Malaysia Prime Minister Datuk Seri Najib Razak in tabling Budget 2012 in the Dewan Rakyat on Friday Oct 7, 2011 announced several proposals related to housing and the property sector.

Below are some highlights from the Budget Speech:

To accelerate the development of Kuala Lumpur International Financial District (KLIFD), an incentive package has been proposed:

Income tax exemption of 100% for a period of 10 years and stamp duty exemption on loan and service agreements will be given to KLIFD-status companies;

Industrial Building Allowance and Accelerated Capital Allowance for KLIFD Marquee Status
Companies;

Income tax exemption of 70% for a period of five years for property developers in KLIFD.

To attract foreign and domestic investments in the capital market and to promote the development of the Real Estate Investment Trusts (REITs) industry, it is proposed that the concessionary tax rate of 10% on dividends of non-corporate institutional and individual investors in REITs up to Dec 31, 2011 be extended for a period of five years commencing Jan 1, 2012 until Dec 31, 2016.

To further encourage investment in hotels, the Government proposes that hotel operators in Peninsular Malaysia investing in new 4- and 5-star hotels, be given Pioneer Status with income tax exemption of 70% or Investment Tax Allowance of 60% for five years. For hotel operators in Sabah and Sarawak, tax incentives had been given. In addition, the Government will corporatise the Malaysia Healthcare Travel Council to promote and develop Malaysia as a main destination for healthcare services in this region.

Proposal to review the current rate of 5% on real property gains tax (RPGT) as the government found it ineffective in curbing real estate speculative activities. It proposes that for properties held and disposed within two years, the RPGT rate be 10%. For properties held and disposed within a period exceeding two years and up to five years, the rate would be 5%.

Properties held and disposed after fie years are not subject to RPGT.

To meet the demand for houses from those earning below RM3,000, the Government proposes to expand the recently My First Home Scheme launched in March 2011, to increase the ceiling of house prices under the scheme from a maximum of RM220,000 to RM400,000. This improved scheme will be available to house buyers through joint loans of husband and wife beginning January 2012.

The government will also identify areas in the vicinity of MRT, LRT and other public transport system to be developed into housing projects under the 1Malaysia People’s Housing (PR1MA) to develop affordable houses for the middle-income group. The government also intends to develop several plots of government-owned land around Sungai Besi and Sungai Buloh. In 2011, 1,880 houses will be built in Putrajaya and Bandar Tun Razak, while in 2012, a total of 7,700 houses will be built in Cyberjaya, Putra Heights, Seremban, Damansara and Bukit Raja.

Proposal to provide 100% stamp duty exemption on loan instruments for the purchase of houses

To encourage the construction of more houses using the build-then-sell concept, the prime minister announced that Islamic banks have agreed to provide syariah-compliant financing and undertake construction risks. Instalments only commence after the house is completed. This scheme will be implemented for houses costing RM600,000 and below.

For the lower income group who have yet to own houses, the Government will continue to implement the Program Perumahan Rakyat (PPR) by building 75,000 units of affordable houses nationwide under the 10th Malaysia Plan (10MP). In 2012, RM443 million has been allocated for the construction of 8,000 units for sale and 7,000 units to be rented.

The Rumah Mesra Rakyat (RMR) programme, managed by Syarikat Perumahan Negara Bhd (SPNB), will be continued to help the low-income group to own decent houses. Under this programme, those with land but without a house or live in dilapidated houses are eligible for financing to build a house. SPNB will build 10,000 units in 2012. Each house costing RM65,000 will be sold for RM45,000 and the Government will subsidise RM20,000. For this, the Government will allocate RM200 million.

Through the Abandoned Housing Rehabilitation Programme, the government successfully rehabilitated 82 projects involving more than 15,000 units. The government will continue this with an allocation of RM63 million in 2012 to rehabilitate 1,270 abandoned houses. The Government will also allocate RM40 million for restoration and maintenance of public and private low-cost housing.

The number of expatriates in Malaysia has increased to 41,000. To provide a more conducive environment for expatriates to continue working in Malaysia, the Government will allow the withdrawal of their Employees Provident Fund (EPF) contributions for the purchase of a house.