Property Malaysia

The Petaling Jaya Municipal Council, MPPJ have increased the assessment rate for landed properties by 10%. This had taken effect since January 14 and was widely reported in most papers the past few days.

Residents who were paying 5-8% of the value of their land who have to pay from 5.5% to 8.8% for the 2006 assessment. Many residents associations have urged the MPPJ to reconsider and to provide due justification for this increase.

According the Star today:

In an immediate response some 35 residents associations in Petaling Jaya are meeting tonight to discuss, among other things, filing a lawsuit against the Petaling Jaya Municipal Council (MPPJ) if need be.

The Local Government Act 1976 (Section 127) states that the local authority “may, with the approval of the State Authority, from time to time as is deemed necessary, impose either separately or as a consoli- dated rate, the annual rate or rates.” However, under the principle of administrative law and good governance, MPPJ is duty bound to prove how they come up with the new rates and allow time for the people to object before any increase in rates can be approved.

While 10% may seem insignificant to some, this represents a huge amount of increase to the hundreds and thousands of working class residents that call Petaling Jaya their home. The resident associations are appealing to MPPJ on the grounds of administrative law and good governance to justify this increase to the public before it is approved.

The meeting will be held at La Salle Hall, Jalan 5/15B, off Jalan Chantek 5/13 in Petaling Jaya. It begins at 8.30pm.

There has been a lot of talk in the past year or two regarding gated communities in Malaysia, especially in the Klang Valley where most new luxury landed properties have this safety and security feature. For the developer, this is a great selling point: a guard house at all entry points to the development (usually there is only one) to check on all incoming cars, guards patrolling the neighbourhood at regular intervals, high walls circling the perimeter, sometimes with CCTV, etc.

For the buyers, the extra price for these features comes with an added security when they sleep at night, buoyed by concerns of crimes like robbery and break-ins. Although cases of crime in gated communities are known to happen, and there have been many complaints of ineffective guards, by and large, gated communities are increasingly popular these days.

But all this may soon come to an end.

The authorities is said to be drafting some guidelines and rules on gated communities, and from what we hear, developers may no longer be able to offer this feature. Due to growing concerns from some sectors, this could mean the end of them.

Firstly, conventional developments with landed units (semi-Ds, bungalows, etc) give individual titles to buyers. That also usually means all the roads, drains, public parks, sewerage, rubbish collection and water supply will be handed over to the relevant authorities (local council, TNB, JPS, etc) after two years. Then the homeowner will pay quit rent, assessment and utility bills to these authorities.

By that reckoning all the roads and parks and their reserves belong to the government, so anyone can use them, whether or not they live in the development or somewhere else. This is the main bone of contention against gated developments. That they stop other people from using public roads and amenities.

Some developments use strata concept for their landed units, some of these are prominent developments in the city. By using strata titles, like condominiums, the management control maintains control of some of the utilities, charges maintenance fees, etc. From the grapevine, this will also come to an end.

One way out for the gated concept is the guarded concept, where they have guards patrolling the estate 24/7 but no boom gates to stop cars from entering (and therefore exiting) the development. Many normal housing estates are already employing this, more of a interim crime prevention measure.

However, the guidelines have yet to be issued, and many developers are keen to see what the authorities will say.

The Shah Alam City Council (MBSA) have drafted a Master Development Plan for villages and Malay reserve land in the outskirt areas of Shah Alam, as reported in Star Metro (Dec 13, page 6).

This includes the area around Paya Jaras and Sg. Buloh, with the idea of achieving a balance and systematic development. According to the report,

• The draft plan includes seven villages – Kg. Kubu Gajah, Kg. Merbau, Kg. Paya Jaras Hilir, Kg. Paya Jaras Hulu, Kg. Paya Jaras Tengah, Kg. Paya Jaras Dalam and Kg. Sg. Plong, covering an area of 1,425ha. The area is within a 2km radius of Sg. Buloh.

• According to the mayor, the plan has been prepared in accordance to the Town and Rural Planning Act, 1972 to ensure the villages benefit from the future massive development.
• MBSA plan to maintain the own identities of the villages, with emphasis on low-density development. The mayor also noted the villagers would be given a month to state their views on the plan before it is passed by the city council.

We applaud the council for taking the initiative to hold dialogue sessions like these with residents and villagers, and to draft a Master Development Plan for everyone to study. We hope that the more areas in the state will also be treated with such a plan, to ensure timely and structured development.

No this isn’t a seminar for those gangsters seeking ‘protection money’ from scared house owners.

The National House Buyers Association (NHBA) is organizing a seminar highlighting the following topics:

• Role & Functions of the Monitoring & Enforcement Division of the Ministry of Housing & Local Government
• Ambit & Jurisdiction of the ‘Tribunal for Home Buyer Claims’ (Housing Tribunal)
• Highlights of Contracts of Sale - Rights & Entitlements

The seminar will be in Bahasa Malaysia and English, and is open for all. Details are as follows:

9 December 2005 (Friday)
2.00pm - 5.30pm
PWTC, Kuala Lumpur
RM50 (Early) RM65 (*Late or walk-ins) per person
*Late registration is less than 48 hours before date of seminar, walk-ins are those who did not pre-register.

You can register at their website here.

Should be interesting.

The Star has this on its front page today.

“Probe under way into 12 stalled police housing plans”

Police are investigating 11 developers who have abandoned or delayed construction of 12 police housing projects costing a whopping RM500mil.

Some of the problems mentioned are:

• 2,670 personnel and their families are without quarters.

• The Government has to fork out an additional RM8.2mil a year in allowances for those renting houses.
• Only 99 of 211 projects under the 8th Malaysia Plan, which ends next year, have been completed.
• Some of the completed projects are not fit for occupation.

The police have been forking out an additional RM8.2mil a year in housing allowances to its rank and file and officers due to the 12 abandoned housing projects. Actually, this problem is not limited to police personnel housing projects.

For more reports, you may want to check out these:

12 police projects worth RM500mil abandoned
RM8.2mil spent on housing yearly

We have always wanted to learn more about real property gains tax (RPGT) in Malaysia, and have been searching for online resources for awhile.

The term real property here is referring to landed property in Malaysia such as residential property (houses, condominiums, apartments), commercial properties (shop houses, commercial lots, factories and office buildings) and land. The property must be in Malaysian territory. Foreign property will not be subject to RPGT.

Capital gains are generally not subject to tax in Malaysia. Real property gains tax is charged on gains arising from the disposal of real property situated in Malaysia or of interest, options or other rights in or over such land as well as the disposal of shares in real property companies. The tax rates for Malaysian citizens and permanent residents are as follows:

Disposal within 2 years – 30%
Disposal in the 3rd year – 20%
Disposal in the 4th year – 15%
Disposal in the 5th year – 5%
Disposal in the 6th year and thereafter:
Company – 5%
Individual – nil

Citizens and permanent residents also enjoy an exemption of RM5,000 or 10% of the gains whichever is the greater, besides a one-time tax exemption on the gains arising from the disposal of one private residence.
For non-citizens and non-permanent resident individuals, gains from the disposal of real property within five years are taxed at a flat rate of 30%, after which the tax rate will be 5%.

The holding period is measured from the acquisition date of the real property up to the disposal date.

Anyway, the best Malaysia online resource we’ve found so far is this helpdesk by property giant Sunrise and this site where someone has even given some calculated examples.

For further reference, you can check out official MIDA site, and this one, too.

If any experts out there are willing to help out, you are most welcome.

We suppose this was a long time coming. The government had stepped up the war against errant developers. Now you can check on the offences committed by these rogue companies and court charges brought against them under the Housing Development (Control And Licensing) Act 1966 (Amendment 2002) from January 2003 to September this year on the website. You can check the list here.

According to a report in the Star,

Of the 538 developers listed, 304 have been fined RM10,000 each for failure to submit half-yearly reports and statements to the ministry.
Those on the list also include prominent firms and government-linked companies.

This is further to our similar report recently, in which the government announced that they will be stepping efforts to punish these developers. You can read it here:

Crackdown on Errant Developers

Errant and irresponsible developers, beware.

The Star ran a cover story on rogue building developers who cheat buyer of their money and how the Housing and Local Government Ministry is catching up with them.

To date, 96 companies have been caught, of which 16 of them are unlicenced developers who openly cheat buyers by appearing to sell houses in building sites.

According to the report:

Thirty-two of those facing court action did not comply with awards and decisions of the Home Buyers Claims Tribunal, and 80 other developers are being investigated for the same offence.

The ministry has also slapped 519 developers with compound fines for failing to submit housing progress reports twice yearly, for violating advertisement regulations and other compoundable offences.

Recently, one of the 16 bogus developers challenged a house buyer to lodge complaints with the ministry despite knowing scores of developers are facing court action and that some had already been convicted.

For the rest of the article, read it here.

What is interesting to note is that a related article mentions that most of these cases are developers based in the Klang Valley.

Another interesting fact - there are currently 4,500 licenced housing developers in Malaysia. Wow, Property Malaysia has a long way to go, man…

The government is set to give Malaysian REITs a big boost, as spelt out in the recently Budget 2006 (read our report here).

In a nutshell, the government is proposing tax deduction for legal, valuation and consultancy expenses incurred by REITs. Many of the industry professional were supportive of the this move, as reported by the Star on Oct 1. REHDA president Datuk Jeffrey Ng said that this would bring down the cost of setting up such trusts.

According to the report,

“More developers and REITs promoters will be encouraged to invest in investment-grade buildings to get into the REIT act,” he said.

We think that this is a good move. However, the tax deductions are only a small fraction of the actual sum required by corporations to acquire the investment instruments and to set up the REITs. However, it will serve more as an incentive to those corporations planning to do so already.

At the moment, there are a handful of companies planning to launch REITs soon. We have always emphasized that perhaps a larger number of counters should be encouraged for it make a significant impact on investors’ interest.

For further reading, check out the following articles in Property Malaysia:

Budget 2006: Effects on Housing & Property Sector

About Malaysian REITs

YTL to Launch Starhill REIT in October

There is an ongoing furore involving the residents of Sri Petaling and the authorities regarding the construction of the KL-Putrajaya Elevated Highway which runs 2 meters away from the houses.

This site, set up by the residents is a must-read. Taken from the site:

The KL-Putrajaya highway Project with 26KM length, from Kampung Pandan roundabout to Putrajaya…Package (5) of this Project starts from Salak South Garden, pass through an established residential area, i.e. Bandar Baru Sri Petaling and end at Bukit Jalil. The stretch in Bandar Baru Sri Petaling with approximately 1.25KM will be an elevated structure to be built on the existing road, Jalan 2/149, which has 32metres reserve width that services the residential area.

In year 1997, a knowledgeable resident had written to advise LLM to shift the alignment of the highway towards Zone N of Bandar Baru Sri Petaling, which has not been developed at that time to ensure adequate buffer zone is provided on both sides of the highway. However his advice was ignored. Besides this, few more residents have also written to LLM for information of the Project between 1998 to 2003, as usual LLM had ignored them.

In general, the awareness of this Project to the public is negligible as reported in the Environmental Impact Assessment report and Supplementary Environmental Impact Assessment dated June 1997 and April 2003 respective.

In the site, the residents claim the following: