/// Contributor
CB 5: Net Purchase Price
Sitting at the core of any real estate investment is the financing policies
introduced by the central bank. In these key positions, we have two
debutants. Yet, apart from the brief statement of “increase transparency in
property sales price, where property developers will have to display detailed
sales price including all benefits and incentives offered to buyers such as
exemption of legal fees, stamp duty, sales agreements, cash rebates and
free gifts” in the Budget 2014; there is no clear direction being issued net
purchase price by the Ministry nor the Bank Negara.
Chris Tan
You can get in touch with him at
Facebook: Chur Associates
Email: [email protected]
Lining Up for Real Estate
2014 Legally
L
ooking into my crystal ball on the legal challenges in real estates in Malaysia for year 2014, an
image of football appears naturally (since 2014 is also the FIFA World Cup Finals in Brazil). I see a
game of two-half with an interesting starting eleven lining up by “FC2014” with a mix of the usual
suspects outnumbered by some unknown qualities making its debut this year. Strategically given the
unknown dark horses, the first half is a game of “wait and see” to access at how formidable is this new
mix taking on the seasoned real estate investors in the home ground.
Scrolling down the visitors’ team sheet, this is how the game shall unfold with the emergence of each
player from the dugout:
GK 1: Real Property Gains Tax (RPGT)
The undisputed No.1 that we keep an eye for
comes every Budget announcement in every
October since 2007. RPGT has been reviewed and
adjusted on yearly basis from no RPGT in 2007
to 5% flat rate in year 2010 up to the current
highest rate of 30% for early disposal. Investment
planning has become challenging as this yearly
lottery draw works on the year of disposal and not
the applicable rate on the year of acquisition.
FB 2: Goods and Services Tax (GST)
While the author makes reasonable
efforts to present information which
he believes to be reliable, the author
makes no representation that the
information or opinions contained in
this article is accurate and complete.
Readers are advised to seek specific
professional advice before acting on
the views.
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Following the launch of Greater Kuala Lumpur, a lot of mega infrastructure
projects have been announced with new highways, MRT as well as the much
anticipated High Speed Rail to Singapore. Investors are buying in to such
development projects banking on the great prospect upon the completion of
these infrastructures. Lessons should be learned from the delay in progress
of various mega infrastructure projects recently such as KLIA 2 and Penang
Second Bridge, investors need to be prepared for any possible delay.
CB 6: Developer Interest Bearing Scheme (DIBS)
Lawyer Specialising in
Real Estate
Chris Tan is the founder and now
Managing Partner of Chur Associates,
a boutique legal practice that thrives
in delivering business friendly solutions
for its clients and having a niche
positioning of ‘Everything Real Estate’
serving the entire value chain from
the upstream to the downstream.
Chur Associates is a boutique legal
firm founded in 2004, specialising in
designing legal solutions catered to
our clients’ needs. Chur Associates’s
brand promise is “We Deliver!” To that
end, they offer clientsthe necessary
means and methods to ensure their
requirements are met.
CF 9: Public Infrastructure
Given a run out prior to its planned debut on 1
April 2015, GST will certainly impact the market
prices given many tiers of supplies in real
estate development that is subject to the same.
Immediately, there is an incentive for investors
to look at commercial property now as there is
directly an extra 6% cost to be paid next year
onward.
FB 3: Foreign Purchase
While it is the federal policy to adjust the
threshold for foreigner’s acquisition of property
from RM500,000.00 to RM1,000,000.00 for 2014,
it is still subject to the adoption by the respective
State Governments given that it is within their
realm of power under the Federal Constitution.
Other than the Federal Territories with immediate
implementation, Johor will only implement
on 1 May 2014 while Penang has long been
implementing such control. It is interesting to note
that the States are getting more autonomous
in this regards with special levy introduced on
foreign purchasers. Naturally, this limits the
market size and decrease the number of potential
takers of Malaysian property saves for those usual
hot spots where price tags in million are the norm.
CM 4: Minimum Wages
Playing the holding role, this new policy has a
preventive effect on any price correction in real
estate. As the construction sector relied heavily
on foreign labours, the full implementation of
minimum wages covering both local and foreign
workforce would have a direct impact on the
construction costs. Increment on construction
costs would naturally uplift the pricing of
properties.
Similarly, this was briefly mentioned in the Budget 2014 announcement
that financial institutions are prohibited from providing final funding for
projects involving DIBS. To date, the only clear direction on the banning of
DIBS appears to be a statement issued by the Ministry of Urban Wellbeing,
Housing and Local Government stating that a new condition in approving
housing development license and advertisement and sale permit does not
allow the use of Interest Capitalisation S