Budget 2010 for property sector

As expected, it was a quiet Budget 2010 for the property sector. Here are some highlights in Malaysia’s Budget 2010 tabled in Parliament by Prime Minister Datuk Seri Najib Razak on Oct 23:

To increase the disposable income of the people, from the 2010 assessment year, personal relief for resident individual income tax is increased to RM9,000 from RM8,000 per year while the personal income tax rate for the group with a chargeable income exceeding RM100,000 per year be reduced by 1% from 27 – 26%.

Real property gains tax have been exempted from April 1, 2007. Budget 2010 however has proposed that a fixed rate of 5% be imposed on gains from the disposal of real property with certain exemptions. This is effective Jan 1, 2010.

A scheme will be launched in January 2010 that enables EPF contributors to utilize current and future savings in Account II to enable them to obtain higher financing to purchase higher value or additional houses. The scheme aims to increase the purchasing power of EPF contributors and is limited to the purchase of one house at any one time and subject to conditions stipulated by EPF.

The tourism industry was given a boost with an allocation of RM899 million for 2010 to boost tourism including programmes to attract more Malaysia My Second Home participants.

To promote the construction of green buildings, the Budget 2010 proposed that owners of buildings which are awarded Green Building Index (GBI) certification be given tax exemption equivalent to 100% of the additional capital expenditure incurred to obtain the GBI certificate

This is applicable to new and upgrading of existing buildings. The proposal is effective for buildings awarded with GBI certificates from Oct 24 till Dec 31 2014.

Buyers of GBI- certified buildings bought from property developers are eligible for stamp duty exemption on instruments of transfer or ownership of these buildings. The amount of stamp duty exemption is on the additional cost incurred to obtain the GBI certificate. The incentive is given only once to the first owner of the building. The proposal is effective for sales and purchase agreements executed from Oct 24 till Dec 31 2014.

The government will also establish a fund amounting to RM1.5 billion. This fund will provide soft loans to companies that supply and utilise green technology. For suppliers, the maximum financing is RM50million and for consumer companies RM10 million. The Government will bear 2% of the total interest rate. In addition, the Government will provide a guarantee of 60% on the financing amount, with the remaining 40% by banking institutions. Loan applications can be made through the National Green Technology Centre. This scheme will commence on 1 January 2010 and is expected to benefit 140 companies.

The government is also refocusing on development in Putrajaya and Cyberjaya. Development in the federal government administrative centre and the Multimedia Super Corridor townships will be intensified to be more lively and vibrant to increase business, commercial and recreational activities. The two townships will also be pioneer townships for Green Technology.

RM200 million has been allocated for rehabilitation of abandoned low and medium-cost housing developments.

The government has identified assets including land and buildings which can be jointly developed or sold to government-linked companies. It is in negotiations to develop government-owned land in Ampang and Jalan Cochrane in Kuala Lumpur. Other areas identified include Brickfields, Jalan Stonor, Bukti Ledang and Sungai Buloh.

By Sharon Kam (The Edge Property)