Budget proposals to kickstart property

02/08/2008 The Star Comment By Angie Ng

HAVING taken tough measures to counter the rising cost scenario, property developers have stepped forward to suggest a series of measures that can help kickstart the industry and put the players on firmer ground.

In its Budget 2009 memorandum, the Real Estate and Housing Developers Association (Rehda) has highlighted that among other things, the bumiputra quota release mechanism should be standardised, structured and transparent.

Rehda president Datuk Ng Seing Liong has proposed:

·An automatic release of the quota units to be in place after six months of a project's launch or when a project has reached 50% in its construction, whichever is earlier;

·Discounts for bumiputra buyers to be capped at 5% and only applicable for houses RM250,000 and below as purchasers in a higher market segment are more financially secure and do not need such discounts;

·The low-cost housing ceiling price to be raised to RM60,000 a unit from RM42,000 currently to mitigate the effect of increased construction costs;

·A reduction or waiver of stamp duty rates for house purchase that average between 2% and 3% now. which will also help reduce the people's burden;

·Granting tax exemption for dividend income to unitholders to give a much-needed lift to the real estate investment trust (REIT) market.

Developers have been harping on some of these issues for a long time but attention from the Government is more urgent now.

The mantle of protectionism should be unshackled so as to create a more level playing field. Developers, already bracing for tougher days ahead, do not want to be further burdened by some of these practices.

Already many new project launches have been delayed to avoid unnecessary cost over-runs, now 25% to 30% higher than earlier projections.

Most developers see more challenges on the horizon with food and petrol price hikes, escalating costs of construction and expected rise in interest rates to contain inflationary pressures.

Their woes have been exacerbated by the weak take-up rate that prevents them from passing on the rising costs to buyers.

Many of these buyers are adopting a wait-and-see attitude especially in view of the uncertain interest rate scenario.

Malaysia has a relatively young population where almost a third of the 26 million people are aged 25 to 44, and the country still needs a fairly big number of houses each year.

There will still be demand for houses, especially good products at competitive prices in the right locations.

While demand for medium and lower priced properties has dropped, the high-end market is still holding out as buyers in this segment are less affected by the rising cost of living.

With sales for lower priced property expected to remain soft, more developers should consider coming up with more versatile designs and smaller projects with shorter turnaround time and better cash flows.