 2007) but, in respect of individuals, introduced a 5% tax rate in place of a nil rate for disposals which take place after the fifth year from acquisition date.

“Apart from this rate change, the existing rates of RPGT in effect prior to the suspension of that tax were not altered by the Finance Bill,’’ Lim explained in a statement yesterday.

“The Ministry of Finance has issued a press release on the matter and explained that a 5% rate of RPGT, irrespective of holding period and category of tax payer, individuals or companies, will be introduced through a ministerial exemption order.

“When the ministerial exemption order is issued and gazetted, the rates of tax in the RPGT Act will be modified by the rates in the order.

“Generally, such orders are temporary in nature and specify a commencement and cessation date. These orders may also be renewed or revoked.

“As long as the order is in force, the rates of RPGT in the Act, which begin at 30%, will be over-ridden by the rates to be specified in the order,’’ Lim said, adding that a flurry of property transactions was expected before the end of the year.

By The Star

Developers, builders fall on property tax

IJM Land Bhd led Malaysian real estate stocks lower and builders fell after Prime Minister Datuk Seri Najib Razak imposed a capital gains tax on property and the government cut development spending.

IJM Land, Malaysia’s fifth-biggest developer, slid 2 per cent to RM2.44 at 10.28 am local time, outpacing the FTSE Bursa Malaysia KLCI Index’s 0.4 per cent decline. IGB Corp lost 3.3 per cent to RM2.07.

The property tax is a “negative surprise” and will “dampen the velocity of transactions,” HWANGDBS Vickers Research said in a report today.

The government aims to bolster revenue and cut spending to help trim a budget deficit to 5.6 per cent of gross domestic product next year from a 22-year high of 7.4 per cent in 2009.
Malaysia plans a 5 per cent capital gains tax on property from January to help broaden the base of revenue collection, Najib said on October 23. Development expenditure will be reduced by 4.4 per cent to RM51.2 billion next year.

Gamuda Bhd, Malaysia’s second-biggest construction company, lost 1.2 per cent to RM3.30, set for the biggest decline since October 9. IJM Corp dropped 1.2 per cent to RM4.87.

“Although we believe the property market has bottomed, we view this measure came too soon,” Citigroup Inc said in a report today, referring to the property tax. It’s a “negative for the sector as it would curb buying interest.”

Sunway City Bhd and Sunrise Bhd had their stock ratings cut to “hold” from “buy” today by HWANGDBS, which also lowered the target prices of SP Setia Bhd, DNP Holdings Bhd and Eastern & Oriental Bhd.

Shares of Sunway were unchanged, while Sunrise fell 2.9 per cent to RM2.32. SP Setia lost 1.3 per cent to RM3.83, headed for the lowest level since July 13. DNP sank 2.7 per cent to RM1.47 and Eastern & Oriental declined 4.1 per cent to RM1.18.

“The government needs to ensure that the Malaysian tax system is equitable and able to generate revenue for development purposes,” Najib said in his budget speech. Property tax exemptions for families will remain, he said.

Malaysia scrapped a three-decade old capital gains tax on property in April 2007 in a bid to help clear a backlog of unsold homes and attract overseas funds.

Previously, the capital gains tax on property was 30 per cent within the first two years, falling to 5 per cent by the fifth year. For foreigners, the old tax started at 30 per cent for the first five years, dropping to 5 per cent in the sixth and subsequent years.

Neighboring Singapore said in August it wouldn’t proceed with an earlier plan to impose a tax on some property transactions after receiving negative public feedback. It had planned to tax individuals who sold more than one property within a four-year period to deter speculation.

By Bloomberg

Naza TTDI set to bag RM14b job

The property arm of the Naza Group is set to bag the job to build Malaysia's largest international conference and exhibition centre for heavy industries

NAZA TTDI, the property arm of the Naza Group, is set to clinch a RM14 billion property development project on a 24.2ha parcel of land near the Malaysia External Trade Development Corp (Matrade) headquarters in Kuala Lumpur.

Sources said the flagship project will be the construction of Malaysia's largest international conference and exhibition centre.

It will specifically cater to heavy industries like shipping, machinery, trains as well as high technology industries such as aerospace.

"The expo centre is part of the government's vison to elevate Malaysia as a regional hub at par with South Korea, China and Japan as well as bolster innovation among Malaysians," said a source.
The project will also include residential units such as condominiums as well as commercial buildings and may take at least five years to complete.

It is understood that the project will be signed between the government and the Naza Group as early as the end of this month (October 2009).

"The expo centre will offer something different because traditionally people always go to the Putra World Trade Centre, Kuala Lumpur Convention Centre and Matrade headquarters for small- and medium-scale events, furniture fairs, export-import fairs or auto shows.

"This massive expo centre will offer something never done before, which are heavy industries such as ships and airplane components and even aerospace," said the source.

Sources said the Naza Group is currently seeking financial partners and is willing to do the project on a joint-venture basis.

It has approached banks like CIMB Group Holdings Bhd, the AmBank Group as well as government-owned funds like the Employees Provident Fund and Permodalan Nasional Bhd.

Neither Naza TTDI managing director SM Faliq SM Nasimuddin nor other Naza officials responded to questions sent by Business Times.

The Naza Group, traditionally known for its automotive operations, also aims to gain equal prominence in its property business as it targets to become among Malaysia's top three developers in five years.

The group is sitting on 180.59ha of land in the Klang Valley with a potential RM7.6 billion gross development value (GDV).

Naza TTDI raked in a net profit of RM86 million on revenue of RM239 million last year.

It has secured orders of RM1.8 billion from projects like the Platinum Park near the Kuala Lumpur City Centre, of which RM1.5 billion has yet to be billed.

By Business Times (by Zaidi Isham Ismail)

SP Setia in US$16.2m Vietnam JV

KUALA LUMPUR: SP Setia Berhad Group's subsidiary, Setia Lai Thieu Ltd is teaming up with Vietnam's Investment and Industrial Development Corp (Becamex IDC Corp) to undertake a mixed-use project in Vietnam valued at US$16.26 million.

The project would be carried out in Lai Thieu, Binh Doung province. The site is 16km north of Ho Chi Minh City and an hour's drive from Tan Son Nhat International Airport.

The development will encompass shophouses, terraced houses, semi-detached houses, commercial centres, club house and apartments which will be for lease and for sale.

"The project is expected to take six years to complete and has a gross development value (GDV) of US$250 million," said SP Setia.

The site is 2.5km from Phase 1 of the Vietnam Singapore Industrial Park with 230 international manufacturers from 22 countries with investments of more than US$1.4 billion. The working population is more than 40,000.

The project will be SP Setia's third project in Vietnam after EcoLakes at My Phuoc Industrial Park, 40 km north of Ho Chi Minh City and EcoXanh at Saigon Hi-Tech Park in District 9 of Ho Chi Minh City.

SP Setia made its maiden foray into Vietnam in mid-2007 when it teamed up with Vietnam’s state-owned conglomerate, Becamex to develop EcoLakes, a 558 acre eco sanctuary, conceptualised after SP Setia’s award-winning Setia Eco Park in Shah Alam.

The success of EcoLakes has reinforced SP Setia's confidence in the Vietnamese property market - in particular that of the Binh Duong Province.

By The EDGE Malaysia

Tax plan spurs new property listings: Website

The government's move to re-introduce Real Property Gains Tax (RPGT) from Jan 1 next year seems to have spurred some borderline sellers to put up their properties on the market, according to Thinkproperty.my.

The move has also encouraged others to reduce their prices to make sure they sell before the end of this year, the property website said in a statement today.

Thinkproperty.my said it saw an unusually high number of new property listings over the weekend as well as an unusually high number of listings where the price had been reduced from an earlier stated price.

Its chief executive officer Asim Qureshi said the re-introduction of the tax will play in important role in stamping out speculative investments in property.
"Speculations in property markets have caused the boom and bust cycles we have seen in many other real estate markets across the world and avoiding that kind of instability would be a positive," Qureshi said.

"However, while we have seen a surge in confidence in the property market in recent months, I cannot help but feel the re-introduction of the tax has been a year or two too soon," he said.

Qureshi said that having a tax exemption if the property was held for a certain number of years would have been better as the tax would have been more targeted at property speculators.

"One concern I do have is the message that this move will send out to foreign investors. Malaysia is increasingly being seen as an international property hotspot, and the re-introduction of the tax will somewhat undermine that view," he said.

"There is a big difference between 100 per cent tax-free property gains, which jurisdictions like the United Kingdom, the United Arab Emirates, Singapore and Hong Kong offer and a low rate of tax of five per cent."

On a positive note, Qureshi said the rate of tax was only five per cent of the gains, adding that the government has done the right thing by re-introducing the tax gently so as not to significantly disrupt the market.

"In terms of opportunity, I believe it will be a good time to buy in the secondary market from now until year-end, which is where the tax will have its most direct impact," he said.

"A lot of property owners will want to sell their properties before the deadline which means more supply, yet in the backdrop we have increasing confidence in the Malaysian property market and the country's strong economic fundamentals."

Thinkproperty.my, launched in October 2007, is owned by Think Media Sdn Bhd. The website has over 20,000 members and a rapidly growing database of over 70,000 quality property listings.

By Bernama

Malaysia clarifies Real Property Gains Tax

SECOND Finance Minister Datuk Seri Ahmad Husni Hanadzlah clarified that the Real Property Gains Tax, effective January 1 next year, is fixed at 5 per cent, irrespective of the property disposal year.

"The Real Property Gains Tax for the first year is 5 per cent and is the same for the second, third, fourth and fifth year," he reportedly said on Saturday.

In a statement released from Putrajaya yesterday, Ahmad Husni reiterated that in the 2010 Budget, the fixed 5 per cent tax to be imposed on the gains from the sale of property is irrespective of the holding period and the category of the owner.

This rate of 5 per cent will be implemented through the Real Property Gains Tax (Exemption) Order 2009. This Order will be gazetted as soon as possible and is effective January 1, 2010.
Therefore, the current rate of RPGT, which is higher than 5 per cent as in Schedule 5 of the Real Property Gains Tax 1976, will no longer be applicable.

The Second Finance Minster said there are three circumstances where the property owner is exempted from the 5 per cent gains tax.

The first is where the level of exemption is increased from RM5,000 to RM10,000 or 10 per cent of the chargeable gains.

The second, is when the property sale are gifts between parent and child, husband and wife, grandparent and grandchild. And finally, when the disposal of a residential property is a once in a lifetime transaction.

By Business Times

Exemption order on property tax out soon

The Finance Ministry is expected to come up with an exemption order on the Real Property Gains Tax (RPGT) this week to clear the confusion surrounding the RPGT proposal.

Under the 2010 Budget, the government proposed a fixed tax rate of five per cent imposed on gains from the disposal of real property effective Jan 1 next year.

However, based on the Finance Bill, disposal within two years of acquisition will be taxed 30 per cent, 20 per cent in the third year and 15 per cent in the fourth year while disposal within five years and beyond will still be subjected to five per cent.

"As far as the Act is concerned, the rate is still there, which is five per cent to 30 per cent. Exemption order has yet to be gazetted but it is coming out very soon, maybe around this week," Finance Ministry's Under Secretary, Tax Analysis Division, Siti Halimah Ismail, said today.
She was speaking to reporters after the 2010 Post Budget Dialogue, jointly organised by the Malaysian Economic Association and University of Malaya's Faculty of Economics and Administration, and supported by Standard Chartered Bank Malaysia Bhd.

Gains from the disposal of property are subject to tax under the Real Property Gains Tax Act 1976 to curb speculative activities in the propoerty sector. However, the RPGT was exempted in 2007 to help the property sector.

Siti Halimah said the government is expected to collect some RM500 million from the real property gains tax in 2010 but lost RM240 million in individual income tax due to the reduced one per cent from 27 per cent to 26 per cent.

On the sources of tax revenue, she said that Malaysia's tax base was narrow.

"Being a narrow base, the revenue is not sustainable actually. For example, the import duty, because our commitment to free trade agreements, we have no choice but to reduce the rate," she added.

Come Jan 1, 2010, an estimated 98 per cent of the goods that come from Asean countries will be at zero import duty.

Siti Halimah said Malaysia's tax revenue was dependent on petroleum income, which contributed over 40 per cent to the total federal government revenue.

"Therefore, we have to find new sources of revenue for the government and we have a lot of new sources of growth, namely biotechnology, green technology, information and communications technology, and financial services," she said.

On the Goods and Services Tax (GST) which is expected to increase the government''s revenue collection, Siti Halimah said: "That is the reason why the government would like to push for the GST."

The government was in the final stage of its GST study, she said.
On the restructured fuel subsidy scheme, Siti Halimah hoped that the scheme would help to reduce the subsidy burden on the government.

"We hope to save government expenditure and the scheme is focused on only the targeted group," she said.

By Bernama

New York's biggest ever US$5.5b real estate poised to flop

NEW YORK: It was the most expensive real estate deal in U.S. history. Now it's poised to become one of the biggest flops.

At the height of the real estate bubble in 2006, an investment group led by New York City real estate firm Tishman Speyer Properties and BlackRock Realty Advisors paid US$5.4 billion for a pair of gigantic Manhattan apartment complexes known as Stuyvesant Town and Peter Cooper Village.

The price seemed outrageous to many, but the company believed it had a winning strategy: It would aggressively convert thousands of rent-regulated apartments occupied by middle-class families into luxury units that would fetch top dollar.

Three years later, to the glee of many New York renters, the tactic has been a bust.

Tenants fought back, conversions happened much slower than expected and a state court ruled Thursday that about $200 million in the company's new rent increases were improper.

Real estate analysts say the ownership group is now just two to three months away from a likely default on the $3 billion mortgage it used, along with a $1.4 billion secondary loan, to buy the property.

Foreclosure looms as a strong possibility.

Even before the state Court of Appeals ruling on a lawsuit filed by the apartment complex tenants, ratings firms had estimated that the value of the 80-acre (32-hectare) property, home to 25,000 people, had fallen to as little as $2 billion - far less than the outstanding loan balance.

Given the math involved, "I wouldn't be surprised if they just want to walk on it," said Steve Kiritz, a senior vice president at the credit ratings agency Realpoint LLC

"The whole master plan with this project had been for Tishman to come in and ramp up the number of units that were paying market rent," he said. New York state's rent regulation laws place restrictions on how much landlords can charge renters for many apartments.

Regular folks - especially those who have had home financing problems of their own - might laugh at the folly until they realize that some of their own money might be tied up in the deal.

Some of the biggest equity investors in the deal are public pension funds that manage retirement system benefits for millions of government employees.

Florida's State Board of Administration had put $250 million into the project. It has already written off the entire investment as a loss.

California's two largest government pension funds, the California Public Employees' Retirement System and the California State Teachers Retirement System, invested a combined $600 million.

CalSTRS has also already written off its $100 million stake.

Tishman, by comparison, stands to lose much less.

Its share was $112 million, less than 2 percent of the purchase price.

A spokesman for the company declined to comment Friday on the project's future.

Tishman Speyer's co-chief executive, Rob Speyer, told The New York Times in a recent interview that win or lose on the court case, "the asset is going to require a restructuring."

"Once the court case is resolved," he said, "we'll speak to our debt holders as well as our fellow equity investors."

Teams of lawyers will likely spend the next few months fighting over who gets control of the complex and which lenders are entitled to get some money back, said Dan Fasulo, a managing director of Real Capital Analytics.

How much they recover, and who is wiped out, may come down to how much appraisers decide the buildings are really worth, based on more realistic rent projections.

"I had a number, put together last week, that I thought was fair. I don't think that number is fair anymore," Fasulo said.

"No one could give you an honest appraisal right now."

Stuyvesant Town isn't the only such project to run into trouble after plans to increase rents went poorly.

An investment group that purchased Riverton Houses, a big development in Harlem built around the same time as Stuyvesant Town, ran into financial problems after its bid to convert hundreds of rent-regulated units to market rates went slower than expected.

One analyst estimated the value of the complex in September at $108 million, about half the value of the $225 million mortgage on the property, which is currently in default.

Any debt restructuring process at Stuyvesant Town is likely to be complicated.

The mortgages that financed the deal were chopped up, repacked and sold as Commercial Mortgage Backed Securities to a variety of investors.

Fasulo said the complexity of the arrangement and the size of the property itself mean that a traditional liquidation still might not happen.

A sale, he said, "would be very disadvantageous at this time," given the state of the real estate market.

"There would be tremendous demand," he said, but at such a depressed price that the lenders might be better off holding on to the troubled property.

By AP