Expectations Govt may announce scrapping real property gains tax Wednesday

PETALING JAYA: Expectations are running high that the Government may abolish the real property gains tax (RPGT) and announce the move at the three-day Invest Malaysia conference which starts tomorrow.  

Construction and property stocks on Bursa Malaysia were generally firm yesterday, as the construction index rose 2.1% and property index added 1.8% as the two top sector indices yesterday.  

The big gainers were property developers and construction players that included SP Setia Bhd, which rose 45 sen to RM7.10, Gamuda Bhd (up 20 sen to RM7.05), UEM World Bhd (up 14 sen to RM3.40) and IJM Corp Bhd (up 5 sen to RM8.40). 

RPGT is a tax on profits from a sale of properties less than five years after they were bought, and was introduced many years ago to curb speculation on house prices.  

Invest Malaysia, jointly organised by Bursa Malaysia Bhd, RHB Investment Bank and UBS Securities, appears to be attracting close to 100% more local and foreign participants than year’s conference. 

About 1,000 fund managers are expected to attend the conference compared with 500 participants last year.  

According to an official from Bursa Malaysia, there was a 36% increase in foreign participation from last year, which was a “good indication of rising foreign interest in our market.”  

The central themes this year are the Ninth Malaysia Plan (9MP) and an update on the government-linked companies (GLCs) transformation programme.  

Liew Kee Sin

The official said the key plenary sessions included a keynote address by Prime Minister Datuk Seri Abdullah Ahmad Badawi and a speech by Datuk Azman Mokhtar, head of the national investment arm, Khazanah Nasional Bhd.  

Aseambankers research head Vincent Khoo said expectations of incentives for the Iskandar Development Region (IDR) were abolishment of the RPGT and suspension of stamp duty for sale of property. 

“These are the most talked about. The idea is to support the development of South Johor,” Khoo said, adding that the long-waited restructuring of Malaysia Airports Holdings Bhd was also likely to be unveiled during Invest Malaysia.  

SP Setia Bhd managing director Tan Sri Liew Kee Sin welcomed the government’s move to relax RPGT as it would boost property investments.  

“The lowering of transaction costs will drive home upgrades among locals while foreigners will find our properties more attractive. For the property sector to thrive, we need foreign-driven investment apart from domestic demand that tracks the income growth of the general population,” he told StarBiz

Liew noted the current disparity between the RPGT rates for locals and foreigners was not consistent with a policy to attract foreign investments.  

“But far more important than introducing a one-off single incentive, is that the Government should make a concerted effort to improve and streamline the underlying policies and procedures to encourage foreigners to settle down in our country. 

“We must attract an expatriate community to live and work here. This will boost demand for local properties through the Malaysia, My Second Home programme,” he said.  

IJM managing director Datuk Krishnan Tan said abolishing the RPGT would spur direct demand in the property sector and indirect demand in the construction and building material sectors. 

“The property and construction industries have high multiplier effects and that would be positive for the economy as a whole,” he told StarBiz.  

I-Bhd CEO Eu Hong Chew said that when a listed company forms a joint venture (JV) with a foreign group, it would be helpful if there was deemed compliance with the policies of the Foreign Investment Committee. 

“As listed companies are already bumiputra-compliant, JVs with foreign developers could be treated as automatic compliance, for instance, if the JVs are 51% controlled by local listed companies. That would speed up the business process,” he added.  

As to concerns that a removal of RPGT would lead to a recurrence of speculation in houses, Eu said: “The economy today is different from yesterday. A lot more houses are being built today. There is no shortage of condominiums.”  

Crescendo Corp Bhd managing director Gooi Seong Lim concurred, saying: “I believe the ample supply would limit sharp price increases,” he said.  

He also hoped the Government would relax the ruling on the period to release bumiputra reserve units.  

For industrial properties, which Crescendo focuses on, bumiputra reserve units could only be released to other buyers after 12 months. Shortening of the period to six months would facilitate purchases by foreigners, Gooi said.

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