Penang developers can now use corporate guarantees

CNY gathering: (from left) Toh, Eco World general manager Khoo Teck Chong, Aspen Group executive director Woo Kok Weng and Penang Island City Council secretary Yew Tung Seang having a discussion at the Chinese New Year dinner gathering.

GEORGE TOWN : Developers in the state can now choose to settle 60% of contribution charges using corporate guarantees.

Real Estate & Housing Developers Association (Rehda, Penang) chairman Datuk Toh Chin Leong said previously 60% of the contribution in the form of development and infrastructure charges had to be settled using bank guarantees, while the remaining 40% by cash.

“This new policy allow 60% of the amount to be settled using corporate guarantees, while the remaining 40% is settled by cash.

“This help to ease the cash flow situation of developers and will also reduce the risk bridging loans for their projects,” Toh said.

He added that the recently adopted housing density guideline for the island is expected to stimulate more property launches over the next two years.

Toh said at a Rehda Chinese New Year dinner that Kuala Lumpur-based and Penang-based developers were now exploring how to best implement projects under the new density guideline, which had increased the density per per acre to 128 units from 87 units.

“The additional 41 units per acre allows the developer to build more 600 sq ft to 700 sq ft units.

“The pricing for these properties is over RM400,000.

“Under the old guideline, developers, due to the lower density of 87 units per acre, have to focus on building larger units of 1,000 to 1,400 sq ft to sell at a higher price to generate a reasonable margin.

“If they build more smaller size units with a lower selling price under the old guideline, they would not be able to generate a decent margin,” Toh said.

On property prices in 2017, Toh expected prices to remain stable.

“There are two factors influencing property prices.

“On the one hand, the development charge of RM15 per sq ft to be paid, and the high cost of land and raw materials will influence developers to raise property prices.

“On the other hand, in order to stay competitive, however, developers would not raise prices drastically.

“They are likely to absorb these charges to be competitive.

“Prices would remain stable due to the soft property market and the difficulty in obtaining a bank loan,” Toh said.

There is also the forthcoming measure requiring the early payment of the stamp duty fee, which requires buyers to fork out the fee - which is usually over 2% of the purchase price of the property upon the signing of the S&P agreement.