The Budget 2020 for Malaysia was recently tabled at the Dewan Rakyat in Parliament by YB Tuan Lim Guan Eng, Minister of Finance, on Friday, 11th October 2019. The Budget 2020 objectives are based on “Driving growth and equitable outcomes towards shared prosperity.”
Real Estate transactions fall under Strategy 11: Promoting Access to Housing in the Third Thrust; which is Creating A United and Inclusive and Equitable Society. Below are the six points which were tabled under this category:-
- Funds for Affordable Homes;
- Extension of the Home Ownership Campaign (“HOC”);
- Stamp Duty Exemptions for Rent to Own Schemes (“RTO”);
- Foreigner Ownership of RM600,000;
- Extension of the Youth Housing Scheme (“YHS”) by Bank Simpanan Nasional (“BSN”); and
- Change in the base acquisition year for Real Property Gain Tax (“RPGT”).
Let’s explore these points:-
1. Funds for Affordable Homes
Funds for Affordable Homes was introduced by Bank Negara Malaysia (“BNM”) and is aimed for those with lower income to purchase property up to the purchase price of RM150,000 at a concessionary interest rate of 3.5%.
These funds are now extended to those who are under the category of B40 and purchase property of up to RM300,000 provided their household monthly income is not more than RM4,360.
It was reported that, until 1.9.2019, the applications received by BNM for these funds had reached 2,840 worth RM472.7Million. The approval rate was 77.9% for 982 approved applications for a total of RM156.2Million.
2. Extension of the Home Ownership Campaign (“HOC”)
HOC is a campaign set up by way of a partnership between the Government and with private sector companies; mainly Developers. This campaign is to ensure that stamp duty is either fully exempted or partly remitted for properties purchased under this campaign. This campaign is also aimed to get the Developers to give a 10% discount for such stamp duty exemption or remittance.
The campaign, which was scheduled to end on 30.6.2019, is now extended to 31.12.2019.
3. Stamp Duty Exemptions for Rent to Own Schemes (“RTO”)
This RTO Scheme is aimed to assist those who intend to purchase their first residential property up to the purchase price of RM500,000.
The scheme works as follows:-
- Five years rent tenure with Banks – this serves as the Deposit;
- after the 1st year, the Tenant decides to purchase the property at the purchase price agreed upon in the tenancy agreement;
- the stamp duties; i.e. between Developer to Bank and Bank to Tenant/Purchaser; will be exempted.
4. Foreigner Ownership of RM600,000
To reduce the overflow of unsold properties; foreigner ownership is now reduced from RM1,000,000 to RM600,000. However, other than the tabling of reduction in the purchase price threshold, the additional terms of foreigner ownership remain the same. Each foreigner is still required to check on the State’s terms of purchase price threshold.
5. Extension of the Youth Housing Scheme (“YHS”) by Bank Simpanan Nasional (“BSN”)
The YHS Home Loan is aimed at youths between the ages of 21 to 45; whether individual or married; to own their first home for properties ranging from RM100,000 to RM500,000. Subject to their application and other terms, the loan granted under YHS covers up to 100% of the purchase price. The Government will continue to assist in providing rebates of RM200 for monthly instalments of the loan for two years.
YHS is now extended from 1.1.2020 to 31.12.2021.
6. Change in the base acquisition year for Real Property Gain Tax (“RPGT”)
In Budget 2019, the baseline for the acquisition purchase price is 1.1.2000. This baseline is to ensure that the gap of gains for those property purchase before the year 2000 will not have a massive difference in profit.
As the Government received feedback on the imposition of RPGT for properties sold after five years, the Budget 2020 has now pushed the baseline to 1.1.2013.
In summary, we can see that the Government aims to assist younger purchasers by both introducing and extending the housing loan schemes. It can also be said that the increase of foreign owners purchasing property in Malaysia would, in turn, increase the RPGT collection upon the future sale of the property. One can hope that these changes will have a positive impact on Malaysia’s economy and the real estate industry.