Unlikely for house prices to come down anytime soon until govt eases Bumiputera Lot Quota Regulation
BY DASHVEENJIT KAUR / Pic By HUSSEIN SHAHARUDDIN
GAMUDA Bhd has offered to allocate 2% from the total sales of unsold Bumiputera properties to the government, should the portion be allowed to be pushed into the open market.
Its MD Datuk Lin Yun Ling said the firm’s property division, Gamuda Land Sdn Bhd, is currently saddled with a substantial number of unsold Bumiputera units that are gradually weighing on the company’s overall revenue.
“Ideally, developers can contribute 2% from its revenue to the authorities for better use, instead of having to keep aside a certain number of units for Bumiputeras, which would eventually be left unsold.
“Then, perhaps the authorities can find better locations to build homes that could actually fit the requirements of those from the B40 (bottom 40% income) group,” he told reporters after the company’s AGM in Shah Alam yesterday.
Lin also said it is unlikely for house prices to come down anytime soon until the government finds a way to close the loopholes in the current policy that requires property developers to allocate a certain amount of units for the Bumiputeras.
The policy Lin was referring to is the Bumiputera Lot Quota Regulation under the New Economic Policy (NEP), which was introduced as a mean to increase Bumiputera ownership in real estate.
Since its inception in 1971, developers have been required to allocate at least 30% of all property units, be they residential or commercial, to Bumiputeras.
“Even with the Bumiputera discounts, we have to contend with hard-to-sell Bumiputera lots due to current predicament of poor sales and market conditions.
“On top of that, we can only release the unsold units three to four years later, but still have to pay the discounted amount to the authorities,” Lin added.
He also said the company has met with the authorities and other industry players and discussed the 2% proposal as it will help to address home affordability issues, especially among the B40 group.
“Right now, the reason why many units are left unsold is because of the location. Most of which are not within the reach of the B40 people. That is why it doesn’t help (the issue of unsold Bumiputera units) even with discounts being offered.”
According to Lin, the developers’ margin of financing for holding cost would generally be between 3% and 5% for large projects.
“The longer you hold on to the units, the higher the holding cost will be. It will not help the economy too because the tax authority will have to defer their collection period.
“The holding cost to comply with the Bumiputera Lot Quota Regulation is getting heavier to bear for the group,” he said.
Lin said Gamuda Land is only making a single digit profit margin due to the ever increasing holding cost.
According to the Malaysian law, state authorities are given full control over land matters and as such, the Bumiputera quota regulation falls under the state government’s jurisdiction. As such, the quota could differ from state to state.
The Federal Territories quota is relatively low at 30% compared to other states such as Johor (40%), Negri Sembilan (50%) or Kelantan (70%).
Lin said when the unsold Bumiputera units add additional costs to the developer, it will eventually be passed down to the property owners.
“That is why affordability is a big issue in the industry. If this goes on, the house prices can never be brought down because developers have no choice,” he added.