Spotlight on rent-to-own scheme, RPGT
Published on: Monday, November 04, 2019
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THE property sector is seen as one clear winner of the recent Budget 2020 compared with other sectors because of the introduction of the rent-to-own financing scheme, the revision of real property gain tax base year to 2013 from 2000, the lowering of the threshold on unsold stocks of high-rise property for foreign ownership, among others.

We compiled what the property players have to say on two policies.

Introduction of rent-to-own (RTO) scheme for first-time home buyers:

l Financing of up to RM10 billion will be provided by the financial institutions with the support from the government via a 30pc or RM3 billion guarantee.

l Purchase of first home up to RM500,000 property price.

l Applicant will rent the property for up to five years and after the first year, the tenant will have the option to purchase the house based on the price fixed at the time the tenancy agreement is signed.

 l Stamp duty exemptions.

“We support the proposal to promote RTO except that the threshold should not be extended to cover pricing up to RM500,000. This figure is the housing developers’ qualification of “affordable housing” and is on the high side as compared to the official definition by the Housing Ministry,” says National House Buyers Association (HBA) Secretary-General Datuk Chang Kim Loong.

The official definition of “affordable housing” must meet three criteria:

1. Price – Affordable housing refers to properties priced between RM150,000 and RM300,000 (between rural and urban)

2. Built-up – Affordable housing must be conducive for “family living” and must have a minimum built-up of 900 sq ft (excluding balcony) and have at least three bedrooms

3. Location – Affordable housing must be located in areas that are accessible and served by public transportation links and located in areas with public amenities.

Whilst we laud the government’s efforts, there were some missed opportunities to kick start the property market. It is unclear at this point as to the incentives on RTO and Bank Negara Malaysia’s fund being extended to transactions in the secondary market. We are appealing for this.

As it stands, the RTO focuses on new development. First time home buyers with the opportunity to purchase their preferred homes in established areas from the secondary market is not able to take advantage of this budget goodies. The secondary market offers unique opportunities not always found in new developments, such as location in favorable areas.

We share the views of HBA that the incentive must only be applicable for units of a certain size and at the same time priced within the threshold amount and not just based on the price alone.

 “We applaud the initiative by the government to continue with the RTO scheme, however there is concern that the property price sold may include the expected capital gain which may lead to higher property price as compared to the current market value. This scheme has to be regulated and should be fairly practised by both the public and private sectors,” says Knight Frank Malaysia Managing Director Sarkunan Subramaniam.

 “We applaud the government’s initiatives in Budget 2020 to raise the ceiling price of homes made available under the RTO scheme, from RM300,000 to RM500,000 as this will give first-time home buyers more options to choose from,” says SP Setia Bhd President & CEO Datuk Khor Chap Jen.

The increase in the allocation for the scheme, from RM1 billion to RM10 billion, including a guarantee of RM3 billion shows that the government sees home ownership as a critical issue for the rakyat.

However, it is noted that under the current scheme, only RM156.2 million worth of loans was approved. We hope the lending guidelines and criteria will be reviewed, especially for first-time home buyers for them to benefit from the scheme.

 “As end-financing has continued to be amongst the major challenge for home buyers, we believe the RTO scheme would help to stimulate the market as first-time home buyers are now given aid and flexibility to own their preferred home at the agreed purchase price during the leasing tenure once their financial position strengthens.

We also commend the government for providing stamp duty exemptions on the instruments of transfer in this scheme as this helps reduce the financial burden that first-time home buyers need to bear when purchasing a home,” says Mah Sing Group Bhd founder & group Managing Director Tan Sri Leong Hoy Kum’

Real property gain tax (RPGT)

 Imposed on disposal of properties after five years

Base year for asset acquisition revised at Jan 1, 2013 (for asset acquired before Jan 1, 2013) compared to the previous base year of Jan 1, 2000

Current RPGT does not differentiate between genuine long-term property investors and property speculators as the tax rate is the same regardless of how many properties disposed. HBA vehemently disagrees with imposing RPGT for properties held for more than six years as it only punishes genuine home owners and long-term property investors. The perpetual 5pc RPGT is a tax on inflation and this seems to punish genuine long-term investors.

HBA disagrees with the government’s decision to continue to charge RPGT rate of 5pc for gains on disposal of properties after the sixth year.

With the Budget announcement, it means that Malaysian individuals and permanent residents will have to continue to bear the 5pc RPGT even though they have diligently preserved beyond the five years. This reflects badly on the government notwithstanding the fact that the reference date (for the valuation of the property/point of valuation) imposed will be calculated with effect Jan 1, 2013 instead of the previous Jan 1, 2000. There seems to be a slight relief but HBA is of the view that the previous RPGT regime was far superior where no RPGT payable beyond the fifth year.

HBA urges the government to reconsider this move and to heed our recommendation vis-à-vis:

1. Increase the RPGT tier rate for disposal within the second, third and fourth years with a corresponding increase of additional 5pc, which means instead of 30pc (first to third year) increase the rate to 35pc. HBA further suggests that the rate of RPGT imposed on foreign owners be increased correspondingly; or

2. That the “cut-off point” or grace period be pushed back by one or two years to the sixth or seventh year. The previous “cut-off point” of five years to be pushed slightly further and beyond that point no RPGT shall be payable on the disposal. Any disposal after the new cut-off point will not attract RPGT; or

3. Date of acquisition to be changed to date of vacant possession. For properties bought under construction, this is to ensure that speculators must hold on to the properties longer before selling it if they wish to pay lower RPGT,” says Chang

“Tweaking the base year of acquisition in RPGT have tackled the underlying issue in which many are concerned of when the 5pc hike announced in Budget 2019, where genuine investors who relied on the gains of their property disposal would be punished under the previous ruling. Though we wished for a 0pc after the sixth year for RPGT, this move is a positive one and we foresee movement in the secondary market in light of this, “ says Malaysian Institute of Estate Agents President Lim Boon Ping. 

 “Revising the base year will allow sellers to pay lower RPGT. We hope continuous improvements to the RPGT policy can be considered to boost more interest and activities in the secondary property market, as many buyers are looking to upgrade after disposing of their older units,” says Mah Sing Group Bhd founder & group Managing Director Tan Sri Leong Hoy Kum.

“The revision of the base year of acquisition for RPGT from Jan 1, 2000 to Jan 1, 2013 will soften its impact on sentiment at higher tiers of the market. However, its continued application will be a concern for investors and other stakeholders in the property value chain,” says PropertyGuru Country Manager Sheldon Fernandez. – theSun Property


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