Prelude
After Malaysia was hit with the Great Lockdown recession in 2019/2020, the real estate industry was hit tremendously, with some property developers declining over 70% in the local bourse, and had yet to recover. In November 2020, the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS) has proposed that the government waive the real property gains tax (RPGT) across all property sectors involving transactions of less than RM10 million in 2021 to stimulate the property market. PEPS is also asking for property transactions above RM1 million to be taxed at a lower 3%, from the 4% currently. PEPS also said independent market feasibility studies should be mandatory for all property development projects before planning approval and bridging financing from banks are given. To address the property overhang, it has proposed that the Employees Provident Fund (EPF) allow more funds from Account 2 to be withdrawn for affordable housing purchases, as well as employers’ contributions to the fund be waived next year, while employee contributions should be discretionary. PEPS also proposed that the loan moratorium be extended with borrowers making interest payments only until June 2021. At the same time, it wants the Malaysia My Second Home (MM2H) Programme to be revived. In the proposed budget 2021, there are a few sections that affect the property industry.
The Budget 2021
Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz announced that in order to further boost home ownership, the government will extend full stamp duty exemption on transfer and loan agreements for first-time home buyers until the end of December 2025. There would be a full stamp duty exemption on both instrument of transfer and loan agreement for the purchase of first house worth up to RM500,000 to encourage home ownership among the people.
To recap, among the policies in the budget 2021 in relate to property are:-
- Full stamp duty exemption on instruments of transfer and loan agreement for first time home buyers is extended until 31 December 2025. The limit of duty stamp for first residential home is also increased up to 500 thousand ringgit. This exemption is effective for sale and purchase agreement executed from 1January 2021 to 31 December 2025; and Stamp duty exemption on loan agreements and instruments of transfer given to rescuing contractors and the original house purchasers is extended for another 5 years. This exemption is effective for loan agreements and instruments of transfer executed from 1 January 2021 to 31 December 2025 for abandoned housing projects certified by Ministry of Housing and Local Government (KPKT).
- The government will also set aside 1.2 billion ringgit for public housing projects. The exemption is applicable for the sale and purchase agreement on purchases that are completed from Jan 1, 2021 until Dec 31, 2025.
- First: 500 million ringgit to build 14 thousand low cost housing units under the Program Perumahan Rakyat;
- Second: 315 million for the construction of 3,000 units of Rumah Mesra Rakyat by Syarikat Perumahan Nasional Berhad;
- Third: 125 million ringgit for the maintenance of low cost and medium-low stratified housing as well as assistance to repair dilapidated houses and those damaged by natural disasters; and
- Fourth: 310 million for the Malaysia Civil Servants Housing Programme (PPAM).
- In addition, the Government will collaborate with selected financial institutions to provide a Rent-to-Own Scheme. This program will be implemented until 2022 involving 5,000 PR1MA houses with a total value of more than 1 billion ringgit and reserved for first-time home buyers.
- The Government will also focus on community development programmes covering all levels of society. For the Chinese community, a total of 177 million ringgit will be provided for programmes to improve educational facilities, housing and the development of new villages, as well as financing facilities through Bank Simpanan Nasional (BSN). For the Indian community, a total of 100 million ringgit is allocated to the Malaysian Indian Transfomation Unit (MiTRA) to the elevate the socio-economy status of the Indian community.