Budget 2006: Effects on Housing & Property Sector
The annual Malaysian Budget Speech was read out by our Prime Minister Datuk Seri Abdullah Ahmad Badawi yesterday at the Parliament. The thrust of the next year’s budget was billed at promoting growth and business while improving the quality of the life of the people (read the Star’s report here).
For the property and construction sector, there were some major announcements, more really for the housing and property side of things, and not so much on the construction half of the equilibrium. At a glance, here are some of the highlights for the property sector (highlights can also be read here, here and here):
- RM3.6bil set aside for houses and quarters for teachers, armed forces, firemen and customs officials;
- Government to allocate RM2.1bil to build low-cost housing. From that amount RM1bil is set aside for building 21,600 units under government housing programmes;
- To encourage developers to construct low-cost houses, estimated losses on low-cost homes can be used to offset estimated profits of other rea property development projects for tax purposes;
- The Prime Minister will chair a Bumiputra property trust foundation (called Yayasan Amanah Hartanah Bumiputra) with a capital of RM2bil for purchasing commercial properties in major towns;
- Emphasis on revenue collection, land conversion, sub-division and partition land by the local government;
- Issuing strata titles will be simplified, now based on Certificate of Completion;
- Proposal for capital expenditure on moulds to manufacture Industrial Building System (IBS) components will be given accelerated capital allowance to be claimed for 3 years;
- To encourage more REITs by allowing tax deductions on legal, valuation and consultancy expenses.
The move to build more low cost homes is definitely a welcome sign in view of the spiralling property prices in the country. The setting up of the Bumiputra property trust foundation was actually talked about a bit by industry folks recently before the budget. The thrust towards IBS is a welcome move, the quality controls on prefabricated building components are generally easier to monitor. As for REITs, we look forward to more corporations issuing such instruments to diversify investors’ choices.
For the construction sector, there was not much big news compared to previous years. There will be RM5.7bil for rural economy and infrastructure, including RM581mil for construction and road upgrading, RM299mil for water and electricity. Sabah and Sawarak were given the main priority in this portion of the budget.
Hey, do you mind posting an article on REITs anytime soon? I’ve never heard of such investment trusts and would like actually know more about it.
Cheers.
Comment by Danny Foo — October 1, 2005 @ 3:48 am
Hi there danny! great to see a web design guru come to this site, hopefully you won’t lambast our design ’standard’ design…
we did write an article some time back, have you read it?
http://propertymalaysia.blogsome.com/2005/08/09/about-malaysian-reits/
We are working on one or two more (in light of the budget news) but a few more REITs in the market would be appreciated.
Here’s another one…
http://propertymalaysia.blogsome.com/2005/07/20/how-secure-are-reits/
Comment by Administrator — October 1, 2005 @ 3:55 am