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InsiderTAPS (April 2002)

Insider TAPS Issue 07 - A Further Boost to the Property Sector in Malaysia

The Malaysian Government has over the recent months announced several initiatives to boost the property sector in the country. Among these was a new package of incentives for investors at the Iskandar Development Region in southern Johor. Companies at the IDR involved in certain industries in specified zones will not only enjoy tax exemption for 10 years provided they begin operations before 2015, but also need not comply with Foreign Investment Committee rules. In addition to this, the Government has removed capital gains tax in Malaysia. What this means is that effective 1 April 2007 the Government has exempted all persons from provisions of the Real Property Gains Tax ('RPGT') Act 1976. The RPGT was the only capital gains tax in Malaysia for over 30 years. This tax was charged on gains arising from the disposal of real property (includes landed property and land) or shares in a real property company.

Improving the Delivery System
In line with Prime Minister Datuk Seri Abdullah Ahmad Badawi's efforts to improve the efficiency of the country's public delivery system, significant changes have been made to revamp the local property sector. These changes streamline all processes prior to construction concerning land, planning and building plan approval. The Ministry of Housing and Local Government has initiated several measures which will benefit developers and property buyers in Malaysia. The Malaysian Government has taken measures to address issues highlighted by developers with regards to delays in getting approvals for development projects. The new changes (explained in brief below) will result in greater efficiency and transparency in the housing industry.

  1. Speedier Development Approval

    A One-Stop Centre ('OSC') has been set up to speed up the process in handling and approving housing projects. The OSC will ensure that development projects are given fast-lane approval within four months. Such fast lane approval will also be granted to high impact projects, projects attracting foreign investment and government projects. The OSC can approve applications for planning permission and building plans as well as land development. In all other cases of normal development projects, approval will be given within six months.

  2. Towards Self-Regulation

    The Certificate of Fitness for Occupation ('CFO') which is issued by the local authority, has been replaced with the Certificate of Completion and Compliance ('CCC') which will be issued independently by professionals (i.e. the Principal Submitting Person who is a professional architect, professional engineer or registered Building Draughtsman). The enforcement for the CCC system for all states has been effective from 12 April 2007.

  3. Benefiting Buyers and Developers

    There will be incentives for developers to adopt the Build Then Sell ('BTS') concept. A fast lane approval of four months would be given to applications for land conversion and subdivision, planning permission and building plan approval by developers for projects which employ the BTS concept. The BTS concept is a new concept introduced by the Malaysian Government where housing developers have to complete a housing project completely before selling it to buyers. [There are two types of BTS. The first is the complete BTS, where the developer only sells the house when it is fully completed with a CCC, and there are no down payments or progressive payments involved. The second is the partial BTS, where the developer can sell house units before completion. For cases of partial BTS, buyers will make a 10% down payment when making a house booking by signing a Sale and Purchase Agreement and they will settle the remaining 90% when the house is ready.] This is different from the current conventional concept of Sell Then Build ('STB'). The BTS will be executed alongside the existing STB method for a transition period of two years and developers will be free to choose BTS or STB.

  4. Systematic Approach to Maintenance and Management of Common Property

    Another significant move is the introduction of the Building and Common Property (Maintenance and Management) Act 2007. Besides facilitating faster approval for strata title application, it also addresses issues relating to the management and maintenance of the building, which is especially crucial before the formation of the Management Corporation ('MC'). The State Government is empowered to appoint a Commissioner of Building ('COB') to settle disputes and to ensure smooth management of the building even after strata titles are issued. The COB will help to resolve problems relating to the maintenance and management of subdivided buildings, especially during the period between vacant possession and the formation of the MC. Maintenance and management of the buildings under this Act cover all categories of buildings which will be subdivided and issued strata titles. They include condominiums, apartments, gated community developments, flats, commercial buildings like offices, shopping complexes, mixed developments, and industrial buildings.

It is obvious that there is much to look forward to in the property sector. A better building delivery system, an investment friendly environment and a more competitive industry are merely some of the obvious goals that the Malaysian Government aims to achieve with these recent changes.